Required minimum distributions are coming due for many; Secure 2.0 Act changed the rules for some

Tax professionals should remind their affected clients that they should take their retirement plan account minimum distributions by April 1 to avoid the punitive excise tax. 

Many individuals turning 72 in 2022 must begin receiving payments from Individual Retirement Arrangements (IRAs), 401(k)s, and similar workplace retirement plans no later than Saturday, April 01, 2023. 

The payments, called required minimum distributions (RMDs), are usually made by the end of the year. But anyone who reached age 72 during 2022 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, 2023, to take their first RMD.  

In other words, in general, the special April 01 rule applies to IRA owners and other participants in these plans who were born after December 31, 1949.

Two payments in the same year for the first year only

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 December 31. 

This means taxpayers who receive their first required distribution (for 2022) in 2023, on or before April 1, must receive their second RMD (for 2023) by December 31, 2023. Even though the first distribution is the required 2022 distribution, it's taxable in 2023 and reported on the 2023 tax return - along with the regular 2023 distribution. 

Types of retirement plans requiring RMDs

These required distribution rules apply to traditional, SEP, and SIMPLE IRA owners while the original owner is alive. They also apply to participants in various workplace retirement plans, including 401(k), 403(b), and 457(b) plans. RMDs don't apply to Roth IRAs. 

Required minimum distributions 

RMDs are the minimum amounts individuals must withdraw from their IRA or retirement plan accounts when they reach age 72. Beginning in 2023, the SECURE 2.0 Act changes the age RMDs must begin to age 73 for taxpayers that reach age 72 after December 31, 2022.  

Roth IRAs are not subject to RMDs until after the original account owner's death. Designated Roth accounts in a 401(k) or 403(b) plan are subject to the RMD rules for 2022 and 2023. However, for 2024 and later years, RMDs are no longer required from designated Roth accounts.

RMDs from an IRA

Individuals can meet their RMD requirements by withdrawing from one or more traditional IRAs, or SEP, SIMPLE, and SARSEP IRAs. They are not required to take a withdrawal from each of their IRAs, but the total withdrawals must be at least equal to the total RMD due from all IRAs in the aggregate. 

RMDs: age and date requirements under the Secure 2.0 Act

Reach age 72 in 2022: The first RMD from IRAs is due by April 1, 2023, based on the December 31, 2021, account balances. The second RMD is due by December 31, 2023, based on the December 31, 2022, account balances.  

Reach age 72 in 2023: Individuals turning age 72 in 2023 don't have an RMD requirement for 2023. Their first RMD is for 2024, the year they reach age 73, and is due by April 1, 2025.

RMDs from a retirement plan

To satisfy the RMD requirements in a retirement plan, individuals must take RMDs separately from each of their retirement plans. If they reached age 72 in 2022, their first RMD for 2022 is due by April 1, 2023, based on their December 31, 2021, account balance. their 2023 RMD is due by December 31, 2023, based on their December 31, 2022, account balance. 

For those still employed 

Individuals that are still employed by the plan sponsor, and not a 5% owner, and are in plans that allow it, may delay taking RMDs from that workplace retirement plan until they retire. IRS rules always require you to take RMDs beginning at age 72 from traditional IRAs, SEP, SIMPLE and SARSEP IRA plans, even if for those still employed.