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!
-
-
Estimated Tax Payments Are Due Next Week
Tax Deadlines Here’s what you need to know about paying estimated taxes and avoiding penalties.
-
Stock Market Today: Stocks Finish Mixed After Bank of Canada's Surprise Rate Hike
Canada's central bank unexpectedly lifted interest rates after pausing them earlier this year, boosting expectations for another Fed rate hike at next week's meeting.
-
Supreme Court: Yes, the IRS Can Secretly Obtain Your Bank Records
The Supreme Court has sided with the IRS in a case that involves owing the IRS money, taxpayer privacy, and notice.
-
Will an IRS Tax Prep Service Replace H&R Block or TurboTax?
A government-run tax preparation and filing service has some wondering if people will leave H&R Block and TurboTax and let the IRS do their taxes instead.
-
IRS Service Improvements Could Bring Faster Tax Refunds
Recent IRS improvements mean taxpayers could see faster tax refunds next year and beyond.
-
Supreme Court to Decide if IRS Can Secretly Obtain Bank Records
Among other high-profile issues, the Supreme Court is considering a case involving taxpayer privacy and the IRS.
-
IRS Says File Soon for $1.5 Billion in Unclaimed Tax Refunds
Unclaimed tax refunds from 2019 are waiting for millions of people who might not know it – but only if they file the pandemic-era tax return soon. Are you one of them?
-
IRS $80 Billion Plan Targets Taxpayer Compliance, Improved Service
The IRS unveiled its much-anticipated strategic operating plan detailing how the agency will spend $80 billion in funding allocated over 10 years under the Inflation Reduction Act.
-
Etsy, eBay, PayPal Want IRS 1099-K Relief for Online Sellers
Companies like ebay, Etsy, and PayPal want Congress to raise the new $600 reporting threshold for IRS Form1099-K to give relief to millions of sellers who use their sites.
-
Tax Scam: IRS Warns Taxpayers Against Filing False W-2 Info
Scams A new tax scam on social media advises lying on your W-2 to falsely claim credits and bigger refunds.
