IRS Deadline to Return Unwanted 2020 RMDs Fast Approaching

unwanted RMDs deadline, IRS,
Less than two weeks left to return unwanted RMDs.

Time is running out for retirement account holders to roll back any unwanted required minimum distributions (RMDs) they already took in 2020.

When the CARES Act was signed into law on March 27, 2020, it enabled any taxpayer with an RMD due in 2020 from a defined-contribution retirement plan, including a 401k or 403b plan, or an IRA (but not defined benefit plans), to skip those RMDs this year if they wanted. That includes anyone who turned age 70½ in 2019 and would have had to take the first RMD by April 1, 2020.

But by late March when CARES became law, many people had already taken then-required RMDs. If they want to roll those distributions back into their 401k or IRA to avoid having those funds counted toward their income for the year, they have to do so by the end of this month. That’s less than two weeks from now—and people who want to return funds should be sure they are back in the account (and not merely postmarked) by August 31.

To address some holes in the CARES Act, the Internal Revenue Service (IRS) extended the opportunity to roll those funds back into a retirement account with Notice 2020-51 (PDF) in June, effectively extending the 60-day rollover period for any RMDs already taken this year to August 31, 2020, to give taxpayers time to take advantage of this opportunity.

In addition to lowering an account holder’s income taxes for the year, returning an unwanted RMD can also help those who would be pushed into a higher income bracket for the purposes of calculating Medicare premiums and the portion of their Social Security income that’s taxed.

Not to mention, returning a RMD that is not currently needed can help that retirement account accumulate more money—something that could be especially helpful for accounts that suffered steep declines early in the year as a result of the coronavirus-fueled economic crisis.

One of the intentions of the CARES Act was to help retirees by allowing them to keep unneeded RMD funds in their retirement accounts to help them recoup those Q1 losses.

The June IRS notice also states that repayments are not subject to the one-rollover-per-12-month-period limitation and the restriction on rollovers for inherited IRAs.

SEE ALSO:

Brian Anderson Editor
Editor-in-Chief at  | banderson@401kspecialist.com | + posts

Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.

Related Posts
Total
0
Share