Required Minimum Distribution Deadlines and Tax Law Changes for 2023
December 31st Deadline for RMDs
If you have clients who were born before 1951, remind them of the approaching year-end deadlines for mandatory withdrawals known as required minimum distributions (RMDs) from individual retirement arrangements (IRAs) and other retirement plans.
RMDs represent the annual amounts that many retirement plans and IRA account holders are obligated to withdraw. These distributions constitute taxable income and may incur penalties if not taken within the specified timeframe. Individuals born before 1951 should be aware that, in most cases, RMDs from IRAs and retirement plans are already due and are mandatory for the year 2023.
Summary of Changes for 2023
Secure 2.0 Act Changes: Raised the age for required minimum distributions (RMDs) from 72 to 73 starting in 2023. Individuals born in 1951 must receive their first RMD by April 1, 2025.
IRAs: RMD rules mandate withdrawals from IRAs (including SIMPLE IRAs and SEP IRAs) annually once individuals reach age 72 (or 73 if they turn 72 in 2023 or later), even if still employed.
Roth IRA owners aren't required to take withdrawals during their lifetime. Beneficiaries are subject to RMD rules after the owner's death.
Retirement Plans: RMD rules extend to employer-sponsored retirement plans (e.g., profit-sharing, 401(k), 403(b), and 457(b) plans). Participants in these plans can delay RMDs until retirement, except for 5% owners of the business sponsoring the plan.
Designated Roth Accounts: In 2023, designated Roth accounts in 401(k) or 403(b) plans are subject to RMD rules. Starting in 2024, these accounts won't have RMD requirements while the owner is alive.
Additional Information: Consult the Retirement plan and IRA required minimum distributions FAQs for comprehensive details on the new provisions in the law. The RMD comparison chart provides an overview of basic RMD rules for IRAs and defined contribution plans.
Disclaimer: This article is for informational and educational purposes only and does not constitute legal tax advice. Advanced Tax Solutions is not liable or responsible for any damages resulting from or related to your use of this information. It is your responsibility to refer to official IRS documentation for information regarding any tax laws or tax information shown here.
