Required Minimum Distribution

The IRS recently issued official guidance providing relief to some taxpayers who may not have made a Required Minimum Distribution (RMD) from their IRA or other retirement accounts.  The official guidance also provides relief to some taxpayers who took a distribution in 2023 from a retirement account and wish to make a rollover.

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 take RMDs from their retirement accounts at the age of 72. Under the new law, taxpayers may take RMDs as late as age 75. Taxpayers that fail to take an RMD will pay a tax equal to 25% of the RMD.

If a retirement account holder dies before he or she reaches the RMD age, the account must generally be distributed to the retirement account holder’s beneficiaries within 10 years. If the retirement account holder dies after he or she reaches the RMD age, the retirement account must generally be distributed within 5 years. The recent guidance states certain taxpayers who inherited an IRA or certain other retirement accounts were not required to take RMD’s 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 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.  For a free consultation, please give us a call at 619-595-1655 or contact at RJS LAW if you have questions about retirement account distributions, tax and/r estate planning issues

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