RMD ROLLBACK FOR IRA’s IRS notice 2020-51 of June 23, 2020

Submitted by Jan Tredway on Fri, 2020-06-26 19:30

My husband took a RMD of $20K from his IRA in February. He passed away in May. This new law states that ALL RMD’s for 2020 can be returned to the IRA’s, if they were witdrawn for 2020 taxes.

The Credit Union is saying that, because of his death, they can not roll the $20K RMD back. He would have to be alive to do it. Furthermore, now the *SAME* IRA does not qualify for a rollback! It seems that I should NOT owe taxes on the $20K then!

What is the best way to handle this to prevent a tax liability?



Submitted by Alan - IRA critic on Fri, 2020-06-26 22:07

  • Sorry to hear of your loss. While there have been some prior lRS letter rulings allowing a surviving spouse to roll back a deceased spouse’s distributions done within 60 days, there is a double hurdle to overcome here. FIrst, such PLRs only technically apply to the applicant, not to others who may have slightly different fact patterns, so many custodians will ask you to pursue your own PLR. That would cost you around 20k including legal costs (same as the distribution amount) and take many months for a decision. Second, Notice 2020-51 needs to be integrated into the process as that is what would provide the longer rollover window, although the distribution would have to be returned to the distributing IRA account which may no longer even be open depending on what you have done to date.
  • Are you the executrix of his estate and the sole beneficiary on the IRA?
  • Consider that this is your final joint return year, so your tax rate will probably be lower this year than when you filing as SIngle in the future. Therefore, even if you rolled this back, it will increase your future RMDs which may be taxed at a higher rate. It might be smarter to not pursue a rollover as a longer term tax strategy. 
  • As it stands, you will have to report the taxable income since a taxable distribution was made. Not being able to complete a rollover means there is no way to avoid reporting this income.

Submitted by Jan Tredway on Sat, 2020-06-27 13:11

Thank you so much for your prompt reply!  Yes, I am the executrix and sole beneficiary of the IRA.  On the face of it it, it seems that if I am liable for taxes on the RMD, then I should be afforded the remedy of the rollback.   Appreciate the consideration of my change of tax bracket next year.

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