Question

In order to avoid a penalty for failure to receive a minimum distribution from a defined contribution plan in 2023, a taxpayer must take her first minimum distribution for the later of which of the following years? (check all that apply.) A. April 1 of the year following the year the taxpayer reaches age 70½: Historically, this has been the age at which individuals were required to start taking RMDs, but the SECURE Act, enacted in December 2019, changed the age to 72 for individuals who turn 70½ after January 1, 2020.

B. April 1 of the year following the year the taxpayer reaches age 72: If the taxpayer turned 72 in 2022, for example, they would need to take their first RMD by April 1, 2023.

C. The year the taxpayer reaches age 72: The taxpayer might also have the option to take their first RMD in the same year they turn 72, rather than waiting until April 1 of the following year.

Answer 1

To avoid a penalty for failure to receive a minimum distribution in 2023, a taxpayer must take her first minimum distribution for the later of:

• B. April 1 of the year following the year the taxpayer reaches age 72: If the taxpayer turned 72 in 2022, for example, they would need to take their first RMD by April 1, 2023.
• C. The year the taxpayer reaches age 72: The taxpayer might also have the option to take their first RMD in the same year they turn 72, rather than waiting until April 1 of the following year.

Step-by-step explanation:

The taxpayer must take their first minimum distribution by April 1 of the year following the year they reach age 72 (options B and C). The required minimum distribution (RMD) rules underwent changes with the SECURE Act in December 2019, altering the age for starting RMDs from 70½ to 72 for individuals who reached 70½ after January 1, 2020. Option A, which historically applied to the age of 70½, is no longer applicable due to the revised legislation.

Options B and C align with the updated regulation, requiring individuals who turn 72 to take their initial RMD by April 1 of the following year or within the same year they reach 72. This shift allows a slight extension for those turning 72, granting until April 1 of the subsequent year to withdraw the first RMD amount. Thus, to avoid penalties for failing to receive the minimum distribution in 2023, the taxpayer must adhere to the age 72 requirement by taking the first distribution by April 1 of the following year.

Correct answer: B and C