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April 04, 2022 at 12:09 PM
What You Need to Know
- The changes to the 10-year rule for inherited IRAs is already effective, the IRA expert and CPA says.
- He expects the IRS to issue relief guidance.
- Clients with inherited IRAs should not take RMDs for years 1-9, or make up missed 2021 RMDs until IRS issues guidance, he says.
The IRS’ recently released proposed regulations on how to handle required minimum distributions under the Setting Every Community Up for Retirement Enhancement (Secure) Act of 2019 are effective now.
While the IRS’ recently released regs “are called ‘proposed’ regulations, they are not like proposed tax laws which are not effective until signed into law,” Ed Slott of Ed Slott & Co. told ThinkAdvisor in a recent email.
For instance, “the changes to the 10-year rule for inherited IRAs, specifically the RMD requirement for years 1 to 9 when death is after the required beginning date is based on IRS’ interpretation of existing law, and is technically already effective,” Slott said.
Industry groups, Slott pointed out, “are complaining about this since some beneficiaries have already missed RMDs for 2021 they didn’t know they had to take!”
The “RMD rule (RMDs for years 1-9) was already established law under the existing regulations,” Slott continued.
In the IRS’ new regs, however, Slott explained, the “IRS is saying that the years 1-9 RMDs (when death occurs on or after the required beginning date) are still applicable in addition to the 10-year rule. In other words, when death is on or after the RMD, then both rules apply —
(1) RMDs for years 1-9, and
(2) The 10-year rule — the full balance in the inherited IRA must be withdrawn by the end of the 10th year after death — i.e., by the end of the 10-year term.”
