Should Your Clients Take Advantage of the IRS RMD Relief for 2023?

The IRS has provided a bit of relief for taxpayers who have inherited IRAs and will be required to take annual distributions over their ten-year depletion period. In 2022, the IRS waived penalties for missed RMDs from inherited accounts in 2021 and 2022. Now, the IRS has extended that penalty relief for missed 2023 RMDs to provide relief in situations where the original account owner died during 2022. Many clients will jump to take advantage of this relief to avoid increasing their 2023 taxable income. However, that's not always a wise move. These taxpayers should be reminded that the original ten-year distribution period still applies, so clients will be required to empty the account by year ten regardless of whether they qualify for relief in years one-three. Those clients may end up with higher distributions in years four-ten--which could increase their overall tax liability in the end. For more information on the post020 distribution rules for inherited IRAs, visit Tax Facts Online. : Q 3689. Note: Q is updated.