Congress has set its sights on mega-IRA balances, in large part due to the recent reports about Peter Thiel’s $5 billion Roth IRA. But some of these proposals will impact many other clients with smaller individual retirement accounts and Roth IRAs.
Imagine spending a lifetime building a retirement account only to have your beneficiaries lose it in one fell swoop: They mishandle the account, triggering tax on the entire inherited individual retirement account.
2021 is the last year your clients can use their retirement funds for unlimited charitable giving as a result of provisions in recent tax laws.
Any IRA owner turning age 72 this year will have a required minimum distribution due for 2021, but the due date for taking that RMD will depend on the half of the year in which they were born. June 30 is the cut-off date when the transition to the SECURE Act age 72 RMD rule becomes complete.The SECURE Act raised the RMD age for owners of individual retirement account owners and certain retirement plan participants from 70½ to 72, but only for those who turned 70½ in 2020 or later.
The issue involves the 10-year rule that most non-spouse designated beneficiaries (like adult children or grandchildren, and certain qualifying trusts) who inherit individual retirement accounts will be subject to under the SECURE Act.It was expected that the 10-year rule would work the same way as the 5-year rule: There wouldn’t be annual required minimum distributions, but the entire inherited IRA account balance would have to be withdrawn by the end of the 10-year term.
This is my third update on the confusion about the 10-year rule on required minimum distributions under the SECURE Act, and it won’t be the last. Last Thursday, the IRS acknowledged that IRS Publication 590-B, which contains the tax rules for withdrawing funds from IRAs, is being revised, likely to fix the error I wrote about twice before here, in “IRS: SECURE Act’s 10-year RMD rule is not what you thought” on April 12 and “Weighing in on disputed language in IRS 10-year RMD rule” on April 28.
Congress has come up with what some are calling SECURE 2.0, or Son of SECURE — a bill entitled Securing a Stronger Retirement Act that includes many positive changes to encourage retirement savings. However, one seemingly pointless proposal in the legislation would raise the required minimum distribution age from 72 to 75 over 10 years.Most advisers might argue that consumers will probably love this
On the eve of this year’s Kentucky Derby, the first of three races a horse must win to grab racing’s Triple Crown, the Biden tax proposals are underscoring the triple crown of tax advantages provided by Roth conversions.
Here’s an update to my earlier article on IRS’s interpretation of how the SECURE Act 10-year rule will work for beneficiaries of individual retirement accounts.I am now 100% convinced that the idea of annual required minimum distributions under the 10-year rule was an IRS error that will soon be corrected
In late March, IRS released IRS Publication 590-B, which contains the tax rules on withdrawing funds from individual retirement accounts.Normally this is a wrap-up of rules to use as guidance in preparing tax returns
