While everyone knows that the SECURE Act (the “Act:) has passed as discussed in a prior blog, there are some outstanding issues, one of which was the confusion surrounding the RMSs and the reporting requirements of the custodian.
In Notice 2020-6, the Internal Revenue Service (“IRS”) clarified the RMD reporting rules.
The new required beginning date (“RBD”) for an IRA owner is now April 1 following the calendar year the owner turns age 72. Under prior law the RBD was April 1 after the year the owner turns age 70 ½.
The new law applies to individuals for distributions required to be paid after 12/31/2019 and the former law applies to distributions required to be paid prior to 12/31/2019.
Thus, those individuals who turn age 70 ½ in 2020 do NOT have to take a RMD in 2020.
Because the custodian must file a 2019 Form 5498 by June 1, 2020 (assuming that these dates are not changed by COVID-19- see below), such Form 5498 should NOT be filed for those who attain 70 ½ in 2020. However, because of the short time frame of the ACT and the ability for financial institution custodian to adjust their reporting system, the Notice gives some relief.
If an institution provides an RMD statement to the IRA owner who turns 70 ½ in 2020, the IRS will NOT consider such a statement to have been provided incorrectly, but only if the IRA owner is notified by the financial institution no later than April 15, 2020.
The SECURE ACT does NOT change the RMD requirements for IRA owners who attained age 70 ½ PRIOR to January 1, 2020. Thus, those individuals MUST take their RMD by April 1, 2020 if not already taken in 2019.
ADVICE: If you or your client receives the Form 5498 CAREFULLY read the documents and make sure the RMD is correct and the timing of the payment. CPAs should be sure to carefully check these forms so RMDs NOT required are not inadvertently taken and improperly taxed.
WORD OF THE WEEK: CARES Act is the 880 page Coronavirus Aid, Relief, and Economic Security Act which was JUST passed the Senate last night to give relief to businesses and individuals as the result of the COVID-19. This author has not had time to digest the CARES Act but recent emails have indicated relief of RMDs in 2020. Look for a blog on the CARES Act after a good few nights of reading. 😊.
GENEROSITY IS A KEY TO HAPPINESS…REACH OUT AND HELP SOMEONE TODAY! 😎