The IRS has recently extended the tax relief on required minimum distributions (RMDs) for inherited individual retirement accounts (IRAs) and annuities through 2024. This extension is part of a series of reliefs that began in 2021, aiming to alleviate financial stress for beneficiaries during the regulatory transition period.
Under Notice 2024-35, the IRS specifies that if certain conditions are met, plans will remain qualified even if they fail to make specified RMDs in 2024. Additionally, affected taxpayers won’t face the usual excise tax penalties for non-compliance with RMD withdrawals. This decision is rooted in modifications introduced by the SECURE Act of 2019, which relaxed several rules around RMDs.
The SECURE Act extended the period within which beneficiaries of retirement accounts must withdraw assets. Previously, the law required a complete distribution within five years for certain beneficiaries; this has been extended to ten years, offering more flexibility in financial planning and potentially lowering annual tax burdens.
These changes were further defined in proposed regulations issued by the Treasury Department and the IRS in February 2022, responding to public comments and aiming to clarify the application of these rules. Notices 2022-53 and 2023-54 provided interim guidance and continued the relief for RMDs due in 2021, 2022, and 2023, respectively.
The final regulations, which will determine the precise RMD requirements for future years, are slated to be applicable no earlier than the 2025 calendar year. This timeline allows taxpayers, advisors, and plan administrators to adjust to the new rules and ensures that the transition does not unfairly penalize those who are still adapting to changes in the law.
For beneficiaries and heirs of IRAs and other retirement vehicles, this ongoing relief means more time to strategically plan withdrawals in a manner that may optimize your tax outcomes. It also emphasizes the importance of staying informed about tax regulations as they evolve. As always, if you have questions about this or any other tax law, reach out to us so we can help you create a tax plan that takes advantage of every opportunity possible.