Took Your 2020 RMD? IRS Offering Relief via Rollover Option

Took Your 2020 RMD? IRS Offering Relief via Rollover Option

  • 06.29.20
  • Retirement & Longevity
  • Article

Taxpayers who took RMDs as early as January 1 now have the option to roll the funds back into a retirement account by the end of August.

As part of its provisions to help support individuals and businesses during this challenging period, the Coronavirus Aid, Relief, and Economic Security (CARES) Act suspended required minimum distributions (RMDs) for 2020. However, many taxpayers had already taken their 2020 RMD by the time this provision was passed.

On June 23, 2020, the IRS expanded the CARES Act, allowing taxpayers who already took an RMD between January 1 and June 23, 2020 from certain retirement accounts the opportunity to roll those funds back into a retirement account by August 31, 2020. Beneficiary IRA owners can also roll over previously taken 2020 RMDs through August 31.

The relief provided by this provision is broad and applies to traditional IRAs, SEP IRAs and SIMPLE IRAs, as well as 401(k), 403(b) and governmental 457(b) plans. Furthermore, the relief applies to both retirement account owners themselves and to beneficiaries taking stretch distributions.

Given the market volatility of the last few months, this change allows retirement portfolios that experienced recent declines time to potentially recover, and it might allow certain investors to draw income from more tax-efficient sources.

If you’ve already taken your RMD for 2020, there are strategies available that can allow you to return the distribution to your retirement account without tax consequences. Please contact your financial advisor for more information. He or she can work with your tax and legal professionals to determine how this legislation affects you directly.