We are in the midst of our holiday season. While most of us do not like to think about taxes and fulfilling the requirements of the Internal Revenue Service while drinking egg nog and buying Christmas gifts, the end of the calendar year does mean one has to pay close attention to keep financial records straight.
RMDs in 2020
In most years, some readers would have to take a required minimum distribution (RMD) from their TSP by the end of the year. 2020 is an exception though because the TSP adopted the portion of the CARES Act as it pertains to temporarily waiving the requirements for Required Minimum Distributions.
Prior to CARES, individuals over the age of 70 ½ (if you were born prior to July 1, 1949) or 72 (if you were born after July 1, 1949), and non-spousal heirs regardless of age, were required to take a minimum distribution from their tax-deferred retirement accounts each year. CARES temporarily suspends RMD’s, and TSP has followed suit.
You do not need to make any withdrawals from your TSP account in 2020 to satisfy an RMD, regardless of your age or employment status.
TSP Processing Dates
The Thrift Savings Plan (TSP) has announced the dates for processing significant transactions for the end of 2020. The announcement includes information about when transactions (including withdrawals and installment payments) will be processed and when the TSP will be closed during the holiday season.
Here are the relevant dates impacting TSP investors.
December 17 — TSP installment payments normally scheduled to be processed between December 17 and December 31 will be processed on December 17.
For income tax purposes, these payments will be reported to the Internal Revenue Service (IRS) as income for 2020.
December 25 — Christmas falls on Friday this year and December 25th is a federal holiday. The TSP will be closed on the 25th.
Financial transactions that would normally be processed Friday night (December 25) will instead be processed Monday night (December 28) at Monday’s closing share prices.
December 29 — Withdrawals processed through December 29th will be reported to the IRS as income for 2020.
December 30 — Withdrawals processed on December 30th will be reported to the IRS as income for 2021. The payments (checks and direct deposits) are expected to be issued on January 4, 2021.
December 31 — Withdrawals processed on December 31 will be reported to the IRS as income for 2021. The payments (checks and direct deposits) are expected to be issued on January 5, 2021.
We wish all of our readers a very Merry Christmas and hope this latest information will be useful in making sure the start to your financial health in 2021 is a smooth one.
