Over the years, millions of Americans had small amounts of money taken out of their paychecks before taxes were collected and put into retirement plans.
The Internal Revenue Service is reminding these taxpayers, who are either already retired or getting ready to retire, that they have to take money out of their retirement accounts.
The IRS says that if you don’t withdraw funds or don’t take the minimum amount required, you could have to pay a 50% excise tax on the amount you got.
If you’re planning your taxes for the end of the year, are at least 72 years old, or were born in 1950 or before, and have a retirement plan, the IRS wants you to start thinking about the required minimum withdrawal.
Account holders can put off their first required minimum distribution until April 1 of the year after they turn 72 or retire if they have a workplace retirement plan.
The amount you took out is taxable income, and you may have to pay penalties if you didn’t do it by a specific set deadline by the IRS.
The money that was taken out cannot be transferred into another individual retirement account (IRA).
The IRS says that Roth IRA owners don’t have to take distributions as long as they are still alive.
IRS rules say that you have to start taking money out of most retirement accounts if you are still working at age 72.
If you turned 72 this year, the IRS wants you to take your first minimum distribution by April 1, 2023, your second by December 31, 2023, and every year after that.
In 2020, the IRS made an exception for distributions that were related to pandemics.
Minimum required distributions were eliminated, and an account owner or beneficiary who got a distribution in 2020 could put it back into their IRA or another qualified plan to avoid paying taxes on it.
A required minimum distribution in 2020 that was made because of a pandemic could be paid back over three years or the taxes on the distribution could be spread out over three years.