IRS Allows Late Rollovers for IRA Owners Age 72 & Waives the Penalty for Certain Missed 2023 Death RMDs

On July 14, 2023, the IRS issued Notice 2023-54 that allows late rollovers for IRA owners age 72 and waives the penalty for certain missed 2023 death required minimum distributions (RMDs).

Late Rollovers Allowed Due to Increase of Starting RMD Age to 73

For WRP participants and IRA owners born in 1951 (i.e., age 72 in 2023) who received distributions between January 1, 2023, and July 31, 2023, the IRS is extending the 60-day rollover deadline to September 30, 2023, to roll over amounts received as an unnecessary 2023 “RMD” because they are not RMDs due to the increase to the starting RMD age to 73. The rollover is permitted, even if an IRA owner has already rolled over an IRA distribution within the prior 12-month period. However, rolling over the unnecessary 2023 “RMD” will preclude the IRA owner from rolling over another IRA distribution received in the next twelve-month period.

IRS Waives Penalty for Certain Missed Death RMDs for 2023

Under the SECURE Act of 2019, for IRA owners who died in 2020 or later, beneficiaries who are not eligible designated beneficiaries (non-EDBs) must take death distributions by December 31 of the 10th year following the IRA owner’s death. In February 2022, the IRS issued proposed regulations that stated that when the IRA owner died on or after their required beginning date (RBD) (e.g., April 1 of the year after the IRA owner attained age 73), non-EDBs are subject to both the 10-year rule and must take annual RMDs.

Previously under Notice 2022-53, the IRS had waived the 50% penalty (lowered to 25% for missed 2023 and later RMDs) for affected non-EDBs for missed death RMDs in 2021 and 2022. New Notice 2023-54 extends similar relief to missed death RMDs in 2023 for affected non-EDBs.

Note: Affected nonspouse beneficiaries who already took death RMDs in 2023 cannot roll over those amounts to undo the tax consequences of those distributions.