Author: Nicholas Watkins

What are Required Minimum Distributions and When Do You Have to Start Taking Them?

People are often confused about the rules surrounding required minimum distributions (RMDs). This article provides answers to common questions regarding the rules and timelines surrounding RMDs.

If you turned 73 in 2025 and own a retirement account, you will likely need to take your first required minimum distribution by April 1, 2026, to avoid potential penalties.

What is an RMD?

A required minimum distribution (RMD) is the minimum amount that must be withdrawn each year from certain retirement accounts once the account holder reaches age 73.

Retirement Plans Subject to RMD Rules

RMD requirements generally apply to the following retirement plans:

Employer-sponsored retirement plans, including profit-sharing plans, 401(k) plans, 403(b) plans, and 457(b) plans
IRA-based plans such as traditional IRAs, Simplified Employee Pension (SEP) IRAs, and SIMPLE IRAs
Inherited Roth IRAs and designated Roth accounts after the death of the account holder

When are you required to start taking RMDs?

Owners of IRA-based retirement plans must begin taking RMDs in the year they turn 73, even if they are still working.

If you turned 73 during 2025, your first RMD must be taken by April 1, 2026. Your second RMD must then be taken by December 31, 2026.

For workplace retirement plans (i.e.,401(k) or profit-sharing plans), RMDs can generally be delayed until retirement if you are still working. However, this exception does not apply to individuals who own 5% or more of the business sponsoring the retirement plan.

What happens if you fail to take an RMD?

If you do not withdraw the full required amount within the specified time frame, you may be subject to a 25% excise tax on the amount that should have been withdrawn.

If the error is corrected within two years, the penalty may be reduced to 10%. In certain cases, the penalty may also be waived if the individual can demonstrate that the failure to take the RMD was due to reasonable error and that appropriate corrective steps are being taken.

How is your RMD calculated?

Your RMD is calculated by dividing the balance of your retirement account as of December 31 of the previous year by a life expectancy factor provided by the IRS in Publication 590-B.

Most individuals use the “Uniform Lifetime Table” to determine their life expectancy factor.

Example

A 73-year-old individual has $100,000 in their retirement account as of December 31, 2025.

According to the Uniform Lifetime Table, the life expectancy factor for someone age 73 is 26.5.

$100,000 ÷ 26.5 = $3,773.58

In this example, the individual’s RMD would be $3,773.58.

Can you withdraw more than the required minimum?

Yes. You are always permitted to withdraw more than the required minimum distribution in any given year.

Are RMDs taxable?

Yes. RMDs are generally taxable as ordinary income because contributions to these retirement accounts were typically made with pre-tax dollars.

However, New York State provides a retirement income exclusion. Individuals age 59½ or older may exclude up to $20,000 of retirement income per year from New York State income tax. Married couples filing jointly may each qualify for this exclusion.

Additional Information and Guidance

Additional information and answers to common questions can be found on the IRS Required Minimum Distribution (RMD) FAQs. To avoid potential penalties and ensure accurate calculations, consider working with an accounting professional familiar with RMD requirements, deadlines, and tax implications. RBT CPAs’ estate planning team is here to answer your RMD-related questions, and to support all of your other accounting, tax, audit, and advisory needs. Give us a call today to find out how we can be Remarkably Better Together.

When Should You Start Planning a Will?

When you think about creating your will, you may imagine yourself many years down the road, getting your affairs in order when life’s circumstances call for it.

While this may be the case for some people, it isn’t the recommended method.

So, when should you start planning your will? The answer may surprise you.

Best practice is to create a will when you are legally able to, which is generally at the age of 18 in the United States.

While we know that most teenagers are not ringing in their 18^th birthday by drafting a will, typically the sooner a person creates a will, the better. It’s rarely too early to begin planning your will, but there may come a time when it is too late.

So, let’s go over some “will basics,” as well as some important considerations to keep in mind during will planning.

What is a will, and why is it important?

A will is a legal document stating an individual’s wishes for the management and distribution of their estate after death. Not only does a will specify how a person’s assets will be distributed, but it also indicates who can make decisions on that person’s behalf if they are not able to, via legal documents such as healthcare proxies and powers of attorney. Wills can also serve other purposes, such as designating guardianship over minor children.

If a person dies without a will in place, state laws determine how their estate will be distributed. However, the state’s plan may not accurately reflect the decedent’s wishes. Establishing a will early on ensures that your estate is managed according to your wishes—and not the state’s laws—after you pass. A will also makes estate administration easier for your heirs by clearly documenting your wishes and instructions.

Some Important Considerations When Planning a Will

Your will should be reviewed and updated for major life events such as marriage, divorce, birth of a child, etc. Don’t just set it and forget it.
Wills are not just for people with significant assets—they are valuable and necessary tools for everyone, regardless of net worth.
Wills must be executed properly in order to be considered valid. It’s important to be aware of the legal formalities required for the execution of a will, such as the presence of witnesses and the notarization of signatures.
Keep in mind that beneficiary designations override instructions in a will in some cases, such as with life insurance policies, retirement accounts, health savings accounts, and trusts (see here for our article on this topic). Be sure to update your beneficiary designations to reflect any changes to your will.
Creating a will is just one component of the estate planning process. Estate planning may also involve setting up trusts, beneficiary designations, healthcare directives, tax planning, and more.

RBT CPAs’ experts in our Trust, Estate, and Gift Practice can help you create and update a will and estate plan that ensures you and your loved ones will be taken care of according to your wishes during your lifetime and after. RBT CPAs has proudly provided accounting, advisory, tax, and audit services to individuals and businesses in the Hudson Valley and beyond for over 55 years. Get in touch to learn more about our services—and find out how we can be Remarkably Better Together.

Pass-Through Entity Tax (PTET): Things to Do ASAP

At RBT CPAs, we’re always ready to take on everything tax- and accounting-related for your organization, so you’re free to focus on driving your business success. Unfortunately, New York’s rules for its Pass-Through Entity Tax (PTET) require you – the business owner – to complete certain tasks. While we can’t automatically do them for you, we are here to guide you – and help where we can – so you have peace of mind that you’ve taken the right steps by designated deadlines to maximize the PTET for your business.

YOUR PTET TO DO LIST

If your business opted in for the 2022 PTET:

Are you prepared to pay any balance owed for 2022 as part of your NYS tax filing by the March 15 deadline? RBT CPAs can help you file and pay in conjunction with your regular partnership or S corporation tax filing.
Do you want an extension of time to file? A six-month extension to September 15^th can be requested; you must still pay the estimated PTET by March 15.
Do you want RBT CPAs’ assistance to file your return, file for an extension, or make a PTET payment? We are glad to help! You’ll need to complete Form TR 2000 giving us the authorization to log into your NYS tax account, file your return or extension request, and pay using the tax information you provide regarding how much is owed.

Consider whether your business should opt in for the 2023 PTET:

This is a tough one. You will only have financial information for the first few months of the year, so you’ll have to speculate about much of the year’s profits.
Take a look at your organization’s cash flow and the potential impact of quarterly payments. You’ll have to make quarterly payments starting in March (and then June, September, and December).
Are you considering selling your business or property owned in your partnership or S corporation in 2023? These sales can create significant tax events; a PTET election would help to minimize that tax burden.
If you’re unsure whether the benefit outweighs the administrative cost, RBT CPAs can partner with you to provide a PTET cost/benefit analysis for NY and other states.
Before making your 2023 election, have a conversation with your RBT CPAs team member.

If your business decides to opt in for the 2023 PTET:

Have you completed your election to opt in? You cannot wait until you file your taxes for 2023. Opting in is an additional step you must complete before or on March 15. You, the business owner, must make this election online via your NYS tax account – you cannot delegate this activity to a third party like a tax preparer. Please see here for our step-by-step guide to making your 2023 NY PTET election.
If your business is making the PTET election for 2023, have you engaged RBT CPAs to provide estimated quarterly tax payments (due in March, June, September, and December)?
If you completed your 2023 PTET election, has your business made its first quarterly estimated tax payment by March 15, 2023?
RBT CPAs can assist with certain aspects of this if you provide us with a completed Form TR 2000 (see “If your business opted in for the 2022 PTET” above for details).

If you have any questions or need additional information or assistance, please remember RBT CPAs is here to help. Let us know what you need so you can be 100% confident you’re making the right decisions and taking the right actions for your firm in relation to the NYS PTET.

Inflation Reduction Highlights

On Sunday, August 7, after nearly 16 hours of deliberation that started on the Saturday night prior, the Senate passed a new bill known as the Inflation Reduction Act. This past Friday, the House voted and passed the bill sending it to President Biden’s desk for signature. Now after months of negotiations surrounding the agreement, it’s official – President Biden signed the bill into law yesterday afternoon. During the signing ceremony at the White House, President Biden referred to this legislation as “one of the most significant laws in our history.”

The bill has extensive provisions related to climate, health care, and taxes. While we navigate the 700 plus pages of legislation included in this newly enacted bill, here are some highlights of the key provisions:

Corporate Alternative Minimum Tax – This provision creates a minimum tax of 15% for corporations (not including S corporations) and is generally applicable to those corporations with average financial statement income exceeding $1 billion.
Excise Tax on Repurchase of Corporate Stock – A tax of 1% will be assessed on the fair market value of any stock repurchased by a corporation whose stock is traded on an established securities market.
Funding the Internal Revenue Service and Improving Taxpayer Compliance – Nearly $80 billion would be allocated to the IRS over the next 10 years to fund taxpayer services, enforcement, operations support, systems modernization, etc. This section of the bill is not intended to increase taxes on taxpayers or businesses with below $400,000 in taxable income.
Prescription Drug Pricing Reform – Allows Medicare to negotiate lower drug prices and imposes an excise tax on prescription drug manufacturers, producers, and importers that don’t enter into drug pricing agreements with the government on selected drugs.
Affordable Care Act Subsidies – Extends the health insurance related Premium Tax Credit, that was previously made under the American Rescue Plan Act of 2021, through 2025.
Energy Security and Clean Incentives – Provides various tax credits for individuals and businesses for the use of green energy and purchasing new and used clean-energy vehicles. Many existing renewable energy credits are extended or expanded.
Reinstatement of Superfund Excise Taxes – Previously expired in 1995, the bill reinstates the Hazardous Substance Superfund imposing an excise tax on crude oil received at a US refinery and petroleum products entering the US for consumption, use, or warehousing, at a rate of 16.4 cents per barrel.
Increase in Research Credit Against Payroll Tax for Small Businesses – Increases the maximum research credit that may be applied against payroll taxes for qualified small businesses from $250,000 to $500,000.
Extension of Limitation on Excess Business Losses – Extends by two years the limitation on amount of business losses that can be deducted in a taxable year by noncorporate taxpayers.

While many tax provisions originally being discussed did not make it into this final bill, this still represents significant changes affecting taxpayers. Over the coming days and weeks, we will provide more information about the tax implications of this new law. As always, we’re committed to sharing information as it becomes available and supporting your tax, accounting and audit needs going forward. If you have any questions, please give us a call, and watch for additional information in the weeks ahead.

NY Homeowner Tax Rebate Checks Are in the Mail

Good news! New York State is giving residents who are homeowners a little respite from all of the talk about inflation, stock market drops, interest rates, and recessions. Homeowner tax rebate checks are in the mail and should arrive in mailboxes across the state this month!

Residents who earn less than $250,000 and are eligible for the STAR (school property tax rebate program) will receive a check. The value will be based on income, where the house is located, and the type of STAR rebate you are eligible for – basic or enhanced. Almost 3 million New York residents will receive checks.

You don’t have to do anything – the state is determining eligibility and payment amounts. If eligible, you’ll automatically receive payment this month (early July, at the latest).

For complete details, visit the New York State Department of Taxation and Finance website. There are answers to frequently asked questions and a “Check Lookup” tool to help you determine how much you may receive.

As always, if you have any questions about tax implications, RBT CPAs is here to help. Give us a call today.

NYS Pass-Through Entity Tax

New York State individual owners of partnerships and S corporations have an opportunity to benefit from valuable tax deductions.

The NYS Pass-Through Entity Tax (PTET) is effective for tax years beginning on or after January 1, 2021. Given the high real property taxes and high personal income tax rates in New York State, many individual taxpayers have felt the effects of the state and local tax deduction limitation that was part of the Tax Cuts and Jobs Act (TCJA) of 2017. NY’s PTET was put into place to hopefully provide some NY business owners with a new opportunity for federal tax savings around this current limitation.

The PTET works by shifting the burden of state income tax payments related to income passed through from partnerships and/or S corporations.

Rather than the individual shareholders/partners being responsible for paying the tax, the pass-through entities (PTEs) will pay the tax. Partnerships and S corporations that pay the PTET are allowed a tax deduction against their ordinary business income without regard to the $10,000 SALT limitation. And if you haven’t been itemizing your deductions on your personal tax return because the standard deduction has been greater than your otherwise deductible expenses, the PTET provides for additional deductions that weren’t available to you previously.

Each year, NY partnerships and/or S corporations must make an annual election to participate in this program. The election is made online with the New York Department of Taxation and Finance through a business’ online services account. Once made, the entity is responsible for filing and paying all required tax returns and payments for that year. The election may be revoked up until March 15 of the year it is made; then, it is irrevocable.

Elections cannot be made by tax professionals, only by authorized individuals (partner, shareholder, etc.) of the business. The election must be made by March 15th.

The calculations differ slightly based on entity type and residency status. S Corporations with all NY resident shareholders will pay the PTET on 100% of the entity’s NY taxable income while S Corporations with any nonresident shareholders will pay the PTET based only on the entity’s NY sourced taxable income. Partnerships will pay the PTET based on all allocable taxable income for residents and only NY sourced taxable income for non-residents. The tax rate ranges from 6.85%, for PTE taxable income up to $2 million, up to the highest NYS marginal tax rate of 10.90%.

The annual return will report the PTE taxable income, total tax liability, and the direct share of PTET that is available to each owner as a tax credit. This PTET credit, equal to 100% of the tax paid, will be claimed by the owner on their personal New York tax return. Certain trust owners may also be eligible to claim the PTET credit. Corporation and partnership owners are not eligible for PTET credits and therefore, PTET won’t be paid on their shares of the income.

Resident owners of a PTE may claim a resident tax credit on Form IT-112-R for the payment of another state’s PTET by their partnership or S corporation.

The PTET has brought challenges and complexities with it. The silver lining is an opportunity for significant Federal tax savings for NY business owners. Please contact our team of dedicated professionals if you’d like to discuss if and how this program can benefit you and your business.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.