2023 RMD Or Not?
CC retired in May 2023 at age 79. She worked full time up to the date of her retirement in May 2023. Due to her continued full time employment she was not required to take RMD from her Employer’s Qualified Plan, despite her age of 79. Immediately after she retired she initiated a Direct Rollover into an Rollover IRA. The Recordkeeper did not require her to take a RMD coincident with her Direct Rollover. Is she required to take a 2023 RMD from her newly created Rollover IRA?
Permalink Submitted by Alan - IRA critic on Thu, 2023-07-20 18:36
Perhaps the record keeper had not recorded her retirement before she did the direct rollover. Nonetheless, the portion of the rollover equal to her 2023 plan RMD is treated as that RMD, but was not eligible for rollover. To correct this, she needs to explain this to the IRA custodian who should treat the RMD amount (less any portion that was eligible for a regular IRA contribution) as an excess regular IRA contribution and return it will allocated gain or less allocated loss. They will also have to report the direct rollover 1099R as a taxable distribution on Form 1040, with only the allowed rollover amount as a direct rollover. So there is no 2023 IRA RMD, just the removal of the excess contribution. The end result for 2023 taxable income will be about the same as if the plan RMD had been distributed before the direct rollover.