The IRS sends out reminders to people who are retiring or approaching retirement age regarding mandated withdrawals from retirement accounts. The Internal Revenue Service claims that a 50% excise tax on the distribution amount is possible if the minimum required amount is not withdrawn.
Millions of Americans over the years had taken little sums of their pre-tax income and invested it in retirement programs.
What Is Retirement Account (IRA)?
There is no option to transfer the withdrawal to another retirement account (IRA). The IRS states that Roth IRA account holders are not obligated to take distributions from their accounts while they are still living.
In the year 2020, the IRS created a special distribution exception in case of a pandemic. An account owner or beneficiary who receives a distribution in 2020 and wishes to avoid paying taxes on that distribution may roll it over into an IRA or other qualified plan. This provision removes the need to take RMDs.
If your 2020 RMD qualifies as a pandemic distribution, you may be able to pay it back over three years or spread out your tax payments.
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Advisors Confuse IRS Penalty Waiver For Missed RMDs
As stated by Gillette, clients who are required by the proposed regulation to take an RMD in 2022 should discuss the potential tax effects with their advisors, as these could affect planning that had been done under the original interpretation of the SECURE Act, resulting in income being received and taxed years earlier than anticipated and cash flow to beneficiaries being accelerated.
Regardless of what clients may believe, Slatter emphasized that they must comply with both the annual RMD and the 10-year complete distribution requirement or face the 50% excise tax.
It is uncertain whether the RMDs for 2021 and 2022 need to be taken at all, as indicated by Karen Goldberg, a partner in charge of the trusts and estates group at the Eisner Advisory Group in New York. The Treasury and the Internal Revenue Service need to provide us with further information.
Gillette added that there may be a delay in implementing the new RMD age of 75 due to continuing negotiations in Congress.
Borglum noted the urgency of the situation due to the delay in the release of final regulations. This is not the year for dramatic strategy changes.
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