IRS Extends Roth Contribution Requirement: The Internal Revenue Service (IRS) said today that the new rule won’t be enforced until 2026, which is a very long time. This rule states that people with higher incomes who take part in 401(k)s and similar retirement plans must make any catch-up contributions as after-tax Roth contributions. Also, the IRS clarified that people aged 50 and older can keep making catch-up payments after 2023, no matter what income band they are in.
The first step toward this big change was the release of Notice 2023-62PDF on IRS.gov. This document gives basic advice on section 603 of the SECURE 2.0 Act. This law, which was passed in December 2022, said that the new Roth catch-up payment rule would apply to workers in a 401(k), 403(b), or government 457(b) plan whose Social Security wages from the previous year were more than $145,000. In 2024, this rule would become law.
The main reason for this administrative transition time is to make sure that taxpayers can change the new catch-up rule without any problems. The goal is to make the transition to this new rule as easy and organized as possible. The notice also says that the SECURE 2.0 Act doesn’t stop plans from letting people make “catch-up” payments. So, people 50 and up can still give money in this way after 2023.
In the future, both the Treasury Department and the IRS are getting ready to give people more detailed rules to follow. The current notice lists some roles that are likely to be in the next set of guidelines.
Also Read: US Treasury Bond Yields Surge: Impact on Equities and Cryptocurrencies
Also, to make sure that everyone has a say in the decisions that are made, the notice asks for the public’s opinion on what it talks about and for ideas about where things should go in the future. There are directions for sending in their thoughts in the notice.
The catch-up rule for Roth accounts has been put off. The IRS is putting off until 2026 the start date of the new rule about Roth catch-up contributions. This rule affects higher-income people who are in 401(k)s and other retirement plans.
More contributions to make up for lost time: People who are 50 or later can keep making catch-up payments even after 2023, no matter how much money they make.
SECURE 2.0 Act Starting in 2024, workers who took part in certain plans and made more than $145,000 in Social Security wages this year must follow the new rules for Roth catch-up payments.
Advice for the future- Both the Treasury Department and the IRS are getting ready to give more information and are always looking for public feedback to ensure that citizens get the best and most helpful rules.
The IRS wants to make things easy for people and ensure that everything about contributions to retirement plans is clear. It shows how much they want to make it easy for people to save for retirement and keep up with changes in the financial world.
Our Reader’s Queries
What is the deadline to contribute to a Roth IRA for 2023?
The deadline for contributing to your traditional or Roth IRA for the year 2023 is April 15, 2024. This means that you still have time to make your contribution count towards the previous year. Whether you have a traditional or Roth IRA, you can take advantage of this opportunity to maximize your savings. So mark your calendar and make sure to contribute before the deadline!
What are the new Roth 401k rules for 2023?
By 2023, the maximum amount you can contribute to a Roth 401(k) and traditional 401(k) in pretax contributions is $22,500. This amount increases to $23,000 in 2024. If you’re 50 or older, you can add an extra $7,500 to your contributions in both 2023 and 2024.
What are the new rules for Roth IRAs?
For 2023, the maximum contribution limit for Roth IRA is $6,500, while it’s $7,000 for 2024. If you’re 50 or older, you can add an extra $1,000 to these amounts. However, there are income limits that determine who can contribute. These limits are based on your modified adjusted gross income (MAGI).
When can I start making 2024 Roth IRA contributions?
Typically, you have until tax day to make IRA contributions for the previous year. For instance, in 2024, you can contribute up to $6,000 towards your 2023 tax year limit until April 15. Moreover, starting from Jan. 1, 2024, you can also make contributions towards your 2024 tax year limit until tax day in 2025.