With the tax law changes that have happened recently because of the Covid-19 pandemic, there have also been changes to the Required Minimum Distributions (RMD) for 2020. RMD is the amount of money that must be withdrawn each year from a SEP, SIMPLE, IRA or other defined contribution plan including 401(k) and 403(b) plans, when the owner/participant reaches age 72 (70½ if you were 70½ before January 1, 2020).
The CARES Act, signed into Law on March 27th 2020, now allows the owners of the above mentioned retirement accounts including inherited and beneficiary accounts, to skip the RMDs for 2020. With the RMD requirement waived, you are still allowed to do a Qualified Charitable Distribution of up to $100,000 directly from your IRA account.
If you have already taken an RMD for 2020, you can redeposit these funds. The 60 day rollover deadline has been waived until August 31st, 2020. This means most distributions that were thought to be RMDs in 2020 but then waived by the CARES Act can now be undone and rolled back to a retirement account by August 31st, 2020. The limit of re-contributing only one IRA distribution over a 12 month window has also been waived through the August 31st, 2020 deadline by this new guidance. Therefore, you can take all of the 2020 RMDs and redeposit them before the deadline. If you just took an RMD recently and the 60 day period is not over until after August 31st, 2020, you can still redeposit it within that 60 day period.
If any taxes were withheld on these RMDs, those cannot be refunded until 2020 taxes are filed. So in order to re-contribute the RMDs, the amount needs to be grossed up which means you may have to come up with more dollars than you received net of taxes.
Electing not to take the 2020 RMD may affect your overall tax situation, so the choice may involve some tax planning. Please contact your advisor at Wegner CPAs for any tax projections or more details on this new guidance.
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