Required Minimum Distributions

The IRS recently issued official guidance providing relief to taxpayers who may not have taken a Required Minimum Distribution (RMD) from their IRA or other retirement accounts.  The official guidance also provides relief to taxpayers who took a distribution in 2023 from a retirement account and wish to make a rollover. Learn more how the IRS provides some relief for required minimum distributions from retirement accounts and IRA rollovers.

The SECURE Act passed in 2022 increased the age taxpayers, who held IRAs and certain other retirement accounts, must take Required Minimum Distributions (RMDs). Under the old law, taxpayers were required to start taking RMDs from their retirement accounts at the age of 72. Under the new law, some taxpayers may start taking RMDs at age 73. Taxpayers born in 1959 and later may start taking RMDS at age 75. Taxpayers who fail to take an RMD will pay a tax equal to 25% of the RMD. (See chart below)

Birth Date                              Age RMD’s Must Start Under New Law

December 31, 1958 and earlier                              73

January 1, 1959 and later                                75

If a retirement account holder dies before he or she reaches the RMD age, generally the account must be distributed to the retirement account holder’s beneficiaries within 10 years. If the retirement account older dies after he or she reaches the RMD age, the retirement account must generally be distributed within 5 years. The recent guidance also states certain taxpayers who inherited an IRA or certain other retirement accounts were not required to take RMDs in 2021 and 2022. The recent guidance also provides certain taxpayers who inherited an IRA in 2020, 2021, or 2022 may not be required to take RMDs in 2023.

A taxpayer generally has 60 days to make a rollover from one retirement account (like an IRA) to another retirement account. If a taxpayer fails to complete the rollover within 60 days, the taxpayer will generally be taxed on the retirement account distributions. The recent IRS guidance also states that certain taxpayers born in 1951 who took certain RMDs in 2023 have until September 30, 2023, to rollover the RMD into another retirement account.

RJS LAW provides tax planning and estate planning advice to its services. For a free consultation, please contact us on the web at RJS LAW or call 619-595-1655 if you have any questions about retirement account distributions. RJS Law represents clients in all aspects of tax, including audits, tax planning, and international tax as well as Trust and Estate Planning.

Written by Joseph Cole, Esq., LL.M.