The Internal Revenue Service (IRS) is urging retirees over the age of 73 to make their required minimum distributions (RMDs) before the end of 2024. These mandatory withdrawals apply to specific retirement plans, and failure to comply can result in significant penalties. RMDs are amounts that owners of certain retirement plans, such as SEP IRA and SIMPLE IRA, must withdraw annually once they reach the age of 73.
The withdrawn funds must be reported as taxable income on tax returns, potentially impacting the tax burden. The IRS mandates these withdrawals to prevent retirement funds from remaining in accounts indefinitely. However, Roth IRAs are exempt from RMDs during the owner’s lifetime, but beneficiaries must adhere to RMD requirements after the owner’s death.
Irs specific retirement plan compliance
The SECURE 2.0 Act, which aims to modernize retirement plans, has adjusted the mandatory age for RMDs from 72 to 73, giving retirees an additional year before they must begin withdrawals. To ensure compliance with tax obligations, retirees should consult a tax advisor for accurate RMD calculations and keep their account details up to date.
Failing to make the required minimum distributions can result in the IRS imposing a penalty equal to 50% of the amount not withdrawn. Retirees are allowed to withdraw more than the minimum required amount, but they must pay the corresponding taxes on these additional funds. In summary, retirees should be mindful of these updated regulations and ensure they meet their RMD obligations to avoid penalties.
Consulting a tax advisor and keeping accurate records can help manage these requirements efficiently.
