IRS Stands Down (Temporarily) on Inherited IRA Required Minimum Distribution (RMD) Rules

The IRS has announced that a 25% excise tax will not be imposed against individuals who in 2024 failed to abide by the SECURE Act’s new RMD requirements for inherited retirement accounts.

The SECURE Act introduced new required minimum distribution (RMD) rules for inherited IRAs, generally requiring that the beneficiary take out the entire account balance by the 10th calendar year after the year of the IRA owner’s death, whereas previously the beneficiary was able to take distributions over his or her life expectancy.

In response to comments by industry experts noting some ambiguities in the new regulations (most notably, whether the 10-year rule could be satisfied by a distribution in the 10th year alone or only by periodic annual distributions throughout the 10-year period), the IRS recently announced that IRA beneficiaries who failed to take the proper RMD will not be subject to an excise tax if the IRA owner died in 2020, 2021, 2022, and 2023.

Final regulations are anticipated to apply for RMDs beginning on or after January 1, 2025.

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