IRS: Heed These RMD Deadlines or Face Penalties
The Internal Revenue Service on Monday reminded taxpayers born in 1950 or earlier of important upcoming deadlines for required minimum distributions to avoid penalties.
RMDs are minimum amounts that many retirement plan and IRA account owners must generally withdraw annually after they reach age 72. RMDs are taxable income and may be subject to penalties if not timely taken.
As the IRS explains, account owners can delay taking their first RMD until April 1 following the later of the calendar year they reach age 72 or, in a workplace retirement plan, retire.
IRAs
Account holders with a traditional IRA, and SEP, SARSEP (a type of simplified employee pension), or SIMPLE IRA must begin taking distributions at age 72, even if they’re still working, the IRS said.
“Account holders reaching age 72 in 2022 must take their first RMD by April 1, 2023, and the second RMD by Dec. 31, 2023, and each year thereafter,” the IRS states.
Retirement Plans
As to 401(k), 403(b) and 457(b) plans, profit-sharing and other defined contribution plans, and defined benefit plans, the first RMD must be taken by April 1 of the later of the year a participant reaches age 72, or the participant is no longer employed (if allowed by the plan), the IRS explains.
A 5% owner of the employer must begin taking RMDs at age 72.
RMDs may not be rolled over to another IRA or retirement plan, and Roth IRAs do not require distributions while the original owner is alive, according to the IRS.
RMD Calculations and 50% tax on missed distributions
An IRA trustee, or plan administrator, must either report the amount of the RMD to the IRA owner or offer to calculate it.
