INHERITED IRAS AND 2021 RMDS: TODAY’S SLOTT REPORT MAILBAG

By Andy Ives, CFP®, AIF®
IRA Analyst

Question:

Good morning,

I have an inherited IRA. I took a manual withdrawal from it in late August. I thought I had deleted my auto withdrawal on the custodian’s website. I just noticed today that another distribution was taken on 9/17. I have done nothing with the money in the core account that it was transferred to. Is there any way for me to reverse this error?

Thank you for any assistance.

Cynthia

Answer:

Cynthia,

Since this is an inherited IRA, there is no way to return the unwanted distribution. Non-spouse beneficiary owners of inherited IRAs are not allowed to do 60-day rollovers, so no mechanism exists to return the funds. Even if you were to petition the IRS, they would not accept the excuse of accidentally not turning off the automatic withdrawal feature. The only possible fix would be if this inherited IRA came from your deceased spouse. Only in that situation could you – as a spouse beneficiary – do a spousal rollover with the extra distribution into you own IRA.

Question:

I have clients, a husband and wife, that both turn 72 in December of this year, one on 12/19 and the other on 12/26.  Under the new RMD rules, are they required to take an RMD for 2021?  If so, I am pretty sure they could wait until the tax deadline of 2022 to take their 2021 RMD, but then wouldn’t they have to take two RMDs in 2022?  Let me know as soon as you have a chance.  Thanks.

Joseph

Answer:

Joseph,

You are on the right track. Since 2021 is the first year for these individuals to take a required minimum distribution (RMD), they are allowed to delay that first RMD until April 1, 2022. (Notice the deadline is April 1 and not the tax filing deadline.) If a person delays all or part of his first RMD until the following year, then the delayed RMD must be taken by April 1, and the RMD for the following year must also be taken by December 31 of that same year. Both distributions will be taxable in the year they are withdrawn.

https://www.irahelp.com/slottreport/inherited-iras-and-2021-rmds-todays-slott-report-mailbag

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