In July 2023, the IRS issued guidance granting taxpayers temporary relief from compliance with recently enacted laws concerning required minimum distributions (RMDs) from tax-deferred retirement accounts, including individual retirement accounts (IRAs) and 401(k)s.
The Secure Act, signed into law in 2019, introduced a requirement that certain non-spouse beneficiaries of inherited IRAs draw down those accounts and pay the related taxes within 10 years of an original owner’s death. To clarify this 10-year payout rule, the IRS explained that non-spouse beneficiaries who inherit a decedent’s IRA after Jan. 1, 2020, must take annual RMDs from those accounts and treat them as taxable income to themselves in years one through nine after an original account holder’s death and remove any remaining balance from those accounts (and pay the related tax liabilities) by the end of year 10. Depending on the value of the IRA, named beneficiaries could risk falling into a higher tax bracket and becoming saddled with significantly high tax liabilities, for which they would pay higher tax rates on ordinary income and certain capital gains.
However, due to ongoing confusion and misinterpretation of these rules, the IRS delayed the start date for the third time. IRS beneficiaries who inherit an IRA from a non-spouse decedent may now wait until 2024 to take their first RMDs from those inherited accounts. While this is welcome news for many beneficiaries, it also means they will need to withdraw higher amounts during the remaining years of the 10-year withdrawal period, potentially putting them into an even higher tax bracket.
Ab About the Author: Robert Mark Weiss, CFA, is a regional director and financial planner with Provenance Wealth Advisors, an Independent Registered Investment Advisor affiliated with Berkowitz Pollack Brant Advisors + CPAs, and a registered representative with PWA Securities, LLC. For more information, call (941) 308-1126 or email email@example.com.
Provenance Wealth Advisors (PWA), 200 E. Las Olas Blvd., Nineteenth Floor Ft. Lauderdale, FL 33301 (954) 712-8888.
Robert Mark Weiss is a registered representative of and offers securities through PWA Securities, LLC, Member FINRA/SIPC.
This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.
Any opinions are those of the advisors of PWA and not necessarily those of PWA Securities, LLC. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of PWAS, we are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional.
Prior to making any investment decision, please consult with your financial advisor about your individual situation. Please note that changes in tax laws may occur at any time and may have a substantial impact on each person’s situation.
The information contained in this report has been obtained from sources considered to be reliable, but PWA Securities, LLC does not guarantee that the foregoing material is accurate or complete.
Posted on October 26, 2023