The SECURE 2.0 Act and 2022 SECURE Act proposed regs changed some of the rules related to Required Minimum Distributions (RMD) both during your lifetime and after death. The IRS has again delayed the applicability date of final RMD regulations for inherited retirement accounts, including IRAs (Notice 2023-54). The notice also provides transition relief for those who turned age 72 this year and thought they had to take their first RMD.
The SECURE Act Proposed Regs
Proposed regs issued early last year changed the RMD rules for those subject to an inherited IRA’s 10-year distribution period to require lifetime payouts during the 10-year distribution period. A notice came out later last year saying that there will be final RMD regs that won’t be effective until the 2023 distribution year and it provided penalty relief for any inherited IRA lifetime RMDs not taken in 2021 or 2022. The IRS recently issued Notice 2023-54, which further delays the applicable date of final regulations to the 2024 distribution year and adds 2023 to the penalty relief. For further details, click here.
Neither of the notices specifically come out and say you don’t have to take RMDs those years from an inherited IRA for those subject to the 10-year rule. However, it waives penalties if you don’t take them.
Rollover Relief
SECURE 2.0 Act changed the applicable required beginning date (RBD) for certain eligible retirement plans, including IRAs.
For an IRA owner who attains age 72 after December 31, 2022, and age 73 before January 1, 2033, the new required date by which RMDs must begin, is April 1 of the calendar year following the calendar year in which the individual attains age 73. Previously April 1 of the calendar year following the calendar year in which the individual attains age 72 was applicable. For example, if you turn age 73 this year, you must take your first RMD by April 1, 2024.
This change is effective for distributions required to be made after December 31, 2022, with respect to individuals who will attain age 72 after that date.
As a result of this change, IRA owners who will turn age 72 in 2023 will have a required beginning date of April 1, 2025, rather than April 1, 2024. This delay in the required beginning date means that these IRA owners will have no RMD due from their IRAs for 2023.
For those who turned 72 this year and took a distribution between 1/1/23 and 7/31/2023 that was mischaracterized as an RMD, this notice provides rollover relief if you want to put it back into your IRA. Usually, a non-RMD distribution can be rolled into an IRA if done within 60 days after receipt. To provide transition relief, the IRS is extending the rollover deadline to September 30, 2023.
This rollover is still permitted even if you already did a 60-day rollover in the last 12 months. However, you won’t be able to do another 60-day rollover for another 12 months. Trustee-to-trustee transfers are not considered rollovers and therefore you can do as many of those as you want in a year.
The Bonadio Group’s Estate & Trust team has years of advisory and tax experience. Please do not hesitate to reach out to our trusted experts to discuss your specific situation.
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.
