IRS Reminder: Most Retirees Must Take RMDs by Dec. 31

IRS RMD deadline

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The Internal Revenue Service today reminded retirement plan participants and individual retirement account owners that required minimum distributions must usually be taken by Dec. 31.

After being waived for 2020 by the CARES Act, required minimum distributions (RMDs) are again in force for 2021.

RMDs generally are minimum amounts that retirement plan account owners must withdraw annually starting with the year they reach 72 or, if later, the year they retire. However, if the retirement plan account is an IRA or the account owner is a 5% owner of the business sponsoring the retirement plan, the RMDs must begin once the account holder is age 72, even if they’re still working. RMD amounts not timely withdrawn from accounts may be subject to penalties.

Individuals who reach 72 in 2021 (and their 70th birthday was July 1, 2019 or later) have their first RMD due by April 1, 2022

IRS Newswire, Dec. 8 2021

Individuals who reached 70½ in 2019, (70th birthday was June 30, 2019 or earlier) did not have an RMD due for 2020, but will have to take one by Dec. 31, 2021.

Individuals who reach 72 in 2021 (and their 70th birthday was July 1, 2019 or later) have their first RMD due by April 1, 2022.

The required distribution rules apply to:

Roth IRAs do not require distributions while the original owner is alive.

The IRS reminder notes an IRA trustee, or plan administrator, must report the amount of the RMD to the IRA owner. An IRA owner, or trustee, must calculate the RMD separately for each IRA owned. However, they can choose to withdraw the total amount from one or more of the IRAs. In contrast, RMDs required from workplace retirement plans must be taken separately from each plan. Not taking a required distribution, or not withdrawing enough, could mean a 50% excise tax on the amount not distributed.

The RMD is based on the taxpayer’s life expectancy and their account balance. Often, a trustee will use Form 5498, IRA Contribution Information, to report the RMD to the recipient. For most taxpayers, life expectancy used to calculate the RMD is based on Uniform Lifetime Table III in Publication 590-B, Distributions from IRAs. Individuals can use online worksheets on IRS.gov to figure the RMD.

SEE ALSO:

• Most Retirees Wait Until RMDs to Tap Retirement Accounts

• Year-End 401k Plan Compliance Checklist

• The Stretch IRA Went Away With The SECURE Act—Here Are Other Options

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