QCDs and RMDs Under the CARES Act: Today’s Slott Report Mailbag

Friday, November 13, 2020

By Sarah Brenner, JD
Director of Retirement Education
Follow Us on Twitter: @theslottreport

Question:

Is there any problem with someone who is self-employed and has an active SEP making a deductible SEP contribution and an IRA QCD after age 70 1/2?  In this case, the QCD would come from the IRA while the SEP continues to be funded.  Does any offset apply?

Bill

Answer:

Hi Bill,

This is an interesting question! The rules do not allow a QCD from an “active” SEP IRA. IRS guidance says that an active SEP IRA is one that receives a SEP contribution for the year. However, even though you cannot do a QCD for the year from your active SEP IRA, if you also have an IRA, you could do a QCD from that IRA. There is nothing in the rules that would prohibit this, and no offsets apply

Question:

Good Afternoon,

I have a unique question regarding RMDs. I transferred my IRA from one custodian to another on 26th December 2019. The funds were in transit until 5th January 2020. Hence on 31st December 2019, both custodians report $0.

My RMDs are based on value 31st December 2019. Does this mean that I do not have a RMD for 2020? I can also defer my RMDs according to the CARES Act? What is the date that I can defer same?

Thanks

Dianne

Answer:

Hi Diane,

The good news is that the CARES Act cancels all RMDs for 2020 so you will never have to worry about taking an RMD for this year.

However, your question raises an issue that we see happen frequently in years when an RMD is required. If there is an outstanding rollover or transfer as you described, any funds that are outstanding would be required to be added to the December 31 year-end balance when calculating the RMD for the next year. For example, any funds that are outstanding as of December 31, 2020 would need to be included in the year-end 2020 balance that is used to calculate the 2021 RMD.

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