Required Minimum Distributions (RMDs) have been suspended for the tax year 2020. This was originally announced as part of the Cares Act when the pandemic first hit and was signed into law on March 27, 2020. There was a provision in the act that suspended all required minimum distributions for those of RMD age and those required to take them from beneficiary designated accounts.
Suspending RMD’s would provide individuals with the ability to skip taking monies from their retirement accounts while the markets were impacted by COVID-19 and also allow them to not incur the tax associated with the withdrawal. The Act provided straight forward guidance to those that did not take an RMD yet, but it was a bit unclear how it would affect those that may have already taken an RMD earlier in the year. This caused a bit of confusion and uncertainty on how to handle those particular situations.
Luckily, on June 23, 2020, the IRS announced that anyone who fell into the group who took their RMD in 2020 from certain retirement accounts would have the opportunity to roll those funds back into a retirement account following the Cares ACT RMD waiver for 2020. This announcement effectively extended the 60-day rollover period, for any RMD already taken, to August 31, 2020.
This gives everyone eligible the ability to take advantage of RMDs being suspended for 2020, whether they already took it or not. The IRS also clarified that this rollover would not count against the taxpayers’ ability to only make one rollover every 12 months and the restriction on rollovers for inherited IRAs. We discussed this on a recent Mitlin Minute, too.
This could provide significant help to those that may have large RMDs who have taken them earlier in the year. It will be important that this is handled correctly and documented properly. Those that have taken an RMD in 2020 should consult with their advisors (financial advisor and tax advisor) to consider whether it would make sense to return the RMD as if it was never taken.
We would be happy to assist you in determining whether returning or not taking your required minimum distribution in 2020 is right for you. Keep in mind that if you have already taken the RMD, you only have until August 31, 2020 to return it and roll it back into your retirement account. Just contact us, Mitlin Financial, at (844) 4-MITLIN x112 to schedule a time for this review. Be sure to share this article with friends, family, and business acquaintances who might be interested, too. We look forward to helping you, and them, get on the right path and stay there.
This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.