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IRS reminder, required minimum distribution rollovers, repayments due by August 31 (COVID-19)

IRS reminder, required minimum distribution rollovers

The IRS today issued a release as a reminder to individual taxpayers that the deadline to rollover or repay retirement plan “required minimum distributions” (RMD) is August 31, 2020.

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As noted in today’s IRS release—IR-2020-187—certain RMDs that are not rolled over or repaid could be subject to income tax.

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (Pub. L. No. 116-136)—legislation enacted to provide relief in response to the coronavirus (COVID-19) pandemic—includes a provision to waive RMDs during 2020 for individual retirement accounts (IRAs) and retirement plans, including for beneficiaries with inherited accounts.

  • The waiver includes RMDs for individuals who turned age 70½ years in 2019 and took their first RMD in 2020.
  • Individuals who took RMDs in 2020, including those who turned 70½ years during 2019, have the option of returning the distribution to their account or other qualified plan.
  • Roth IRAs do not require withdrawals until after the death of the owner.
  • The CARES Act provisions apply to most retirement plans—including traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k) plans, 403(b) plans, 457(b) plans, profit sharing plans, and other defined contribution plans.
  • The RMD suspension does not apply to qualified defined benefit plans.

As the IRS explained, because the RMD rule is suspended, RMDs taken in 2020 are considered eligible for rollover. Therefore, RMDs can be rolled over to another IRA, another qualified retirement plan or returned to the original plan by August 31, 2020, to avoid paying taxes on that distribution.

IRS Notice 2020-51 also provides that the one rollover per 12-month period limitation and the restriction on rollovers to inherited IRAs do not apply to this repayment rule. Read TaxNewsFlash

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