August 31, 2020 Deadline to Roll Back RMD’s Taken for 2020

The IRS issued new guidance this week regarding Required Minimum Distributions (RMD). Long story short: RMD not required for 2020 and if you have already taken your RMD, you have until August 31, 2020 to put it back in the IRA and not pay tax on the RMD.

As a reminder, in March the CARES Act was passed that suspended the Required Minimum Distribution for 2020. This applied to anyone that was required to take a distribution from their IRA or other defined contribution plans (does not apply to defined benefit plans). This was easy for taxpayers who had not taken their RMD at the time the CARES Act was passed, as they just had to let their advisor know not to distribute the money during the year.

Things were a little more complicated for taxpayers who had already taken their RMD because, under the rules at the time, you only had 60 days to roll a distribution back into the account. If a taxpayer had taken an RMD on January 2, 2020, by the time the CARES Act was passed, the 60-day period had passed and the taxpayer could not roll that amount back into their IRA. Under the new relief, the recipient may repay the distribution to the distributing IRA, even if the repayment is made more than 60 days after the distribution, provided the repayment is made no later than August 31, 2020. The taxpayer who took out their RMD in January now has until August 31 to roll the funds back into the account.

The notice also provides that this repayment is not subject to the one rollover per 12-month period limitation and the restriction on rollovers for inherited IRAs.

Please call us for more information or clarification.