10 Year Rule RMDs In Years 1-9 Under New Proposed Regulations
The proposed regulations would be effective beginning 1/1/2022. For 2021 distributions, taxpayers apply existing regulations taking into account a good faith interpretation of the amendments made by section 114 and 401 of SECURE. Compliance with the proposed regulations would satisfy the good faith requirement.
Question: For an IRA owner who died in 2020 after their RBD leaving a designated beneficiary operating under the 10 year rule, is the IRS taking the position that this designated beneficiary should have taken a distribution based on their life expectancy in 2021? If yes, would the IRS would be looking to asses a penalty since the propose regulations requiring the year 1-9 distributions did not come out until 2022?
Permalink Submitted by Alan - IRA critic on Thu, 2022-03-24 03:02
I would expect that if the beneficiary did not take a LE RMD for 2021, it would be a good faith interpretation of IRS Pub 590 and other guidance from the IRS. The new proposed Regs were not released until this year, and therefore beneficiaries had no way of knowing about the decision to require RMDs within the 10 year rule. And since the new Regs will not be permanent until late this year, it would probably be wise to not take the 2022 beneficiary RMD either unless the beneficiary wants to in order to spread the income over the 10 years. When the Regs are finalized, the IRS should clarify the options for 2022, but it is highly unlikely that a retroactive RMD for 2021 will be required.