Cares Act Roth Distribution Repayment in 2020

Submitted by Sean Mulvaney on Wed, 2020-12-23 18:09

Background:

-This year my 401K rolled over to an IRA Account from an employer that I no longer work for.
-I took two distributions from the IRA, one for 100K and another for 35K to cover living costs due to loss of Job. Total of 135K.
-I am now in a good situation and have 135K available to pay back and want to pay back into my IRA all the money I took out before the end of the year

Questions:
-Can I pay back the entire 135K to my IRA if I have the available funds?
-What are the tax implications of my actions overall and specifically in regards to the Cares Act?

Thank you,
Sean



Submitted by Alan - IRA critic on Wed, 2020-12-23 19:15

  • If you qualify for a CRD (eg loss of job due to Covid), you can report up to 100k of your distribution as a CRD on Form 8915 E, and repay it now or up to 3 years. Repayment does not count against the one rollover limitation  per 12 months.
  • However, the additional 35k cannot be part of the CRD so you must treat it as any other distribution, subject to the 60 day rollover deadline and also subject to the one rollover limitation. If you qualify for rolling it back, you would report it as a normal rollover on Form 1040, lines 4a and 4b.
  • If you complete the CRD repayment and the other rollover, there is no taxable income from these distributions.  If you want to hold back some of the money, I would complete the 60 day rollover first, since you have 3 years to repay the 100k CRD and/or 3 years to report the CRD distribution income.

Submitted by Sean Mulvaney on Wed, 2020-12-23 20:38

The 35K is outside the 60 Day Window.  Took it out in March.  Can I put it back in my Roth?  Can I put it in another in a New Roth?  

Submitted by Sean Mulvaney on Wed, 2020-12-23 20:39

I want to be able to get it into a tax-deferred account as I plan to actively trade with it. 

Submitted by David Mertz on Wed, 2020-12-23 21:11

Since it’s been more than 60 days since the $35k was distributed, it is not permitted to be rolled over or otherwise returned to a retirement account, not even as a Roth conversion to a Roth IRA.  The taxable amount of the $35k distribution (all $35k if you have no basis in nondeductible traditional IRA contributions) will add to your AGI.

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