New IRA RMD effective ages under the New Secure Act

[RWG1950]

As I understand this, IRA RMD's now begin at:
AGE 70 1/2 for those born before July 1st 1949
AGE 72 for those born between 7-1-1940 and 12-31-1950
AGE 73 for those born between 1-1-1951 and 12-31-1959
AGE 75 for those born after 1-1-1960
If I mis-understand please post a corrective reply.
Thanks

[Lion]

From Wolters Kluwer:

Increased age for Requires Minimum Distributions.


SECURE 2.0 increases the age for RMDs to 73, beginning on January 1, 2023, and to age 75 on January 1, 2033, for certain individuals. In addition, it reduces or entirely eliminates the excise tax imposed for not taking RMDs.

https://www.wolterskluwer.com/en/expert-insights/retirement-savings-plans-see-big-changes-tax-and-administrative-implications-with-secure-act-2-0#:~:text=Key%20provisions%20in%20SECURE%202.0

[New York Enrolled Agent]

From Wolters Kluwer:

Increased age for Requires Minimum Distributions.


SECURE 2.0 increases the age for RMDs to 73, beginning on January 1, 2023, and to age 75 on January 1, 2033, for certain individuals. In addition, it reduces or entirely eliminates the excise tax imposed for not taking RMDs.

lion - the section 4974 excise tax has been reduced but I know of no provision where it is eliminated.

The excise tax is reduced to 25% effective for tax years beginning 1/1/23. The tax can be further reduced to 10% if the taxpayer corrects the shortfall in the period known as the “correction window”. I don’t believe it can be eliminated completely. Please let me know if I miss something.

[Lion]

I was quoting Wolters Kluwer.

[New York Enrolled Agent]

I can't speak to what WK said or didn't say but the Secure Act shows only a reduction.to 25% and possibly 10%. This is section 302 of the Secure Act 2.0 of 2022. If you find anything in WK which shows excise tax elimination please post.

Sec. 302. Reduction in excise tax on certain accumulations in qualified retirement plans

(a) In general, Section 4974(a) is amended by striking 50 percent and inserting 25 percent.

(b) Reduction in excise tax on failures to take required minimum distributions

Section 4974 is amended by adding at the end the following new subsection:

(e) Reduction of tax in certain cases

(1) Reduction In the case of a taxpayer who—
(A) receives a distribution, during the correction window, of the amount which resulted in imposition of a tax under subsection (a) from the same plan to which such tax relates, and
(B) submits a return, during the correction window, reflecting such tax (as modified by this subsection), the first sentence of subsection (a) shall be applied by substituting 10 percent for 25 percent.

(2) Correction window ….

(c) Effective date The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

[Rapid Robert]

While not legislation, isn't there a proposed reg that will entirely waive the excise penalty for missed RMDs on inherited IRAs for the last two years? (because of different interpretations of how to apply the 10-year rule). Not sure if that is what Wolters Kluwer was referring to...

[New York Enrolled Agent]

While not legislation, isn't there a proposed reg that will entirely waive the excise penalty for missed RMDs on inherited IRAs for the last two years? (because of different interpretations of how to apply the 10-year rule). Not sure if that is what Wolters Kluwer was referring to...

You’re probably thinking about Notice 2022-53. However, that Notice deals with the original SECURE Act.

The provision which reduces the excise tax to 25% (with a possible reduction to 10%) is in the SECURE 2.0 Act.

[Rapid Robert]

Still not sure what WK was referring to, but I just attended a SECURE Act 2.0 webinar (good quality and very reasonably priced, presented by CSEA and Thomas A. Gorczynski, EA, USTCP). It was revealed that whereas in the past, anyone with an excess accumulation subject to the excise tax did not start the statute of limitation clock until they filed a Form 5329, there is now an SOL based on filing of the income tax return for the year in question, and even a provision for those not required to file income tax returns. The SOL is now either 3 or 6 years depending on the excise tax in question. So, as of now, if someone has excess accumulations that occurred more than the new SOL period, it is too late for the IRS to come after them, therefore you could say the excise tax in that case is now zero (from the taxpayer's point of view, anyway).

SEC. 313. INDIVIDUAL RETIREMENT PLAN STATUTE OF LIMITATIONS FOR EXCISE TAX ON EXCESS CONTRIBUTIONS AND CERTAIN ACCUMULATIONS.
(a) IN GENERAL.—Section 6501(l) is amended by adding at the end the following new paragraph:
‘‘(4) INDIVIDUAL RETIREMENT PLANS.—
‘‘(A) IN GENERAL.—For purposes of any tax imposed by section 4973 or 4974 in connection with an individual retirement plan, the return referred to in this section shall include the income tax return filed by the person on whom the tax under such section is imposed for the year in which the act (or failure to act) giving rise to the liability for such tax occurred.