Month: April 2023

Required Minimum Distributions (RMDs) are minimum amounts you must withdraw from your IRA or retirement plan account when you reach age 72. Beginning in 2023, the SECURE 2.0 Act changes the age RMDs must begin to age 73 for taxpayers that reach age 72 after December 31, 2022.

Roth IRAs are not subject to RMDs until after the original account owner dies. Designated Roth accounts in a 401(k) or 403(b) plan are subject to the RMD rules for 2022 and 2023. However, for 2024 and later years, RMDs are no longer required from designated Roth accounts.

RMDs from an IRA

You can meet your RMD requirement by taking a withdrawal from one or more of your traditional IRAs, or SEP, SIMPLE and SARSEP IRAs. It’s not necessary to take a withdrawal from each of your IRAs, but your total withdrawals must be at least equal to the total RMD due from all IRAs combined.

If you reached age 72 in 2022: The first RMD from your IRAs is due by April 1, 2023, based on the December 31, 2021, account balances. Your second RMD is due by December 31, 2023, based on the December 31, 2022, account balances.

If you reach age 72 in 2023: If you reach age 72 in 2023, you don’t have an RMD requirement for 2023. Your first RMD is for 2024, the year you reach age 73, and is due by April 1, 2025.

If you reach age 73 in 2023: If you reach age 73 in 2023, you were 72 in 2022 and must take your first RMD for 2022 by April 1, 2023, based on your December 31, 2021, account balances.

RMDs from a retirement plan

To satisfy the RMD requirements in a retirement plan, you must take RMDs separately from each of your retirement plans. If you reached age 72 in 2022, your first RMD for 2022 is due by April 1, 2023, based on your December 31, 2021, account balance. Your 2023 RMD is due by December 31, 2023, based on your December 31, 2022, account balance.

If you’re still employed by the plan sponsor, and not a 5% owner, your plan may allow you to delay taking RMDs from that workplace retirement plan until you retire. IRS rules always require you to take RMDs beginning at age 72 from traditional IRAs, SEP, SIMPLE and SARSEP IRA plans, even if you’re still employed.

If you can’t pay your tax bill by the April 18, 2023 deadline, don’t panic. The IRS offers several options to help you pay on a schedule you can afford.

First of all, if you find yourself with a tax bill you can’t afford, it’s important that you don’t ignore the problem. You still need to file your tax return or request an extension of time to file by the April 18, 2023, deadline – even if you can’t pay your tax bill in full. Filing or requesting an extension on time will help you avoid costly penalties that could make you owe even more.

Also remember that an extension applies only to the filing deadline, not the payment deadline. If you can’t pay the full amount of taxes you owe by April 18, you should file and pay what you can. Making a payment, even a partial payment, will help limit penalty and interest charges.

Payment options

If you find yourself struggling to meet your tax obligation, you might consider these options:

Online payment plans

If you owe but can’t pay in full by April 18, you don’t have to wait for a tax bill to set up a payment plan. You can apply for a payment plan online, or contact us and we can help you. These payment plans can be either short- or long-term.

• Short-term payment plan – The payment period is 180 days or less, and the total amount owed is less than $100,000 in combined tax, penalties and interest.
• Long-term payment plan – The payment period is longer than 180 days, paid in monthly payments, and the amount owed is less than $50,000 in combined tax, penalties and interest.

Offers in compromise

An offer in compromise lets you settle your tax debt for less than the full amount you owe. This may be an option if you can’t pay your full tax bill or if doing so creates a financial hardship. The IRS considers a taxpayer’s unique set of facts and circumstances when deciding whether to accept an offer.

Penalties and Interest

If you owe tax and don’t file on time, you can be charged a failure-to-file penalty. This penalty is usually five percent of the tax owed for each month or part of a month that the tax return is late, up to 25 percent. The failure-to-pay penalty applies if you don’t pay taxes by the due date.

Interest is based on the amount of tax owed and for each day it’s not paid in full. The interest is compounded daily, so it is assessed on the previous day’s balance plus the interest.

Remember: An extension of time to file is not an extension of time to pay. An extension only gives you until October 16, 2023, to file your 2022 tax return, but taxes owed are still due April 18, 2023.

If you have questions about payment options for your tax bill, please contact our office. We would be happy to help.