Recently, the CARES Act authorized those who took an RMD in January 2020 the ability to return it to an IRA. I did so, but the amount was net of taxes. How do I get my Federal and state (California) withholding back. And, do I have to do so by the Aug 31, 2020 deadline? Thank you.
Thank you for the quick response. With respect to the withheld funds from my RMD that I have not yet rolled back to the IRA–will these funds (the W/H not yet returned) be considered a distribution and be taxed AGAIN for 2020?
The withholding is a deposit against your actual tax liability. Once you file you are only taxed one time on the distribution portion not rolled back. You might consider the withholding as a tax, but since it will be applied against the actual tax, you are only taxed once. If you complete the rest of the rollover, you will not be taxed at all, once you file your return and the amount already paid is applied as a credit against your final tax bill.
Thank you, again. Finally, I will not run afoul of the “one time only in 12 months” regulation? Appreciate your help.
Notice 2020-51, which allows those who took January distributions that would have been RMDs as well as later RMD distributions to roll them back by 8/31. The 60 day time limit and the one rollover limit in 12 months does not apply to these rollovers as indicated in the Notice. You still have time to roll back the amount that was withheld, using your other funds for this money. None of your distribution would then be taxable, and you get credit for the withholding when you file.
Permalink Submitted by Alan - IRA critic on Wed, 2020-07-01 22:20
You will only get credit for the withholding when you file your returns next year. However, any other tax payments you would have made starting now can be reduced to the extent of the withholding and that will effectively produce your credit sooner. There is no August deadline for this. However, you can also still roll back the withheld amount to the IRA using your other funds if you want. You could have done that with the rollover you already completed. If you leave things as they are, you will be reporting a partial rollover (the net amount received only) and will still be taxed on the withheld portion. It is entirely optional to complete the process by doing a second supplemental rollover deposit, for which the deadline is 8/31.