Change Jan RMD to Roth Conversion

Submitted by Undocumented Newcomer on Thu, 2020-05-21 13:03

Wife took her 2020 RMD in January. The entire amount was withheld and sent directly from the broker to IRS in lieu of a separate 2020 Q1 quarterly estimated payment.

Since there are no RMD requirements in 2020, is she able to put an equivalent amount into her Roth IRA and designate the withdrawal a Roth conversion?

Thanks,

Michael



Submitted by Alan - IRA critic on Thu, 2020-05-21 15:19

  • Unfortunately, those who took distributions in January, thinking they were RMDs have been left out in the cold with respect to rollovers. The IRS has allowed such distributions done in Feb, March, and April to be rolled over subject to the rollover rules, up to 7/15. As it stands however, January distributions had to be rolled over within 60 days of those distributions. But there is always a chance that Congress will pass further relief, since this issue is well known.
  • There is one exception to the above. If wife qualifies for a CRD (corona virus related distribution), then she can replace the withheld amount by doing a rollover including a conversion. The IRS is expected to broaden the current requirements for a CRD in future guidance. A CRD includes all distributions taken back to 1/1/2020, so keep monitoring both these possibilities.

Submitted by Undocumented Newcomer on Thu, 2020-05-21 15:28

Thanks for the rapid response, Alan.I was furloughed at the end of March as a result of COVID 19.  Based upon your reply, I believe that my furlough allows my retired wife to return the distribution to her IRA or convert the amount to her Roth IRA.  Is there a deadline for her to perform either action?  I presume that the direct movement of her “RMD” to IRS has no impact.  Please confirm.Gratefully,Michael

Submitted by Alan - IRA critic on Thu, 2020-05-21 15:59

Still not there yet. Qualification for a CRD requires the furloughed worker to take a CRD from THEIR plan, but this was your wife’s distribution, so she does not qualify for a CRD based on your furlough. This is another unpopular restriction that might be eliminated when the IRS releases their guidance. Yet another such restriction is that a loss of hours qualifies for the account owner, but not a reduction of pay rate. I think there is a pretty good chance she will qualify for a CRD and thus the January distribution can be treated as a CRD once these restrictions are modified. The IRS knows they need to release this guidance very soon since there are far too many gray areas within the current CRD definition.

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