Bene IRA Penalty waived but not RMD’s
It’s important to make the distinction that it is the excise tax that is waived and not the required minimum distributions
Can someone shed some light if the IRS only waived the penalty by not taking the RMD’s but doesn’t have authority to waive RMD themselves that would take an act of Congress?? I was under the impression Bene RMD’s on accounts when owner had died 2020 or after were waived once again this year but seems the actual RMD may not have rather the penalty!!
Permalink Submitted by Alan - IRA critic on Thu, 2024-05-30 03:59
Technically, the IRS has only waived the penalty for certain 10 year rule beneficiaries. While the RMDs themselves were not waived, no one believes that once the IRA finalizes the Secure Act Regs, that beneficiaries will have to suddenly make up the RMDs that they did not take. The IRS has waived the penalty for 4 years, therefore a beneficiary who took no distributions now has only 6 years left (if they inherited in 2020) of the 10 year rule period and the RMDs in those years will now be larger because the year end balances will be larger. As such, the IRS does not have that long to wait until the entire balance is distributed and taxes will be collected. In addition, those tax rates may well be higher then they have been since 2020.
The conclusion is that even though the penalty was waived, most beneficiaries should have been taking voluntary distributions to even out the taxable income over the 10 years to avoid getting hit with a very large tax bill in year 10.