April 1 is the Last Day for New Retirees to Take RMDs

For retirees who turned 72 during the last half of 2021, in most
cases, Friday, April 1, 2022, is the last day to begin receiving
payments from Individual Retirement Arrangements (IRAs), 401(k)s, and
similar workplace retirement plans.

The payments, called required minimum distributions (RMDs), are
normally made by the end of the year. But anyone who reached age 72
after June 30, 2021, is covered by a special rule that allows IRA
account owners and participants in workplace retirement plans to wait
until as late as April 1, 2022, to take their first RMD. In other
words, in general, the special April 1 rule applies to IRA owners and
other participants in these plans who were born after June 30, 1949.

Two payments in the same year

The April 1 RMD deadline only applies to the required distribution for
the first year. For all later years, the RMD must be made by Dec. 31.

This means that taxpayers who turned 72 after June 30, 2021, and
receive their first required distribution (for 2021) in 2022 on or
before April 1, must receive their second RMD (for 2022) by Dec. 31,
2022. Even though the first distribution is actually the required 2021
distribution, it’s taxable in 2022 and reported on the 2022 tax return
– along with the regular 2022 distribution.

Types of retirement plans requiring RMDs

These required distribution rules apply to owners of traditional, SEP,
and SIMPLE IRAs while the original owner is alive. They also apply to
participants in various workplace retirement plans, including 401(k),
403(b), and 457(b) plans. RMDs don’t apply to Roth IRAs.

An IRA trustee must either report the amount of the RMD to the IRA
owner or offer to calculate it. Often, the trustee shows the RMD
amount on Form 5498 in Box 12b. For a 2021 RMD, required by April 1,
2022, the RMD amount is shown on the 2020 Form 5498, normally issued
to the owner during the first part of 2021.

Some can delay RMDs

Though the April 1 deadline is mandatory for all owners of traditional
IRAs and most participants in workplace retirement plans, some people
with workplace plans can wait longer to receive their RMD.

Most participants who are still working for that employer can wait
until April 1 of the year after they retire to start receiving these
distributions if their workplace plan allows. This RMD exception does
not apply to 5% of owners of the business sponsoring the retirement
plan or to participants in SEP and SIMPLE IRA plans. See Tax on Excess
Accumulation in Publication 575 for details.

Employees of public schools and certain tax-exempt organizations with
403(b) plan accruals before 1987 should check with their employer,
plan administrator, or provider to see how to treat these accruals.

IRS online tools and publications can help

Many answers to questions about RMDs can be found at RMD FAQs on
IRS.gov. Most taxpayers use Table III (Uniform Lifetime) to figure
their RMD. Married taxpayers whose spouse is more than 10 years
younger and is their only beneficiary use Table II.

Because this and other life expectancy tables were updated for 2022,
recipients need to use a different version of this table to figure
their 2021 RMD, compared to their 2022 RMD. The required withdrawals
in 2022 and future years will generally be smaller.

For a 2021 RMD (due April 1, 2022), use the life expectancy tables in
Appendix B of Pub. 590-B used for preparing 2020 returns. As shown in
Table III, the RMD for a person age 72 in 2021 will normally be based
on a distribution period of 25.6 years. Divide the Dec. 31, 2020,
balance by 25.6 to get the RMD for 2021.

For a 2022 RMD (due Dec. 31, 2022), use the revised life expectancy
tables in Appendix B of Pub. 590-B used for preparing 2021 returns. As
shown in the revised Table III, the RMD for a person age 72 in 2022
will normally be based on a distribution period of 27.4 years. Divide
the Dec. 31, 2021, balance by 27.4 to get the RMD for 2022.

Pub. 590-B has worksheets, examples, and other information that can
help anyone figure out their RMD. Visit IRS.gov for more information.