There's still time to beat the RMD deadline and withdraw your required minimum distribution from your traditional IRA, 401(k) or other retirement account (except a Roth IRA) for 2022…but you better hurry! The due date for taking this year's RMD is December 31 for most seniors who are at least 72 years old. That's just a few weeks away!
And if you don't take enough out of your retirement plans this year, you could be hit with a 50% penalty from the IRS on the amount not distributed as required. That's a big penalty that you certainly want to avoid.
More Time Allowed to Take Your RMD?
Some people have more time to take their 2022 RMD. For example, if you turned 72 in 2022, you actually have until April 1, 2023, to take your first RMD. (Use our handy RMD calculator to determine when you have to take your first RMD.) You don't have to wait until April 1, but it's an option.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
If you're still working and don't own at least 5% of the company, you can also delay taking RMDs from your current employer's 401(k) plan until April 1 of the year after the year you retire. Again, it's your choice.
If you delay your first RMD to April 1, you'll have to take two RMDs in 2023, which could trigger unintended consequences that increase your tax bill. For example, two RMDs in one year might kick you into a higher tax bracket or affect the amount of Social Security benefits that are subject to tax. One the other hand, if you had a lot of income in 2022, it might make sense to delay your first RMD to avoid similar problems this year. It all depends on your circumstances.
Calculating Your RMD
Generally, the minimum amount you're required to withdraw in 2022 is calculated by dividing the account balance at the end of 2021 by a life expectancy factor that the IRS publishes in Publication 590-B. (Again, we've created an easy-to-use tool that computes RMDs from traditional IRAs for you.) Fortunately, thanks to changes to the life expectancy tables, most seniors will have smaller RMDs for 2022 when compared to previous years.
If you have more than one traditional IRA, you need to determine a separate RMD for each IRA, but you can add up the RMD amounts and take the total from any one or more of your IRAs. However, if you have multiple 401(k) accounts, you have to calculate and take the RMD from each plan separately. (Your 401(k) plan sponsor or administrator should calculate the RMD for you.)
Waiver of RMD Penalty
You may be able to avoid the 50% penalty tax. You can request a waiver if your failure to take the RMD is due to a reasonable error and take whatever steps are necessary to increase your distribution to the required level. To request a waiver, submit Form 5329 with a statement explaining the error and the steps you're taking make things right.
Steps to Take Now
If you haven't withdrawn the necessary funds yet from any retirement account, don't delay. Contact the financial institution administering your account right away and set up a distribution (you might want to take out a little extra for your RMD to take care of estimated tax payments).
Most large financial institutions allow you to set up an RMD online. Some companies will even process an RMD automatically if they don't receive a completed form or online request before the deadline (so you aren't hit with a penalty). However, at this time of year, the most important thing is that you get the ball rolling now!
-
Will Utah Stop Taxing Social Security Benefits?Retirement Taxes Utah Gov. Spencer Cox wants to end the state's tax on Social Security income.
-
IRS Shakeup? What Trump's Commissioner Pick Could Mean for TaxesIRS An unconventional nominee comes amid broader efforts to reshape the IRS and tax policy in 2025.
-
IRS Shakeup? What Trump's Commissioner Pick Could Mean for Taxes
IRS An unconventional nominee comes amid broader efforts to reshape the IRS and tax policy in 2025.
-
IRS Could Lose Another $20 Billion in FundingIRS A mistake in legislative language could soon risk the tax agency's Inflation Reduction Act funding.
-
Two Consequential Tax Cases You May Not Have Heard AboutThe Supreme Court's decisions in these cases create uncertainty about challenging IRS regulations and guidance. Expect more litigation to follow.
-
Sometimes It Pays to 'Blow the Whistle' on IRS Tax EvadersTax Fraud The IRS recently awarded three IRS whistleblowers $74 million. Here's why.
-
The Big CPA Shortage Problem in AccountingCareer This once resilient accounting industry is cracking, as the labor force seems in dire straits. It’s also affecting the IRS.
-
IRS Skirts TikTok Ban to Sniff Out Tax ScammersTax Scams Social media scams caused thousands to file inaccurate returns. What does that have to do with TikTok?
-
Who Does the IRS Audit the Most?Audits The IRS has a $400K audit directive problem. Here’s what you need to know.
-
IRS Hauls Back $1.3 Billion From High-Income EarnersTax Filing Certain income and wealth levels can trigger an IRS audit. Here's what you need to know.
