IRS gives banks leeway on notifying IRA owners about RMD change

Accounting

The Internal Revenue Service is giving financial institutions a break when it comes to notifying owners of individual retirement accounts about taking their required minimum distributions after a new law increased the age for taking RMDs from 70½ to 72.

The SECURE Act was signed into law last month and includes a number of changes to IRAs and 401(k) plans with the goal of increasing access to tax-advantaged retirement accounts. Among them was a change in the age by which people are required to start taking minimum distributions from their IRAs, and it allows individuals to continue to make IRA contributions indefinitely. Prior to passage of the SECURE Act, financial institutions were required to notify by Jan. 31 any IRA owners who turn 70½ in 2020 about the RMD that would need to be made for 2020. But since the SECURE Act changed the age triggering the RMD requirement from 70 and ½ to 72, these notices are no longer due under the amended law.

The IRS issued Notice 2020-06 on Friday, saying that if an RMD statement such as a Form 5498 is provided for 2020 to an IRA owner who will attain age 70½ in 2020, the IRS won’t consider such a statement to be incorrect, provided that the financial institution notifies the IRA owner no later than April 15, 2020, that no RMD is due for 2020. The IRS said it is providing the relief because of the short amount of time after the enactment of the SECURE Act that financial institutions have had to change their systems for furnishing the RMD statement.

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