March 2023 Compliance News Article

Reporting Relief for 2023 RA RMDs

The Internal Revenue Service has issued guidance to financial institutions on reporting required minimum distributions (RMDs) for 2023 for individual retirement accounts and annuities (IRAs) as a result of the SECURE 2.0 Act of 2022 (SECURE 2.0).

Background

One of the retirement savings provision changes in SECURE 2.0 is a change in the required beginning age for RMDs from 72 to age 73 starting on January 1, 2023. Under this provision, an IRA owner must take their first RMD by April 1 of the calendar year following the year in which the individual attains age 73 starting on January 1, 2023 and ending on December 31, 2032. IRA owners turning 72 in 2023 will now have a required beginning date of April 1, 2025, instead of April 1, 2024, the date that would have been required prior to SECURE 2.0 passing.

When an IRA owner has their first RMD due by April 1, the financial institution that is the trustee, custodian, or issuer of the IRA must issue a statement to the IRA owner by January 31 informing them of the due date and the amount of the RMD that is due (or offer to calculate the amount by request). Once the RMD has been distributed, the financial institution must also file a Form 5498 by May 31.

Relief

Since IRA owners attaining age 72 in 2023 will not have an RMD due for 2023, the RMD statement and corresponding Form 5498 should not be issued. Due to the short amount of time that financial institutions have had to update their systems since SECURE 2.0 was enacted on December 29, 2022, the IRS is providing reporting relief. If a financial institution incorrectly issues an RMD statement to an IRA owner turning age 72 in 2023, they can issue another statement to the owner by April 28, 2023, stating that an RMD is not due for 2023. If these circumstances are met, the IRS will not consider the first RMD statement to have been issued in error.

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