The Internal Revenue Service (IRS) isn’t messing around when it comes to informing retirees of the April 1 deadline for receiving benefits from a variety of employment retirement programs.
Contributions from retirement plans, such as IRAs or 401(k) plans, are typically made by the end of the fiscal year. Retirees who turned 72 last year, on the other hand, are covered under a rule that allows participants in employee retirement plans to defer their first required minimum distribution payment, or RMD, until as late as April 1 this year, the IRS stated Thursday.
Retirement Programs That Need RMDs
The April 1 RMD deadline only applies to the first year’s mandated distribution. For all subsequent years, the RMD must be paid by December 31.
This means that taxpayers who get their first necessary distribution (for 2022) on or before April 1, 2023, must also receive their second RMD (for 2023) by December 31, 2023. Notwithstanding the fact that the first dividend is the required 2022 distribution, it is taxable in 2023 and must be recorded on the 2023 tax return alongside the ordinary 2023 distribution.
While the original owner is still living, these necessary distribution regulations apply to regular, SEP, and SIMPLE IRA owners. These also apply to members in employee retirement plans such as 401(k), 403(b), and 457(b). Roth IRAs are exempt from RMDs.
An IRA trustee must either report or offer to compute the RMD amount to the IRA owner. On Form 5498, the trustee frequently shows the RMD amount in Box 12b. The RMD amount for a 2022 RMD, due by April 1, 2023, is listed on the 2021 Form 5498, which is generally issued to the owner during the first half of 2022.
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Can You Delay RMDs?
Despite the April 1 deadline is necessary for all traditional IRA owners and most company retirement plan participants, some persons with workplace plans may have to wait longer to receive their RMD.
If their workplace plan allows it, most participants who are still working for that employer can wait until April 1 of the year after they retire to begin receiving these distributions.
This RMD exemption does not apply to 5% of owners of the business sponsoring the retirement plan or to SEP and SIMPLE IRA participants. For more information, see Publication 575, Tax on Excess Accumulation.
Workers of public schools and some tax-exempt organizations who had 403(b) plan accruals before 1987 should consult with their employer, plan administrator, or provider to determine how these accruals should be treated.
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