Check back frequently for updates and guidance on all these new changes.
Important Note: Required Minimum Distributions from tax-deferred IRAs and QPs are not
allowed to be rolled into an IRA or converted to a Roth IRA.
IRA Webinar 4-Part Fall Series Now Available On Demand
at www.bankwebinars.com:
9/5/24 IRA Part 1 - The Basics
9/12/24 IRA
Part 2 - Rollovers and Transfers
10/10/24 IRA Part 3 - Distributions (including new Beneficiary Payout
Options)
10/17/24 IRA Part 4 - How to Audit
your IRAs
https://www.bankwebinars.com/iras-achieving-a-working-knowledge-from-start-to-finish-4-part-series-70bwus245340e
"IRA Update": In July 2024,
the IRS realeased IRS Notice 2024-190 which finalized the Proposed Regulations released in February 2022 and clarified the
Beneficiary Payout Options.
Effective
2025: Beneficiaries of owners who died beginning in 2020 and the owner had reached his/her Required Beginning
Date (April 1st of the year after RMD age) can no longer skip death distributions in years 1-9. Simply put, if the owner was
in RMD status at death, the beneficiary must begin taking distributions the year after the owner died based on the younger
age of the beneficiary or deceased owner. Those must continue in years 1-9 and then closed by 12/31 of the 10th year
after the owner dies. For beneficiaries of owners who died between 2020-2024, the IRS did not impose a late penalty
if distributions were not taken. Beginning in 2025, they must start RMDs for the remaining 9-year period and still have
it closed by 12/31 of the 10th year after the owner died. To obtain the 2025 divisor: Using the Single Life Table look
up the age of the beneficiary in the year after death, or the owner's age in the year of death (if younger than the beneficiary)
and subtract one for every year up to 2025 to get next year's divisor.
"The IRS releases substantial Cost of Living Adjustment to IRAs for 2025".
See tables below.
"IRA Update":
(IRS Notice 2024-35): Required Minimum Distributions to Beneficiaries
The IRS has again the extended the exception for beneficiaries of owners who died begnning in 2020 and were in RMD
status and the beneficiary did not begin death distributions the year after the owner died, will not receive the 25% excise
tax for not taking it in a timely manner for the years 2021-2024.
"IRA Update": (IRS Notice
2023-54): Required Minimum Distributions to IRA Owners and Beneficiaries"
This notice also clarified that beneficiaries of IRA owners who died beginning
in 2020 and were in RMD status, will not be penalized if they do not take their single life expectancy death distributions
in 2021, 2022 and 2023.
"2024 IRA Annual 2-day Live Stream Event" - August 13-14,
2024 Available On-Demand:
Including 2024 Cost of Living Adjustments, New Federal Withholding Requirements (W-4R) and the Newly Enacted
SECURE Act 2.0 effective January 1, 2023, Distributions to beneficiaries and much, much more! An electronic
version of the IRA Training Manual (the Red Book) will be included in the price. Registration is now open through your
State Banking Association or by accessing the link below:
https://partners.bankwebinars.com/iras-2024-from-a-z-2-day-live-streaming-70bwus245170e?partner=sunwest-training-corp
SECURE Act 2.0 signed into law December 29, 2022
Raises Required Minimum Distribution age to 73 for those born between 1951 and 1959.
Raises Required Minimum Distribution age to 75 for those
born after 1959
New W-4R Federal Withholding Requirements
The W-4P will no longer be used for an IRA client to choose to opt out or choose a percentage
of federal withholding.
From January 2023
forward, the W-4R will replace the W-4P and be used as follows:
'On-Demand' Nonperiodic Payments - An IRA Distribution
Form with a W-4R must be completed and signed for every IRA distribution where the client is not choosing the default 10%
federal income tax withholding. On line 2 of the W-4R the client can choose 0-100% federal income tax withholding.
If that form is not signed by the client for each withdrawal, the bank must default to 10% federal income tax withholding.
'Scheduled' Automatic Payments (monthly, quarterly, annually, etc.) When a client sets
up a scheduled payment from an IRA beginning in 2023, they must make the federal withholding election on the 2023 W-4R when
setting up the schedule. The bank must annually notify these clients by sending them an Annual Notice of Federal Withholding
no more than 6 months before the scheduled payment date that they have the right to change their withholding election on file
by completing a new W-4R.
Existing clients set up on "Scheduled" payments
who previously signed a W-4P do not have to sign the new W-4R unless they change their federal withholding election.
IRS 50% Excise Tax Reduced for Excess Accumulations (under-distributing your RMD amount)
The IRS has reduced the penalty for not taking the full amount of an RMD from a 50% penalty
to a 25% penalty effective for 2023 RMDs.
If the client corrects
the amount within a reasonable period of discovering the error - usually by the tax-filing deadline including extensions -
the penalty may drop as low as 10%.
The client can still apply for a waiver of the penalty from the IRS in certain situations.
IRA SECURE Act Amendments - IRS has postponed mandatory
amendments to customers until December 31, 2026.
IRA regular contribution deadline
for Traditional, Roth, Coverdell ESAs and Health Savings Accounts for 2024 is Tuesday, April 15, 2025
12/31/2021 IRS
has released new Uniform, Joint and Single Life Expectancy Chart for use in calculating distributions effective for 2022.
Check with your processor to make sure they are updating
your life expectancy calculation tables to be used beginning for 2022 distributions.
The Secure Act of 2019 is now a
law and effective January 1, 2020
On December 20, 2019 the Secure Act of 2019 was signed into law with
major changes to IRA contributions, RMDs for owners and beneficiaries and Annual RMD Notice changes. The revisions are summarized
below:
- Nonspouse Beneficiaries of IRA owners who died 1/1/2020 or later
are no longer allowed to take distributions over the Single Life Expectancy method. Unless the beneficiary
meets one of the exceptions of spouse, disabled, minor child, chronically ill or nonspouse beneficiaries less than
10 years younger than the owner, the Inherited IRA must be closed by December 31st of the 10th year after the owner dies. There are no "required" distributions in the
first 9 years but the account must be paid out by the 10th year after the owner's death.*
* The Proposed Regulations released
February 2022 were finalized in July 2024 and will require some nonspouse beneficiaries can to take SLE payouts in years 1-9
instead of being optional.
I have revised
my 2024-2025 IRA Training Manual (aka the "Red Book"). It is available for a discounted price of $120 if you
attend the Webinar or it is included in your seminar registration fee if you attend an IRA
Live Stream training class through www.BankWebinars.com . Please click on the "IRA Manual Order"
tab to complete your order and the "IRA Training" tab to see my full 2025 Webinar schedule To see Live
IRA Training, access your State Banking Association website and calendar.
Required Minimum Distributions to Qualified Charities Have Been
Extended Permanently Effective December 18, 2015
The Consolidated Approriations Act
of 2016 was signed into law on Friday, December 2015. One of several provisions regarding IRA changes was the ability for
70.5 year old IRA accountholders and beneficiaries of IRAs who have attained the age of 70.5 or older to use their RMD amount
plus more up to $105,000 per year for 2024 and $108,000 for 2025 to make tax exempt charitable contributions directly from
an IRA to qualified charities has been made permanent by this Act effective immediately.
The following procedure
must be followed in order for the tax exemption to take affect:beginning in the calendar year of 2015 and beyond:
1. IRA account owners
and beneficiaries of IRAs who have attained the age of 70.5 or older will instruct the financial institution to take a distribution
from their IRA and have a bank check or cashier's check made payable directly to a Qualified Charity. The financial
institution can mailt the check directly or the IRA accountholder can mail it to the charity.
2. The financial institution will code the distribution as either a "normal distribution"
if coming from an IRA owner's account (IRS code "7" in box 7 of the 1099-R) or a "death distribution"
if coming from an Inherited IRA (IRS code "4" in box 7 of the 1099-R). The should NOT be coded as
an IRS Code "F" - "Charitable Gift Annuity"
3.
The IRA accountholder will take the tax exemption on the IRA distribution line of his her tax return (line 4a and 4b
of the 1040 form) and put the letters "QCD" next to 4b to take the exemption. See the 1040 instructions for
more details.
IRA ROLLOVERS WERE CHANGED IN 2015
Effective January 1, 2015, the new definition of the "once-per-12 month" rule applies to the IRA accountholders
"aggregate" IRAs - NOT per IRA, NOT per plan type and NOT per financial institution. Once an accountholder
has taken money out of ANY of their IRA plans and rolled those fund over, the accountholder cannot do any more rollovers from
any of his/her IRAs for the next 12 months - starting from the date of the distribution. Any additional distributions will
be ineligible for rollover during that 12 month period. This does not apply to QP to IRA rollovers or conversions from Traditional
or SEPs to Roth IRAs. Additional IRA to IRA movement has to be done as direct IRA to IRA non-reportable "transfers".
August 24, 2016 IRS releases 11 exceptions when the financial institution may accept
late rollovers (past 60 days) if the accountholder "self-certifies" the exception.
The accountholder will sign a "self-certification" letter provided by the financial
institution choose the exceptions that apply. The bank will report the late rollover in box 13a of the 5498 as a "postponed
contribution" - not in box 2 as a "rollover" contribution. In box 13c of the 5498 the financial institution
will use the code "SC" for "Self Certification".