IRS Publishes Guidance on Rollover Relief for RMDs

On Tuesday, June 23, the Internal Revenue Service (IRS) announced that taxpayers who have already taken their required minimum distribution (RMD) in 2020 from certain retirement accounts will now be able to roll those funds back into eligible retirement accounts. This is the result of a waiver for RMDs in the Coronavirus Aid, Relief and Economic Security (CARES) Act, benefiting those who do not need the money as they will not have to pay the taxes that would have been due on those distributions.

Taxpayers who were supposed to take the required RMD in 2020 included anyone who turned 70½ in 2019 and would have had to take the first RMD by April 1, 2020. However, the CARES Act waives that requirement for the calendar year 2020.

Rollover period

According to the IRS guidance, the 60-day rollover period has been extended to August 31, 2020. Furthermore, an IRA owner or beneficiary who received an RMD in 2020 can repay that distribution to the IRA by August 31, 2020. The repayment will not be subject to the usual limitation of one rollover during a 12-month period or restrictions on rollovers for IRSs that were inherited.

Applicable plans

The waiver applies to any taxpayer with an RMD due in 2020 from defined-contribution retirement plans, including a 401(k), a 403(b) or an IRA. It does not apply to defined-benefit plans that are funded by employers.

If you need any more information or help addressing RMD rollovers, please contact Smith and Howard by filling out the form below.