Retirees, comply with THIS requirement by April 1 or face a 25% IRS fine
BySumanti Sen
Mar 30, 2025 12:43 PM IST
Retired workers in the United States who are reaching the age of 72 must comply with a requirement if they want to avoid risking penalties from the IRS.
Retired workers in the United States who are reaching the age of 72 reportedly need to comply with the Required Minimum Distribution (RMD) law no later than April 1 if they want to avoid risking penalties from the Internal Revenue Service. Retirees must take a minimum amount in withdrawals from their withdrawal account every year. If they fail to do so, the IRS can hand out a penalty worth 25% of the amount.
IRS could fine retirees in US 25% if they fail to follow this one rule by April 1 (Photo by Brendan SMIALOWSKI / AFP)(AFP)
IRS could fine retirees in US 25% if they fail to follow this one rule by April 1 (Photo by Brendan SMIALOWSKI / AFP)(AFP)
IRS, a US government agency, collects taxes and looks after the enforcement of tax laws. The service's main purpose is to collect individual and employment taxes.
More about the rule
The rule applies to Individual Retirement Accounts (IRAs) too. This means that if the original account holder dies before reaching the RMD age, their heir is also required to comply with RMD laws on their behalf.
Individuals with tax-deferred retirement accounts must do this by April 1 to avoid mandatory fines from the IRS. This applies to traditional IRAs and employer-sponsored retirement plans as well. Those who are unsure if the regulation applies to them should talk to an attorney or verified expert.
The IRS uses a formulae method to calculate the RMD. It takes the retirement account balance as of December 31 of the previous year and then divides it by life expectancy. The burden of paying is then placed on the taxpayer.
The 25% fine is introduced if one fails to comply with the rule. However, if the amount is paid off within 24 months and a Form 5329 is filed with the body, it can be reduced to 10%.
It is generally recommended that the first RMD is taken on December 31 of the year an individual turns 73, Marca reported. This offsets the impact of two RMDs within the same year, and also lowers taxable income overall.
Us News
United States
Irs
Read breaking news, latest updates from United States on topics related to politics, crime, along with national affairs. Stay up to date with news developments on Kamala Harris and Donald Trump.
Read breaking news, latest updates from United States on topics related to politics, crime, along with national affairs. Stay up to date with news developments on Kamala Harris and Donald Trump.
News / World News / US News / Retirees, comply with THIS requirement by April 1 or face a 25% IRS fine
See Less