IRS Offers Relief on IRA Withdrawals

The SECURE Act of 2019 required non-spouse beneficiaries who inherited an IRA after December 31, 2019, to withdraw all the funds within ten years of the original owner’s death. The ACT also increased the RMD age from 70 ½ to 72.

Next, the SECURE 2.0 Act increased the RMD age to 73 beginning in 2023. In 2033, the RMD age will increase to 75. Unfortunately, those who turned 72 in 2022 were required to take a 2022 RMD no later than April 1, 2023. But someone who turns 72 in 2023 has an additional year before they must begin withdrawals.

All of this created confusion for account holders, IRA beneficiaries, not to mention financial institutions. In response, the IRS recently delayed the application date for the final regulations on RMDs until at least 2024. Participants will not incur penalties for distributions made in the first seven months of 2023. Also, plans and beneficiaries are getting an extra year of relief for the SECURE Act 1.0 10-year rule.


There are a few exceptions to the 10-year rule – surviving spouses, someone disabled or chronically ill, a child who has not reached the age of majority, or a person not more than ten years younger than the deceased IRA account owner.

What Does All This Mean

Some who inherited IRAs will have additional time to meet the distribution requirements. The IRS will waive penalties for missed distributions in 2023, where the IRA was inherited in 2022, and the decedent was required to take distributions. The IRA also extended the 60-day rollover to September 30, 2023, allowing those who received distributions earlier in 2023 that were mischaracterized as RMD’s.

The penalty for not taking the required minimum distribution is 25% of the amount not taken, so the relief could be significant.  The rules are in such a state of flux some brokerage houses are passing on making calculations for those under the five or 10-year payout rules.

While a tax deferral is valuable, there are other considerations:

  • If your taxable income is down, consider taking a larger IRA distribution and paying the tax at a lower rate.
  • Those who itemize and make charitable contributions might use the inherited IRA funds to make a Qualified Charitable Distribution (QCD). This is a direct gift to the charity, which is neither reported as income nor a deduction. A better option than using cash.

If you inherited an IRA in 2020, 2021, and 2022, meet or contact your investment advisor and make certain you (and they) have a clear understanding of the required distributions. For those who, for the first time, received IRA distributions in 2023, check and make certain the distribution was required – you may be eligible for a rollover.

Please call if we can help.