CARES Act and RMD’s
Assume a person took an RMD post February 1, 2020 and withheld federal and state taxes. If the IRA owner returns the entire distribution, the taxes are held as a credit against future taxes owed.
Assume a $40,000 distribution and $10,000 in federal taxes withheld. If only $30,000 were returned, that would be $10,000 in income and essentially 100% withheld. Would that negate the credit and create a refund situation to the extent deserved based on the person’s overall tax situation? Or would there be some type of pro-rata calculation combining withholdings and future tax credits?
Permalink Submitted by Alan - IRA critic on Fri, 2020-05-01 20:31
If only 30,000 is rolled back, there is 10,000 in taxable income (the amount withheld). The withheld 10,000 is just a deposit toward the person’s eventual tax bill for 2020. This may or may not be enough to avoid quarterly estimates or withholding from other sources. Not sure I understand your question about pro rating or future credits. Are you asking about the CARES rebate payment?