IRS Changes the Rules on IRA RMD Notifications
The Internal Revenue Service (IRS) is changing the rules on when financial institutions must notify IRA accounts owners of their obligation to take a required minimum distribution (RMD) for 2020.
Under the old law, financial institutions would have been required to notify IRA owners by January 31, 2020, who turn 70 ½ in 2020 about the RMD that would need to be made for 2020. The SECURE Act was signed into law on January 8, 2020, and one of its many provisions was to change the requirement for an RMD to the year the IRA owner turns 72 instead of 70 ½. As a result of this change in the law, the 2020 notices that were required for IRA owners who turned 70 ½ in 2020 are no longer required.
The IRS issued Notice 2020-06 to inform financial institutions that if an RMD statement was provided to an IRA owner for 2020 who will turn 70 ½ in 2020 they will not consider that statement to be incorrect (and therefore subject to filing penalties for furnishing an incorrect informational statement). To avoid any potential penalties, the financial institutions will need to issue another statement no later than April 15, 2020, stating that no RMD is required for 2020.
The IRS stated that it issued the relief because of the short time between the SECURE Act being signed into law and the typical due date of the RMD statement may not have given financial institutions time to adjust their system of providing the notices.
If you have any questions on how to implement the penalty relief provided by Notice 2020-6, you should consult a tax professional.
- Employee Benefit Plans7
- Fortner Bayens, P.C. Banking Letters29
- General Interest11
- IT Risk Management20
- Loan Review and Asset Management34
- Regulatory Compliance22