Some people will be retreating twice this year, which could have an impact on taxes.
The U.S. Internal Revenue Service (IRS) issued an alert reminding retirees that some of the retirees are obligated to withdraw money from their retirement accounts by the beginning of next month.
RMDs “usually are made by the end of the year. However, individuals who turn 73 in 2024 can delay their first RMD until April 1, 2025. This special rule applies to IRA owners and participants born after December 31, 1950.”
The April 1 deadline applies to most workplace retirement plan participants and all traditional IRA owners, but some people with workplace plans can delay RMDs.
The IRS has made it clear that the April 1 deadline will only apply to the first year. The withdrawal must occur by December 1st for all subsequent years.
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Therefore, taxpayers who obtain their first RMD in 2024 by April 1, 2025 must make a 2025 distribution by December 31 this year, resulting in two RMD withdrawals in a year. Both amounts will be reported on your 2025 tax return.
“This strategy may make sense if you still provide stable income, but for most people it’s better to take the distribution by the end of the year rather than wait until April 1st.”
Over the next few years, the timing of your RMD withdrawal will depend on your personal preferences, such as income requirements and other matters.
“Some people may choose to take a bulk distribution at the beginning of the year, so you don’t need to think about it again until the next year. Others may find that getting regular withdrawals is the easiest way to meet RMD requirements and manage cash flow, especially if you need funds to cover your living expenses,” the company said.
“Be careful if you plan to wait until the end of the year to take RMD. You don’t want to accidentally forget them on your holiday.”
Such exemptions are issued “if the account owner establishes that the shortfall in distribution is due to a reasonable error and that reasonable measures have been taken to remedy the shortfall.”
“To qualify for this relief, you must submit Form 5329 and attach the instructions.”
Starting in January 2024, individuals are permitted to take up to $1,000 a year to meet emergency costs before reaching the age threshold.
The amount must be repaid within three years, and further withdrawals will not be permitted before that.
