The CARES Act provided a waiver allowing any taxpayer with a required minimum distribution (RMD) due in 2020 from a defined-contribution retirement plan (i.e. Traditional IRA, SEP IRA, or SIMPLE IRA, 401(k), 403(a), 403(b) and 457 plans) to skip those RMDs this year. The waiver includes anyone who turned age 70 1/2 in 2019 and would have had to take the first RMD by April 1, 2020.
On June 23rd, the IRS updated certain details of the waiver related to RMDs already taken in 2020 and the redeposit of those funds back into retirement accounts.
Summary of the key updates
- RMDs that have already been taken at any point in 2020 are now eligible for redeposit
- The 60-day rollover period (i.e. the ability to redeposit) for any RMDs taken in 2020 has been extended to August 31, 2020
- Inherited IRA distributions taken in 2020 are eligible to be repaid by August 31, 2020
Redeposit of the RMD
Taxpayers may redeposit the entire gross amount of an RMD. If there were federal and/or state taxes taken out of the distribution, those amounts should be provided to your tax preparer and will be considered an advance payment towards your 2020 taxes.
Process for redeposit of funds into a defined-contribution retirement plan
Clients may redeposit the funds to their account at the custodian prior to August 31, 2020. The redeposit should be accounted for as a “60-day rollover” by the custodian. For Inherited IRA accounts, the redeposit is not technically a 60-day rollover; however, it is expected that custodians will have a way to account for the redeposit under the CARES Act waiver.
Please contact the firm if you have any questions about the waiver and your RMDs for this year.