The IRS has issued a notice reminding retirees aged 73 and older to take required withdrawals from retirement accounts before a Dec. 31 deadline or face the prospect of hefty penalties.
The agency said in a Dec. 10 notice that required minimum distributions (RMDs) must be taken annually from traditional IRAs, 401(k)s, and other retirement plans. Failure to do so subjects the plan owner to a 25 percent excise tax on the amount not withdrawn, though the penalty drops to 10 percent if the shortfall is corrected within two years.
Penalties for failing to take required withdrawals may be waived entirely if the account owner can prove the error was “reasonable” and is being corrected. In order to apply for such relief, account owners must file Form 5329 and attach a letter of explanation.