IRS Issues Ruling on 10-Year RMD Rule
The IRS and Treasury Department recently issued Notice 2022-53, waiving the 50% penalty on missed 2021 and 2022 required minimum distributions (RMDs) for inherited retirement accounts within the 10-year payout rule.
In February, the IRS issued proposed regulations to reflect amendments made to section 401(a)(9) by provisions of the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act). The proposed regulations said that if a beneficiary inherited a retirement account from someone who was already taking RMDs, the beneficiary would be subject to the 10-year rule and would also be required to take RMDs for years 1-9 after the owner’s death.
As language in the SECURE Act suggested that there is no annual RMD for designated beneficiaries, those who inherited in 2020 and 2021 may not have taken RMDs for 2021 and 2022 even though some should have. After February’s proposed regulations were released, the IRS and Treasury received comments on the proposed regulations requesting transition relief for those who were required to take RMDs in 2021 and 2022 and did not.
As a result, Notice 2022-53 provides that to the extent a taxpayer did not take a specified RMD, the IRS will not assert that an excise tax is due under section 4974. If a taxpayer has already paid an excise tax for a missed RMD in 2021, they may request a refund of the tax.