Rollover of January 2020 SEP-IRA Distributions

Submitted by Sidney Poretsky on Mon, 2020-07-06 16:41

Husband and wife each took 2020 RMD’s from their brokerage account SEP-IRA’s in January. Distributions for both were in cash and mutual fund shares transferred to their individual brokerage accounts. Wife died in March, and husband took his wife’s SEP-IRA combining it into his own SEP-IRA. He also combined both individual accounts. Two questions: Can the combined RMD’s, totaling about $60,000, be rolled back into his SEP-IRA; and can it be put back in cash?



Submitted by Alan - IRA critic on Mon, 2020-07-06 17:03

  • Husband can roll his 2020 RMD back to the SEP IRA, but must roll the same cash and securities that were distributed in January. He cannot substitute cash for the securities, and must roll both back to the same SEP IRA from which the distributions were taken. Deadline is 8/31 to do this. He could also do a partial rollback, for example just rolling the cash part back. That said, he will probably be filing single starting next year and his tax rates will go up, so perhaps he is better off to retain some or all of the distribution which will be taxed at the lower joint tax rates in 2020.
  • All of the above detail also applies to his wife’s RMD except that it may not be possible. The IRS has allowed a decedent’s distribution to be rolled back under various letter rulings, but is not otherwise allowed in the IRS Regs and in addition her SEP IRA no longer has a balance, although it may still exist with a 0 balance titled as a beneficiary IRA. The SEP custodian will probably not accept the rollback for deceased wife, or might request him to get his own PLR, and that costs around 20k with no guarantees. Can’t hurt to ask the custodian however. Her distribution would have to go into the empty SEP and then he could do another spousal rollover if the custodian accepts the roll back.
  • So the simpler money to return falls in this order:  1) HIs cash to his SEP   2) His securities to his SEP  3) Her cash to her old SEP  4) Her Securities to her old SEP. 

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