IRS Announces Another Extension for Inherited IRA RMD Rules

By Ginny Graef, CPA, Partner

IRS Announces Another Extension for Inherited IRA RMD Rules

Update on RMDs under the provisions of the SECURE Act and SECURE Act 2.0

On April 16, 2024, the Internal Revenue Service (IRS) issued Notice 2024-35, which provides no penalties to be applied if an IRA beneficiary does not take a required minimum distribution (RMD) in 2024. 

This new notice also states the final RMD regulations are anticipated to apply for tax years beginning on or after January 1, 2025. This implies that the IRS is planning to issue final regulations of RMDs as provided for in the SECURE Act sometime in 2024.

Background of RMD rule changes and delays

In our article, SECURE Act and IRAs: New Rules Mean New Opportunities and Challenges, we discussed the Internal Revenue Service (IRS) proposed regulation that provided for an employee or IRA owner that died after his/her required minimum distribution (RMD) date, the beneficiary of the IRA or retirement account, other than an eligible designated beneficiary, must take annual distributions from the account for each year following the death of the employee or IRA owner with a final, full distribution from the account by the end of the 10th year.

The provisions of the SECURE Act and SECURE Act 2.0 did away with the so-called “stretch” IRA, and provided that IRA beneficiaries other that “eligible designated beneficiaries” had to withdraw the fund from an inherited IRA over 10 years following the death of the IRA owner. The same rules applied to distributions from business defined contribution retirement plans.

IRS response to comments on proposed payout rule

The IRS asked for comments on the proposed regulations and many of the commentators disagreed with the IRS interpretation of the 10-year payout rule under the SECURE Act. In the opinion of these commentators, no RMDs had to be taken under the SECURE Act until year 10.

In response to the comments to the proposed regulations, the IRS issued Notice 2022-53 and Notice 2023-54. These notices provided that if a beneficiary did not take annual distributions as required under the 10-year rule for 2021, 2022, and 2023, the IRS would not impose the RMD excise tax penalty as provided in IRC section 4974.

To date, the IRS has not issued final regulations interpreting the RMD provisions of the SECURE Act. 

Your Keiter Family, Executive, and Entrepreneur Tax Advisory Services team will continue to monitor this regulation and keep you updated. Questions on how this may impact your inherited IRA or estate planning? Contact your Keiter Opportunity Advisor.

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About the Author

Ginny Graef

Ginny Graef, CPA, Partner

Ginny enjoys working closely with her clients and their team of legal and financial advisors to provide tax planning solutions that meet her clients’ specific needs and goals. Ginny’s areas of expertise include income, gift, and trust and estate compliance and planning services. In addition, she focuses on compliance and consulting related to investment partnerships.

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The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.


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