For the 2024 tax year did the IRS waive the penalty for failing to take a RMD from an Inherited IRA?

[trust812]

Because of the Secure Act, for the 2024 tax year did the IRS waive the penalty for failing to take a RMD from an Inherited IRA?

[dmertz · Accepted solution]

If you are subject to the 10-year rule, yes, IRS Notice 2024-35 waived the penalty for taking an RMD from an inherited IRA.  If you are not subject to the 10-year rule, the penalty for failing to take an RMD from an inherited IRA has not been waived.

[trust812]

Are Trusts subject to the 10 Year Rule as long as the Beneficiaries are mentioned in the Beneficiary section of the Trust document? Thanks! 

[dmertz · Accepted solution]

To be subject to the 10-year rule, the trust must be qualified for look-through:

https://www.irs.gov/publications/p590b#en_US_2023_publink100090033

[trust812]

Yes it appears so. All of the following requirements apply. Thank you! 

“A trust is considered a qualified “look-through” trust if the following requirements are met:

• The trust is a valid trust under state law.
• The trust is irrevocable or will, by its terms, become irrevocable upon the IRA holder’s death.
• The beneficiaries of the trust are identifiable from the trust instrument.
• Certain documentation has been provided to the IRA trustee, custodian, or issuer.”

[taxchamp]

If the IRA owner died prior to January 1, 2020, (in my case March 2017) and a non-spouse Inherited IRA was established: 

1. Am I subject to 10 year rule? (I don't think so.)

2. Was I required to take RMD each year through 2024? (I did, but I do not think I had/have to for 2020-2024)

Thank you.

[dmertz]

@taxchamp , the 10-year rule potentially applies only in the case of decedents dying after 2019, so it does not apply to you.

All 2020 RMDs were waived by the CARES Act of 2020 due to COVID.  You were required to take RMDs each year after that.  Waiver of the penalty for not taking RMDs in 2021 through 2024 only applied to beneficiaries who are subject to the 10-year rule.

[peiterjsp]

Did you ever get an answer for your question? I inherited in 2016 from my grandpa and didn't take a RMD in 2024 by mistake (not mine!) I'm not subject to the ten-year rule  like you so, why do you think you don't have to take it from 2020-24?

Thanks!

[dmertz]

The waiver of the penalty for not taking the 2024 beneficiary RMD only applies to those under the 10-year rule.  @peiterjsp , you are not subject to the 10-year rule, so your missed RMD is subject to penalty.  To potentially avoid the penalty you must make the late distribution and file Form 5329 Part IX requesting waiver of the penalty for good reason.  TurboTax will give you the opportunity to make this request and prepare Form 5329 accordingly.