ArticleThe SECURE Act, which became law as of January 1, 2020, changed a variety of retirement account rules. Most notably, it increased the required minimum distribution (“RMD”) age and added a new 10-year rule for inherited retirement account distributions. The 10-year rule applies regardless of whether a participant dies before, on, or after, the required beginning date and there are certain exceptions for a surviving spouse, a child who has not reached the age of majority, or a disabled or chronically ill person. The SECURE 2.0 Act, which was signed into law in December 2022, further changed the RMD rules. Beginning on January 1, 2023, the age to start taking RMDs jumps once more, from 72 to 73, and increases again in 2033 to 75.
The Internal Revenue Service reminded retirees yesterday, specifically those who turned 72 during 2022, that, in most cases, Saturday, April 1, 2023, is the last day to begin receiving RMDs. See IR-2023-43.
Although an IRA custodian or retirement plan administrator may calculate RMDs, it is important to remember that it is the account owner who is ultimately responsible for calculating and withdrawing the amount of the RMD. If an account owner fails to withdraw an RMD, fails to withdraw the required amount, or fails to withdraw the RMD by the applicable deadline, the shortfall is subject to a 50% excise tax. The tax may be waived if the account owner establishes that the shortfall was due to reasonable error and that reasonable steps are being taken to remedy the shortfall.
Read more here: IR-2023-43: IRS reminder to many retirees: April 1 is last day to start taking money out of IRAs and 401(k)s (govdelivery.com)
Thank you to Michelle E. Espey for this week’s Tax Tracker post.
