IRS Provides 2020 Required Minimum Distribution Rollover Relief

On June 23rd, the IRS issued Notice 2020-51, which provides far-reaching relief for taxpayers who took required minimum distributions (RMDs) in 2020 from their IRAs or other retirement accounts before the CARES Act suspended the RMD requirement for 2020. Taxpayers who have already taken an RMD in 2020 from certain retirement accounts now have the opportunity to repay those funds to a retirement account. The 60-day rollover period for any RMDs already taken in 2020 has been extended to August 31, 2020, to allow taxpayers time to take advantage of the relief. 

When the CARES Act RMD suspension was originally enacted, folks who had already taken their RMDs for 2020 struggled with whether or not the RMD could be undone. In April, the IRS issued a notice saying those who took an RMD between February 1st and May 15th of 2020 could put the funds back into the retirement account by July 15th. But that left individuals who had taken RMDs in January of 2020 without a clear understanding of how any relief might apply to them. With this new guidance, those individuals now have clarity on the matter.

2020 RMD Waiver Eligibility 

The CARES Act allows taxpayers with RMDs from a defined contribution retirement plan, including a 401(k) plan, 403(b) plan, or an IRA, that are payable in 2020 to skip those RMDs this year. However, this waiver of RMDs does not apply to defined benefit plans. The waiver also applies to anyone who turned age 70½ in 2019 and would have been required to take their first RMD by April 1, 2020, under the law in effect before the enactment of the SECURE Act. The SECURE Act changed the required beginning date for RMDs to be determined based on when an individual attains age 72, rather than age 70.5, effective in 2020. In addition to granting relief for taxpayers who made a distribution in 2020, this guidance expands eligibility to include taxpayers generally subject to the once-per-year rollover limitation and restrictions on rollovers for inherited IRAs.

Contact ARB

ARB is dedicated to updating our clients and community as the legislative implications of the COVID-19 pandemic continue to unfold. Contact us  if you have questions on this information, or visit our COVID-19 Financial Resource and Tax Center for additional information on related matters. 

 

by Daniel Doiron, CPA