The IRS has announced relief for individuals who turned 72 in 2023 and received, between January 1, 2023, and July 31, 2023, distributions that were mistakenly categorized as “required minimum distributions” (RMDs).

The announcement is contained in






IRS Notice 2023-54


.

Under the relief, if you reached (or will reach) age 72 in 2023 and received, prior to August 1, 2023, a distribution of what you thought was an RMD, the 60-day deadline for rollovers back to the IRA or qualified plan has been extended until September 30, 2023.

In addition, if you received another distribution from an IRA within the one-year period preceding the distribution of the mistaken RMD in 2023, you can still make the rollover by September 30, 2023.

In other words, the one-year restriction on rolling distributions from an IRA back to an IRA will not apply for this one distribution for which relief has been granted. However, if you make the rollover by the later of September 30, 2023, or the expiration of the normal 60-day rollover period, you will be precluded from making another rollover to an IRA within the one-year period from the date you receive the distribution that you are rolling over.

Background


. The federal SECURE 2.0 Act, passed in 2022, moved back by one year the “required beginning date” by which many individuals must commence withdrawing funds from their IRAs and qualified plans.

Under the 2022 law, which became effective January 1, 2023, the required beginning date is April 1 following the year in which the individual turns 73. (Previously, the triggering birthday was 72.)

The change applies to individuals who are no longer working or are a 5% owner of the company sponsoring the plan.

With this change in the law, if you were born in 1951 (i.e., turning 72 in 2023), your required beginning date will be April 1 of the calendar year following your 73rd birthday in 2024. In other words, your required beginning date has been moved back one year. 

The Problem


. Because the change in the law was adopted at the very end of the 2022 year, some financial institutions and individuals who attain age 72 in 2023 thought that an RMD must commence in 2023 may have made a distribution that was not required.

Further, because the distribution was incorrectly referred to as an RMD, it would not have been categorized by the financial institution making the distribution as being eligible for a rollover back to the IRA or to another eligible plan that can accept rollovers.

Accordingly, the IRS issued






Notice 2023-54


, granting relief to certain taxpayers for the change in required beginning date under the SECURE 2.0 Act.

Relief Example


. Assume that Mary was born on March 1, 1951, and attained age 72 on March 1, 2023. On April 15, 2023, Mary withdrew what she thought was an RMD from her IRA. In addition, the financial institution maintaining the IRA had not updated its software and the distribution was designated as an RMD for 2023 and thus not eligible for rollover. Also assume that a year earlier, on July 15, 2022, Mary received from any of her IRAs a distribution that she rolled back to an IRA within 60 days of its receipt.

In this example, Mary can rollover the mischaracterized RMD by September 30, 2023. The one-year rule that would have otherwise precluded Mary from making the rollover does not apply. However, Mary will not be able to make another rollover back to an IRA, from a distribution from any IRA, until after March 15, 2024, which is one year from the date she received the 2023 distribution that was rolled back to an IRA by September 30, 2023.