As tax season approaches, the IRS has issued a crucial reminder for retirees who turned 73 in 2024. If you fall into this category, you must begin taking Required Minimum Distributions (RMDs) from your Individual Retirement Accounts (IRAs), 401(k)s, and other workplace retirement plans by Tuesday, April 1, 2025.
Key Points About RMDs for 2024
- Who Must Take RMDs?
- Individuals born after December 31, 1950 who have traditional IRAs, SEP IRAs, SIMPLE IRAs, or participate in 401(k), 403(b), or 457(b) plans.
- Roth IRAs do not require RMDs while the original owner is alive.
- Two RMD Payments May Be Required in 2025
- If you delay your first RMD until April 1, 2025, you will still need to take your second RMD for 2025 by December 31, 2025.
- Both distributions will be reported as taxable income for 2025, which could increase your tax liability.
How to Calculate Your RMD
Your RMD amount is typically provided by your IRA trustee or plan administrator and can be found on Form 5498, Box 12b. The IRS life expectancy tables in Publication 590-B help determine the distribution period. For example, if you turned 73 in 2024, your RMD is generally based on a 26.5-year distribution period.
To calculate your 2024 RMD:
- Check your December 31, 2023 account balance.
- Divide it by 26.5 (per IRS Table III, Uniform Lifetime Table).
Exceptions to RMD Rules
- Still Working Exception: If you participate in a workplace retirement plan and are still employed, you may be able to defer RMDs until April 1 following your retirement (if your plan allows it).
- This exception does not apply to 5% business owners or participants in SEP and SIMPLE IRA plans.
Read also: IRS Provides Tax Relief For Taxpayers Affected by California Wildfires
Stay Compliant & Avoid Penalties
Failing to take your RMD on time can result in a 50% excise tax on the amount not withdrawn. To avoid penalties, ensure you:
- Confirm your RMD deadline with your plan administrator.
- Withdraw the required amount before April 1, 2025 (for your first RMD) and December 31, 2025 (for your second RMD).
Source: irs.gov/newsroom
