RMD Question
Client overshot his RMD (this years 2021) …
RMD total was $500k … Client took a distribution of securities valued at $540k
The date of distribution was just recently (2/11/21) …
Being that he overshot the required minimum amount, is he able to make a ‘Rollover Contribution’ (in cash) back to the IRA account, prior to the 60 days elasping, to in essence bring that overall figure back down to the RMD amount ?
Thanks as always for you input …
Very much appreciated !!
Permalink Submitted by Alan - IRA critic on Thu, 2021-02-18 15:00
Unfortunately, an IRA rollover can only be done using the same property that was distributed. Therefore, if the client wants to complete a rollover he will have to determine which shares are to be rolled back within 60 days. In order to avoid overshooting the rollover he will probably have roll back fewer shares than needed to bring the reported distribution down to the exact RMD amount. The challenge with an in kind RMD distribution is controlling the exact amount of the distribution and knowing when the custodian will complete the distribution.
He needs to know the share price on the distribution date, and should use that price to determine which shares are to be rolled back even though the value of the shares will have changed. This will set up a mismatch with the Form 5498 value that the custodian reports as a rollover contribution since the custodian will report the current value when the rollover is received. The IRS is used to mismatches, but it might help to attach a note to the 2021 return indicating that shares were used for the distribution and rollover.
Considering this hassle and that future tax rates for a client with this much income are almost certain to rise, and that this rollover will use up his one rollover for 12 months, maybe he will just stick with this distribution. It will slightly lower future RMDs. Another option is to roll the excess to a Roth IRA (conversion).