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RMD Deadlines for Those Reaching Age 72 in 2021

The script has flipped for investors entering their seventies after decades of putting money away in tax-advantaged retirement accounts. Uncle Sam begins requiring taxpayers to take required minimum distributions from their retirement account savings once they turn 72 years old. Besides calculating how much must be withdrawn each year, you also have to pay the taxes on the distributions.

An old couple checking Required Minimum Distribution deadlines In & Near Bronx, NY

The withdrawal age from retirement accounts changed from 70½ to 72 years old in 2020, causing many taxpayers to become confused. Due to the complexity of this matter, we strongly recommend that you work with experienced tax professionals. SCL tax services in and near Bronx, NY, offers all the tax help you need.  

Based on the SECURE Act of 2019, you must start withdrawing from a retirement account on April 1, following the year you turn 72. Following the current Required Minimum Distribution (RMD) calculation, the retiree has to withdraw the RMD amount each year. 


But before we get too far into the details, let’s take a look at some RMD basics.

What Is a Required Minimum Distribution (RMD)?

A required minimum distribution (RMD) refers to the amount of money that must be withdrawn from an employer-sponsored retirement plan, SEP, traditional IRA, or SIMPLE individual retirement account (IRA) by the owner or participant of the retirement plan.


Why Are There RMDs?

RMDs prevent people from using retirement accounts to avoid paying taxes. Distributions are calculated by dividing the retirement account’s prior year-end fair market value (FMV) by the applicable distribution period or life expectancy. A worksheet on the IRS website helps taxpayers calculate the amount they should withdraw.


When You Must Start Taking Required Minimum Distributions

The SECURE Act of 2019 has raised the starting age for retirement contributions from 70½ to 72. As a result, many people turning 72 in 2021 assume that this is the year for their first retirement contribution; however, the SECURE Act restricted the 72 starting age to those who did not turn 70½ in 2019. 

As a result, regardless of when they turn 72, if people were 70½ in 2019, then 2021 is not their first distribution year, but rather a continuation of their RMD schedule that started in 2019 (when they were 70). They continue RMD schedules under the old 70½ rules and do not start RMD schedules under the new 72 rules.


Because of this small but important difference, those who turned 72 in the first half of 2021 should have taken their RMDs by December 31, 2021, according to the RMD schedule (that began in 2019). On the other hand, those who had reached 72 in the second half of 2021 will have until April 1, 2022, to withdraw their 2021 RMD. 

Please note that the folks that turned 72 in the second half of 2021 can also take their 2021 RMD in 2021 if they’d like. In contrast, they must take their 2022 RMD by December 31, 2022; if they wait until 2022 to take their 2021 RMD, they will take two RMDs in 2022.


The fact that RMDs were waived by the CARES Act in 2020, which means that many people haven’t taken an RMD for a while, complicates the timing issue for those who took a 2019 RMD. Considering both problems at once, many 72-year-olds risk failing to take their 2021 RMD if they incorrectly believe the new age 72 RMD starts date applies to everyone and that RMDs don’t have to be taken in 2020. If they fail to take their RMD on time, they may pay more tax than necessary as a penalty tax for missing their RMD. More to the reason to get tax help from professionals like Bronx tax services.


Let’s explore some examples 


Let’s look at a few examples of how this rule would work for different people who turned 72 in 2021.


Example 1 – Assume an IRA owner’s birthday is March 20, 1949. That means they have turned age 70 in the first half of 2019 and turned 70 ½ on September 20, 2019. As this owner turned 70½ in 2019, they followed the pre-SECURE Act RMD requirements, requiring distributions to begin at age 70½. The taxpayer had a 2019 RMD they could have taken in 2019 or waited until April 1, 2020. The CARES Act also waived the 2020 RMD, so now they have to take their 2021 RMD by December 31, 2021, operating under the old 70½ rules.


Example 2 – Assume a taxpayer was born on October 15, 1949. This means they have turned 70 on October 4, 2019, and 70 ½ on April 15, 2020. Since they did not turn 70 ½ in 2019, they were not required to take their RMD in 2019 under the old RMD laws, nor were they required to take their RMD in 2020 because they were not yet 72 years old. They can take their RMD in 2021 or April 1, 2022, since they turned 72 in 2021 (on October 15, 2021).

In Summary

Here are the 2021 RMD rules for people 72 years and older

  • The due date for their 2021 RMD is December 31, 2021, if their birthday is between January 1, 1949, and June 30, 1949.
  • The due date for their 2021 RMD is April 1, 2022, if their birthday is July 1, 1949, to December 31, 1949.

an old man calculating Required Minimum Distribution In & Near Bronx, NY

How to Calculate Required Minimum Distribution?

Divide your previous year’s year-end account balance by the IRS life expectancy factor based on your birthday in the current year to determine your RMD.


If you own more than one IRA, you must calculate the RMD for each account, but you may take the total RMD from just one IRA or any combination of IRAs. If you have an IRA smaller than your total RMD, you can empty the small IRA and take the rest from a larger IRA.


Retirement accounts such as 401(k)s are also subject to RMDs at age 72. Unlike IRAs, you must calculate and take each 401(k) ‘s RMD separately if you own multiple 401(k)s.


Your annual RMD can be taken as a lump sum or in piecemeal payments, such as monthly or quarterly. However, by delaying your RMD until the end of the year, your money will grow tax-deferred. However, make sure you withdraw the full amount by the end of the year and if you feel like this is too much, visit our tax office in Bronx, NY, and we’ll give you all the tax help you need.


What Happens If You Miss RMD Deadlines

You could be hit with Uncle Sam’s harshest penalty–50 percent of the shortfall. If, for example, you should have taken out $15,000 but just took out $11,000, you would owe a $2,000 penalty and income tax on the shortfall.


However, the IRS is known to be relatively lenient in these situations so that you can ask for relief from the harshest of penalties. If you made a mistake, you could request relief by filing Form 5329 and a letter explaining how you fixed it.


The best way to avoid forgetting is to work with tax professionals. SCL tax services in and near Bronx, NY, has an extensive background in RMDs. 


Need a Hand In & Near Bronx, NY? 

The SECURE Act of 2019 brought many complications to the RMD deadlines. We understand that you may be confused about when to withdraw from your IRAs. Working with tax professionals is the best way to ensure the IRS won’t hit you with penalties. To start working with Bronx tax services, feel free to reach out to our tax office in the Bronx, NY, and talk to one of our specialists to find out how we can help you. Call us at at +1-347-305-4348 for more Information!

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