IRS Reminds Retirees of April 1 RMD Deadline

The Internal Revenue Service is reminding retired Americans who turned 72 during the last half of 2021 that, in most cases, April 1 is the last day to begin receiving requirement minimum distribution payments from IRAs, 401(k)s and similar workplace retirement plans.

RMDs are normally made by the end of the year, the IRS explains.

However, “anyone who reached age 72 after June 30, 2021, is covered by a special rule that allows IRA account owners and participants in workplace retirement plans to wait until as late as April 1, 2022, to take their first RMD,” the IRS said.

In other words, the IRS said, the special April 1 rule applies to IRA owners and other participants in these plans who were born after June 30, 1949.

Two payments in the same year

The April 1 RMD deadline only applies to the required distribution for the first year. For all later years, the RMD must be made by Dec. 31, the IRS said.

“This means that taxpayers who turned 72 after June 30, 2021, and receive their first required distribution (for 2021) in 2022 on or before April 1, must receive their second RMD (for 2022) by Dec. 31, 2022,” according to the IRS. “Even though the first distribution is actually the required 2021 distribution, it’s taxable in 2022 and reported on the 2022 tax return – along with the regular 2022 distribution.”

Retirement plans requiring RMDs

These required distribution rules apply to owners of traditional, SEP and SIMPLE IRAs while the original owner is alive, the IRS said.

They also apply to participants in 401(k), 403(b) and 457(b) plans. RMDs don’t apply to Roth IRAs.

“An IRA trustee must either report the amount of the RMD to the IRA owner or offer to calculate it,” the IRS said. “Often, the trustee shows the RMD amount on Form 5498 in Box 12b. For a 2021 RMD, required by April 1, 2022, the RMD amount is shown on the 2020 Form 5498, normally issued to the owner during the first part of 2021.”

Some can delay RMDs

While the April 1 deadline is mandatory for all owners of traditional IRAs and most participants in workplace retirement plans, the IRS explains, 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 1 of the year after they retire to start receiving these distributions, if their workplace plan allows,” the IRS said.

“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. See Tax on Excess Accumulation in Publication 575 for details.”

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, the IRS said.

IRS online tools to help

Answers to questions about RMDs can be found at RMD FAQs on IRS.gov.

Most taxpayers use Table III (Uniform Lifetime) to figure their RMD. Married taxpayers whose spouse is more than 10 years younger and is their only beneficiary use Table II.

“Because this and other life expectancy tables were updated for 2022, recipients need to use a different version of this table to figure their 2021 RMD, compared to their 2022 RMD,” the IRS said. “The required withdrawals in 2022 and future years will generally be smaller.”

The IRS explained:

·       For a 2021 RMD (due April 1, 2022), use the life expectancy tables in Appendix B of the Pub. 590-B used for preparing 2020 returns. As shown in Table III, the RMD for a person age 72 in 2021 will normally be based on a distribution period of 25.6 years. Divide the Dec. 31, 2020, balance by 25.6 to get the RMD for 2021.

·       For a 2022 RMD (due Dec. 31, 2022), use the revised life expectancy tables in Appendix B of the Pub. 590-B used for preparing 2021 returns. As shown in the revised Table III, the RMD for a person age 72 in 2022 will normally be based on a distribution period of 27.4 years. Divide the Dec. 31, 2021, balance by 27.4 to get the RMD for 2022.