Retired workers in the US who are turning 72 must comply with the Required Minimum Distribution (RMD) law by April 1 to avoid a 25% IRS penalty. The RMD law requires annual withdrawals from retirement accounts, and failure to do so can result in a significant fine.
The rule applies not only to individual retirement accounts (IRAs) but also to employer-sponsored retirement plans and traditional IRAs. If the original account holder dies before reaching the RMD age, their heir is also required to comply with RMD laws on their behalf.
To calculate the RMD, the IRS uses a formula that takes into account the account balance as of December 31 of the previous year and life expectancy. The burden of paying the penalty falls on the taxpayer if they fail to comply.
While there is no deadline extension, individuals who are unsure about the regulation can consult with an attorney or verified expert. However, if the amount owed is paid within 24 months and a Form 5329 is filed, the penalty can be reduced to 10%.
It is recommended that the first RMD is taken on December 31 of the year an individual turns 73. This timing offsets the impact of two RMDs within the same year and reduces taxable income overall.
Source: https://www.hindustantimes.com/world-news/us-news/retirees-comply-with-this-requirement-by-april-1-or-face-a-25-irs-fine-101743318384243.html