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Question//

Is a Profit sharing account considered an IRA?

more to follow..
thanks
Debbie
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Most likely your profit sharing is deposited into your employers 401K program.

An IRA is set up by you, and only can be contributed into by you.
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Debbie asks:

<<Question//

Is a Profit sharing account considered an IRA?>>


No, it is not. A profit sharing plan is a qualfied defined contribution plan offered by an employer to employees. For an overview of both IRAs and retirement plans, see my Foolish Retirement Plan Primer available at http://www.fool.com/Retirement/Retirement.htm.

Regards..Pixy
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Thanks Pixy

The reason I ask is that my mother in law had a profit sharing with the company she worked for up until Dec 1997..I t was then transferred to an IRA in the Wellington Fund. She retired in 1995 at age 70 1/2...Unfortunatley . she never took her RMD until this year..( she became blind and either lost or never received paperwork to do so) ...The only RMD she has taken is for this year 1999...So...my question is-- since this was a profit sharing plan initially was she reqired to take distributions from it at 70 1/2?
I have spoken to Vanguard and they will help me figure out the distributions, if needed , but only for the years the money was in the Vanguard Fund (1997 +) but not before that.
I am aware of the penalties also (50% of RMD) but I am told she can possibly be reimbursed by the IRS with good reason for not taking them ( maybe blindness would qualify?)
Thanks for any help
Debbie
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Debbie writes:

<<The reason I ask is that my mother in law had a profit sharing with the company she worked for up until Dec 1997..I t was then transferred to an IRA in the Wellington Fund. She retired in 1995 at age 70 1/2...Unfortunatley . she never took her RMD until this year..( she became blind and either lost or never received paperwork to do so) ...The only RMD she has taken is for this year 1999...So...my question is-- since this was a profit sharing plan initially was she reqired to take distributions from it at 70 1/2?
I have spoken to Vanguard and they will help me figure out the distributions, if needed , but only for the years the money was in the Vanguard Fund (1997 +) but not before that.
I am aware of the penalties also (50% of RMD) but I am told she can possibly be reimbursed by the IRS with good reason for not taking them ( maybe blindness would qualify?) >>


Yes, unfortunately, she was required to begin distribuions in 1995 based on her life expenctancy at that time. That would be true even if the money had remained in the plan because she was no longer working for the company sponsoring that plan.

Make haste to a qualified tax advisor, one who is an enrolled agent with the IRS, who can negotiate with the IRS on your mom's behalf. Unless an agreement can be reached, she is liable for a 50% penalty on the money that should have been taken but wasn't. She would also be assessed interest penalties for the failure to pay the 50% in the years she was required to do that.

Yes, the IRS has a program where these penalties and interest can be forgiven or reduced. A good tax person should help negotiate these IMHO.

How sad. My heart goes out to her and to you. Please take action now to alleviate the matter as best you can so it gets no worse through interest charges.

Regards..Pixy
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Thanks Pixy ...Your reply was very helpful...I do have an accountant that will help her. It is a shame also that the IRS penaly is so extreme..I wonder why..

The best to you and all the FOOLS!!

Debbie
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