With the CARES Act, Congress decided to waive all 2020 required minimum distributions (RMDs).
What if you already took out your annual RMD before Congress changed the law?
The IRS just granted you brand-new mercy to fix the issue, but you need to take action before August 31, 2020.
2020 RMD Waiver
The CARES Act waived all 2020 RMDs for IRAs and defined contribution plans. This waiver applies to your RMD if you
Let’s say you did not know about the waiver and you took your RMD. You want to put it back and avoid paying taxes on it. You have two ways to undo your 2020 RMD:
Indirect rollover. You generally have 60 days from the distribution date to complete an indirect rollover. But in Notice 2020-51, the IRS extends this indirect rollover deadline so that you have until August 31, 2020, for RMD distributions you took earlier in tax year 2020.
As a reminder, you can’t do an indirect rollover from an inherited non-spousal IRA. Instead, to avoid being taxed on your RMD, you have to use the repayment method.
Repayment. You can repay the RMD to the original account by August 31, 2020, and pay no tax on it. And when you make this repayment under Notice 2020-51, it doesn’t count as the “one” indirect rollover per year that you can use.
Important note. These rules apply only to RMD amounts distributed (taken out of the IRA). Any amounts you took out exceeding your RMD amount aren’t eligible for relief.
Example. Ann had a $4,000 RMD requirement for her traditional IRA for tax year 2020 and took out $5,000 on January 15, 2020.
Jo-Ann has two options, However, Ann must pay tax on the $1,000 she took above and beyond her RMD amount.
The August 31 date is coming soon. If you would like my help with your RMD, please don't hesitate to contact us.
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Spencer Accounting Group, LLC does not provide investment, tax, legal, or retirement advice or recommendations in these blogs. The information presented here is not specific to any individual's personal circumstances.
Keana Spencer is an Accountant, Entrepreneur, and Educator to her clients, with a strong passion. Keana has over 10 years of experience and through her practice, she is a source of knowledge and strategies to her clients.