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  • Kathryn Bruns, CPA

Is it almost time to start using your retirement funds ?

For those that have certain retirement accounts and are nearing 70 years old, I'm sure you're familiar with the term "RMD". Your RMD start date is a very important milestone in the cash flow and tax world. Although financial institutions are required to follow rules with the reporting of RMDs, you should definitely have a handle on this yourself. Take a quick read of this IRS notice to learn more. If you want to take it to the level of managing the timing and amount of your RMDs, we and my financial planning partners can help !


- Notice 2020-6

The IRS has issued guidance to financial institutions on reporting required minimum distributions (RMDs) for 2020. Under the SECURE Act (Public Law 116-94), the new required beginning date for an IRA owner is April 1 of the calendar year following the calendar year in which the individual attains age 72. Under prior law, it was April 1 of the calendar year following the calendar year in which the individual attained age 70 1/2.

The new law is effective for distributions required to be made after December 31, 2019, with respect to individuals who will attain age 70 1/2 after that date. As a result of this change, IRA owners who will attain age 70 1/2 in 2020 will not have a required beginning date of April 1, 2021. This means that these IRA owners will have no RMD for 2020.

Author's Comment: IRA owners who attained age 70 1/2 in 2019 are still required to begin taking RMD by April 1, 2020.

Financial institution reporting. If an IRA owner has an RMD due for 2020, the financial institution that is the trustee, custodian, or issuer maintaining the IRA must file a 2019 Form 5498, IRA Contribution Information, by June 1, 2020, and indicate by a check in Box 11 that an RMD is required for 2020. If an IRA owner has an RMD due for 2020, the financial institution must also furnish an RMD statement to the IRA owner by January 31, 2020, that informs the IRA owner of the date by which the RMD must be distributed, and either provides the amount of the RMD or offers to calculate that amount upon request.

Under the new guidance provided in Notice 2020-6, the RMD statement required to be sent to the IRA owner should not be sent to IRA owners who will attain age 70 1/2 in 2020. However, the IRS is issuing relief if a financial institution provides an RMD statement to an IRA owner who will attain age 70 1/2 in 2020 (including by providing a Form 5498). 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, that no RMD is required for 2020.



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