Relief for Certain RMDs Extended through 2024
The IRS recently issued Notice 2024-35, which provides special relief for required minimum distributions (RMDs) for certain inherited accounts subject to the 10-year rule.
Inherited accounts subject to the 10-year rule for RMDs are discussed on pages 26 to 30 of the Tax Year 2023 M+O=CPE Individual Tax Year-End Workshop Reference Book. The IRS had previously provided special relief from penalties for not taking RMDs from certain inherited retirement accounts for the 2020 through 2023 tax years, and the new notice extends this relief for an additional year.
Proposed regulations issued in 2022 require certain beneficiaries who inherited a retirement account and who are subject to the 10-year rule for distributing the balance of such accounts to receive certain annual distributions in each of the years following the date of death of the original account owner, requiring annual distributions prior to reaching the 10th year.
In Notice 2022-53, the IRS waived the penalty for not taking such annual distributions for the 2021 and 2022 tax years. The IRS then extended that relief to apply to the 2023 tax year, when it issued Notice 2023-54. Now, Notice 2024-35 extends the relief to the 2024 tax year.
As a result, the special relief is now available for 2024 for beneficiaries who inherited a retirement account where the original owner died in 2020, 2021, 2022 or 2023, where the original owner died after reaching the required beginning date, and where the beneficiaries are subject to the 10-year rule for distributing the balance of the account.
If such beneficiaries do not receive an annual distribution from the inherited account during 2024, they will not be subject to the penalty for failing to withdraw an RMD from that inherited account.