CARE ACT RE REQUIRED RMDs

Submitted by Gerri Fehst on Thu, 2020-04-02 03:05

In January 2020, I took my RMD from my TSP for TY 2020 in cash. Ten percent tax was withheld from the amount.

My husband took $20,000 in cash out of the $70,000 originally owed for his 2020 Traditional IRA distribution.

Under the CARE Act, no RMDs are required in 2020.

What recourse do either I or my husband have under the Act to convert these withdrawals? In my case, am I eligible for a rollover of the amount — or is a rollover only permitted within a 60 day period?

In my husband’s case, he took his $20,000 in cash about 30 days ago. Is he eligible to convert that amount to a Roth?

Please advise on all aspects. And thank you.



Submitted by Alan - IRA critic on Thu, 2020-04-02 04:14

  • Husband can convert to a Roth if he wishes or roll it back to his TIRA. However, a rollback to his TIRA counts against the one rollover in 12 months limit, while the conversion does not.
  • Your situation is more complex because your 60 days has expired. You will have to wait for more flexible rules that allow you to exceed 60 days, OR if all distributions in 2020 eventually are treated as corona virus related, you can roll yours back anytime in the next 3 years without regard to either the 60 day time limit or the one rollover per 12 month limit. Just stay tuned for IRS releases on this or the next stimulus bill from Congress. You can also replace the 10% withholding with other funds if you wish.

Submitted by Gerri Fehst on Thu, 2020-04-02 04:35

Is this no 2020 rmd for everyone over 70.5 or just for people who have the virus or are in one of those special categories?  Thx

Submitted by Alan - IRA critic on Thu, 2020-04-02 13:59

The RMD waiver applies to everyone for all plans including inherited plans. However, you must qualify for a Coronavirus related distribution which allows you to roll distributions back for up to 3 years and therefore avoids the 60 day rollover deadline and the one rollover limitation. These also allow penalty free distributions and taxes due to be spread over 3 years. Eligibility requirements for this include those directly impacted, but the complete definition is yet to be determined.

Submitted by Steven Williams on Thu, 2020-04-02 21:14

What is the process to potenially extend the 60-day window for those who already took their 2020 RMD?  Would this be a determination by the IRS or would this need to go through the legislative process to have the IRC updated?

Submitted by Steven Williams on Thu, 2020-04-02 21:33

Are 2020 distributions from inherited IRA and employer plan eligible to be paid back over the 3-year period if the distributions are qualified (i.e. coronavirus related)?

Submitted by Alan - IRA critic on Thu, 2020-04-02 21:58

For elimination of the 60 day rollover deadline, you must qualify for a Corona VIrus related distribution per the CARES Act. If you qualify the deadline is 3 years from the date of the distribution, the custodian will allow you to self certify that you do, and will then code the rollover contribution with an assigned identification code shown on Form 5498 for the IRS and taxpayer. Therefore, there will be no red tape for the IRA owner or plan participant. Eligibility for CVDs is expected to be made broader, perhaps eventually will be made available to the majority of taxpayers, maybe even everyone. However, distributions to non spouse beneficiaries will not be eligible for rollback once they are made as has always been the case.

Submitted by Robert Blanchard on Fri, 2020-04-03 13:41

I understand that an RMD taken before the CARES Act can be rolled back in within 60 days. If I had some withholding can I roll back in the full withdrawl and treat the withholding like an estimated tax payment?

Submitted by Alan - IRA critic on Fri, 2020-04-03 14:32

Yes, you can replace the amount withheld to eliminate all tax on the distribution. However, this will use up your one permitted 60 day rollover for the 12 month period starting with the distribution. Hopefully, you have a rollover available.

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