A reminder for retirees who turned 72 during 2022, Sunday April 1, 2023 is the last day to begin receiving payments from IRAs, 401(k)s, and similar workplace retirement plans.
Required minimum distributions (RMDs), are normally made by the end of the year, but anyone who reached age 72 during 2022 is covered by a special rule that allows IRA account owners and participants in workplace retirement plans to wait until as late as April 1st 2023, to take their first RMD. In other words, the special April 1st rule applies to IRA owners and other participants in these plans who were born after December 31, 1949.
Two payments in the same year The April 1st RMD deadline only applies to the required distribution for the first year. For all later years, the RMD must be made by December 31st.
This means that taxpayers who receive their first required distribution (for 2022) in 2023, on or before April 1st, must receive their second RMD (for 2023) by December 31, 2023. Even though the first distribution is actually the required 2022 distribution, it’s taxable in 2023 and reported on the 2023 tax return along with the regular 2023 distribution.
Types of retirement plans requiring RMDs These required distribution rules apply to owners of traditional, SEP and SIMPLE IRAs while the original owner is alive. They also apply to participants in various workplace retirement plans, including 401(k), 403(b) and 457(b) plans. RMDs don’t apply to Roth IRAs.
Some can delay RMDs Though the April 1st deadline is mandatory for all owners of traditional IRAs and most participants in workplace retirement plans, some people with workplace plans can wait longer to receive their RMD.
Most participants who are still working for that employer can wait until April 1st of the year after they retire to start receiving these distributions, if their workplace plan allows. This RMD exception does not apply to 5% owners of the business sponsoring the retirement plan or to participants in SEP and SIMPLE IRA plans.
Employees of public schools and certain tax-exempt organizations with 403(b) plan accruals before 1987 should check with their employer, plan administrator or provider to see how to treat these accruals.
New age 73 rule starts in 2023 For those planning ahead, starting in 2023 retirees can wait until age 73 to begin receiving RMDs.
Contact us for more information regarding the RMD requirements.
Dasta & Company CPAs and Consultants