Year-End RMD Checklist: December 31 IRS Rules
Required minimum distributions can feel like one more year-end detail, but the basic IRS framework is fairly straightforward when broken into steps. The goal is to know which accounts are covered, what deadline applies, and where to confirm the amount before taking action.
The IRS explains required minimum distributions, often called RMDs, in its retirement plan guidance, RMD FAQs, and Publication 590-B.
What an RMD is
An RMD is the minimum amount the IRS generally requires a retirement account owner to withdraw each year from certain tax-deferred retirement accounts.
The IRS required minimum distribution rules are based on the idea that money in certain retirement accounts has not yet been taxed as ordinary income. At a required point, annual withdrawals generally must begin.
Many people currently reaching required minimum distribution age begin at 73, but the applicable age and deadline can depend on date of birth, account type, employment status and current law.
Because the rules can vary, it is best to confirm your specific situation before relying on a general summary.
Which accounts are covered
According to the IRS, RMD rules generally apply to:
Traditional IRAs
SEP IRAs
SIMPLE IRAs
Workplace retirement plans
Workplace plans can include employer-sponsored retirement accounts that are subject to required distribution rules.
Roth IRA RMD rules are different. The IRS states that Roth IRAs have no RMDs while the original owner is alive. Beneficiaries of Roth IRAs may have required distribution rules after the owner’s death.
That distinction matters during a year-end review. A traditional IRA and a Roth IRA may sit side by side in a household’s planning, but they are not treated the same for lifetime RMD purposes.
Know the key deadlines
For most years, December 31 is the RMD deadline to keep in view. The IRS says RMDs generally must be taken by December 31 each year.
There is one special rule for the first RMD. The IRS says the first RMD can be delayed until April 1 of the following year. Taking that option means there would generally be two RMDs in that following year.
Some workplace plans may allow a delay while a person is still working. The IRS notes this does not apply to certain owners, including 5% owners. This rule depends on the plan and the account owner’s situation.
Also, custodians may set processing cutoffs before the IRS deadline. A year-end RMD checklist should include asking the custodian how much time is needed to process a distribution, especially near the end of December.
How the IRS method works
The IRS describes the general RMD method as a formula using:
The account balance from the prior year-end
An IRS life-expectancy factor
In plain English, the prior year-end balance is divided by an IRS life-expectancy factor. The result is the required minimum amount for that account under the applicable rules.
Your custodian may provide an RMD figure, but the account owner remains responsible for taking the correct amount under IRS rules.
If an RMD is missed
The IRS says that if an RMD is not taken, the IRS may apply a 25% excise tax on the amount not withdrawn. The IRS also states that this may be reduced to 10% if corrected in time.
The IRS discusses reporting this issue on Form 5329.
If a missed RMD may have occurred, avoid guessing. Review the IRS guidance, contact the custodian, and speak with a tax professional about the proper correction steps.
Charitable giving and RMDs
If you give to charity, the IRS notes a qualified charitable distribution can count toward an RMD; eligibility rules apply.
This is a tax-specific area, so it should be reviewed carefully with a tax professional before acting.
A practical year-end checklist
Use this list as a calm review tool before year-end:
Confirm which accounts are subject to RMD rules.
Check whether any Roth IRA is owned by the original owner or held by a beneficiary.
Ask each custodian for the RMD amount or support documents.
Confirm the required minimum distribution deadline that applies to each account.
Ask about the custodian’s year-end processing cutoff.
Review whether the RMD April 1 first-year option applies.
Check whether any workplace plan still-working exception may apply.
Speak with a tax professional before correcting a missed RMD or using Form 5329.
Review charitable giving plans before making a qualified charitable distribution.
Before you act
IRS guidance is the starting point, but your facts matter. Account type, plan rules, employment status, beneficiary status, and current law can all affect the answer.
Rezny Wealth Management in Fort Myers, FL can help organize the planning conversation. To discuss your year-end RMD questions, request a consultation with Rezny Wealth Management.
Confirm details with your custodian and tax professional before taking a distribution or making a correction.
Sources
- IRS: Retirement Topics – Required Minimum Distributions (RMDs): https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds
- IRS: Retirement Plan and IRA Required Minimum Distributions FAQs: https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs
- IRS Publication 590-B: https://www.irs.gov/publications/p590b
This article is for educational purposes only and is not tax, legal, or investment advice. Rules can change; confirm current IRS guidance and consult your tax professional before acting.
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