IRS Warns Seniors About Social Security

But I don’t want to see anyone lose any money as well, all right? Because in this day and age, we all know that we can use every penny because of the great inflation that’s going on thanks to the government and the Federal Reserve. Sorry. I digress. Here we go. The Internal Revenue Service is warning seniors that were born before 1951 that they are required to take minimum distributions from their retirement plans by the end of the year or face possible penalties.

The required minimum distributions, or RMD, as they’re known, are amounts that many owners of individual retirement arrangements, like iras or other retirement plans, must withdraw each year, even if they’re still working for 2023. The Secure 2. 0 act raised the age requirement from 72 to 73 for account owners, for owners to have to start taking the mandatory distributions from their retirement funds. This means that people born before 1951 face a December 31 deadline.

So less than a week from now. Is it a week from now? No, it’s more than a week from now. My dates are getting all mixed up, but they have until December 31 to take the distributions or face a possible penalty. Rmds are taxable income and may be subject to penalties if not taken timely, the IRS warned in a December 20 announcement. Well, that makes sense because they want to tax the snot out of you, right? That’s one thing the government’s good at.

The only thing they’re good at is taxing the snot out of us. But here’s the thing. If you don’t do it thinking you’re going to put off the taxes, they could penalize you and just take money from you, and then you still got to take the taxes when you go take that money out. So I wanted to put this out there. Now. The penalties in focus. Account owners who fail to withdraw the full amount of the RMD by the deadline of December 31 face a 25% excise tax on the amount not withdrawn.

25%? That’s insane. The penalty may be reduced to 10% if the RMD is corrected within two years, the IRS said. Even possible, it says, for the penalty to be waived entirely if the account owner can prove that the shortfall in distributions was due to reasonable error. I don’t think you’re going to get away with justifying reasonable error to the IRS. That’s just my personal opinion. Hey, type one, if you love the IRS, that’s not going to get any action.

Type two, what you think. Type two, if you don’t like the IRS and think that we shouldn’t have tax at all when it comes, this is insane and it blows me away. I got to just say this. The Federal Reserve came about, what, like 1910, I want to say. And then a couple of years later, boom, employment tax. And one thing that people need to realize is they got away with conning the people because very few people were wealthy back then and most were middle class or poor.

And they said, this isn’t for you, it’s for the rich. And then all they did is they just started going, we’re just going to start saying, we’re just going to redefine what rich is. Well, now, rich isn’t millionaire. It’s this much, and now it’s this much. And then eventually everyone’s paying tax. Well, why? Because you’re all rich. But type three, if you think that you’re rich or feel that you’re rich.

Type four, if you don’t feel like you’re rich, especially in an environment where things keep getting more and more expensive. And that’s why I want to warn people. So please, even if you’re not, what is it, 72, 73 years old? Like I said in the beginning of the story, please share the video out, because it’s important that people warn. I mean, get this out on the AARP threads and websites because it’s important.

They’re going to tax you anyway. But I don’t want you to lose money in fees or penalties. And nobody wants to be in trouble with the IRS, right? I mean, that’s stressful enough as it is, but then they’re going to tax you anyway on top of it. So I don’t want that to happen. Now, it says the RMD rules require individuals to withdraw from their iras every year once they reach the age of 72 or 73, if the account owner reaches 72 in 2023 or later.

This holds true for those who are still employed. An exception to the requirement is Roth IRAs, whose owners are not required to take rmds during their lifetime. However, and I’ll think about that, why? They don’t care because they’re not getting taxed on those. So the IRS is like, oh, whatever, just take it out whenever so that’s the exception, right? The Roth IRAs. However, the beneficiaries of a Roth IRA are subject to the withdrawal rules after the account owner’s death.

So if you inherit this, you need to be paying attention to when you’re taking those withdrawals. Now, the rules also apply to employer sponsored retirement plans, including profit sharing plans and 401k plans. Although participants in such plans can delay taking rmds until they retire, an exception is part owners of the business that is responsoring the plan now, some other recent developments on December 19, the IRS said it is providing failure to pay penalty relief for roughly 4.

7 million taxpayers who didn’t receive automated collection reminder notices from the tax agency. So that’s nice. The 1 billion or so in total penalty relief will be granted to certain individual taxpayers, businesses and tax exempt organizations for the taxable years of 2000 and 22,021, the IRS said. The taxpayers eligible for the relief are those who did not receive automated reminders from the IRS to pay overdue tax bills when the agency temporarily suspended mailing of such notices in February of 2022 due to the unprecedented effects of Covid-19 Jeso, I really can’t stand the IRS.

Normally, these reminders would have been sent as a follow up, they said after an initial notice. But the IRS didn’t send them out because it was swamped by a backlog of millions of original and amended tax returns filed at the height of the pandemic that the agency was unable to process. Now, demands to return the pandemic funds. You know what? I’m going to do a whole nother video about that because that’s a big deal.

No, I’ll touch on it real quick, though. Demands to return the pandemic era funds while the IRS is waiving the failure to pay penalties for nearly 5 million americans, it also recently announced that it’s sending letters to around 20,000 taxpayers demanding that they return wrongly claimed and receive pandemic era tax credits. The letters demanding a return of the pandemic era relief money relate to a flood of bad claims for the pandemic error relief program known as the employee Retention Credit.

This refundable tax credit was designed for businesses that continued paying employees during the shutdowns. My companies never put in for that, actually during that time, so I’m glad. An investigation by the IRS Criminal Investigation Division uncovered over $2. 8 billion of potentially fraudulent ERC claims. So that’s going to be a big deal. But point being is this. If you are in the age group between 72 and 73, depending on when you were born.

If you’re not taking those withdrawals, you need to look at this by December 31. Go talk to your tax professional, because you can be fined, penalized by the IRS. And that has to do with 401 ks, iras, all kinds of different accounts. So retirement accounts, so go. And look at that. The IRS wants their pound of flesh. I hate that version, that wording. But I don’t want to see you get penalized.

Okay. I hope you got something out of this. Thank you so much for watching. The economic ninja is out. Bye. .