IRS delays guidelines, waiving penalties for some inherited retirement accounts until 2023

IRS delays guidelines, waiving penalties for some inherited retirement accounts until 2023


Zinkevych | iStock | Getty Images

If you inherited a retirement account in 2020 or 2021, the IRS is waiving penalties for some heirs who needed to start taking required minimum distributions right away, according to a notice issued Friday.

The new rule won’t apply until 2023.

Typically, there’s a 50% penalty when you skip RMDs or don’t take the full amount by the deadline, applying to the balance that should have been withdrawn.

Thanks to the Secure Act of 2019, certain heirs, known as “non-eligible designated beneficiaries,” have to deplete inherited retirement accounts within 10 years, known as the “10-year-rule.”

More from Personal Finance:
Here’s how to pay 0% capital gains taxes with a six-figure income
How Congress may renew monthly child tax credit checks
Long-term unemployment dips by another 70,000 people

Non-eligible designated beneficiaries are heirs who aren’t a spouse, minor child, disabled, chronically ill or certain trusts. The 10-year rule applies to accounts inherited on Jan. 1, 2020, or later.

However, there’s an even shorter timeline if the original owner already reached their “required beginning date” when their own RMDs needed to begin. In that case, heirs were expected to start taking RMDs immediately.

Owners of inherited IRAs and retirement plan beneficiaries have expressed confusion about the timeline for required RMDs, and asked for “transition relief” for missed 2021 and 2022 RMDs, according to the notice.

Investors reconsider 60/40 stock and bond strategy amid market downturn

As a result, taxpayers who skipped RMDs from inherited retirement accounts won’t owe a penalty for 2021 or 2022, the IRS says.

If you already paid the penalty for 2021, you can “request a refund of that excise tax,” the notice says.

These guidelines don’t apply to regular RMDs, eligible designated beneficiaries or heirs who inherited retirement accounts before 2020.



Source

Student housing CEO says luxury is losing its appeal
Business

Student housing CEO says luxury is losing its appeal

Annex, a Scion community in Oxford, Ohio, that serves students of Miami University. Courtesy of Scion A version of this article first appeared in the CNBC Property Play newsletter with Diana Olick. Property Play covers new and evolving opportunities for the real estate investor, from individuals to venture capitalists, private equity funds, family offices, institutional […]

Read More
Lamborghini CEO says tariffs are causing even the wealthiest buyers to pause
Business

Lamborghini CEO says tariffs are causing even the wealthiest buyers to pause

Uncertainty around tariffs has caused even the wealthiest buyers of Lamborghini supercars to hold off on their purchases, CEO Stephan Winkelmann told CNBC. While the White House recently announced an agreement with Europe on a 15% tariff rate, that rate hasn’t yet taken effect for cars. Lamborghini and other European automakers are still paying a […]

Read More
Frontier Airlines goes after struggling rival Spirit’s customers with 20 new routes
Business

Frontier Airlines goes after struggling rival Spirit’s customers with 20 new routes

A Frontier Airlines plane near a Spirit Airlines plane at the Fort Lauderdale-Hollywood International Airport on May 16, 2022 in Fort Lauderdale, Florida. Joe Raedle | Getty Images Frontier Airlines is going after customers of Spirit Airlines, whose financial footing has gotten so shaky in recent weeks that it warned earlier this month it might […]

Read More