A financial advisor contacted me about her client who had recently passed away. The advisor was legitimately concerned about a rollover check received by the now-deceased individual. It had not been deposited into his IRA prior to death. Was her client’s estate stuck with a taxable distribution? Could the financial institution refuse the rollover because the person was no longer of this earth?
With more 401(k) plans offering Roth contributions and more folks taking distributions from their plans, now’s a good time to review the tax rules governing Roth 401(k) distributions.
Question:Once the RMD’s for 2020 were suspended, I withdrew what would have been my RMD from my traditional IRA and deposited it in my Roth IRA. Can I now withdraw that amount from my Roth and repay it to my traditional IRA?Thank you.RussAnswer:Russ,Once you deposited the RMD amount into your Roth IRA, it became a conversion. Roth conversions can not be reversed (“recharacterized”).
It happens. You have made a 2019 contribution to the wrong type of IRA. All is not lost. That contribution can be recharacterized. While recharacterization of Roth IRA conversions was eliminated by the 2017 Tax Cuts and Jobs Act, recharacterization of IRA contributions is still available and can be helpful in many situations.Maybe you contributed to a traditional IRA and later discovered the contribution was not deductible. Or maybe you contributed to a Roth IRA, not knowing that your income was above the limits for eligibility.
The IRA and plan rollover rules have been in constant flux this year. We are now past the original July 15 extended rollover deadline. This was the first extension date created by IRS Notice 2020-23. Distributions from an IRA or company plan taken February 1 or later could have been rolled back to an IRA or company plan beyond the standard 60-day rollover window. This rule applied to any distributions that were otherwise eligible to be rolled over, including unwanted RMDs.
Question:For COVID "special" Aug 31 rollovers, am I allowed to return my 401(k) required minimum distribution (RMD) to my IRA?Thank you,MariaAnswer:Hi Maria,Yes, the CARES Act and subsequent IRS guidance allows unwanted
Admittedly, it’s not such a bad problem to have. Nonetheless, it’s true that high-paid company plan participants can have their benefits limited by the IRS compensation limit.The compensation limit is $285,000 for 2020 and goes up most years based on cost-of-living increases. It was $280,000 for 2019 and $275,000 for 2018.Pay above the limit can’t be used in determining employer contributions made to 401(k) plans and SEP and SIMPLE IRAs. Excess pay also can’t count towards benefits earned in defined benefit pension plans.
The countdown to the much delayed 2019 tax filing deadline is on. The deadline is July 15, 2020, which is only a couple of days away. Time is running out. Is your IRA ready?Making Your 2019 IRA ContributionDue to the COVID-19 pandemic the 2019 tax-filing deadline has been extended until July 15, 2020. This means that July 15, 2020 is also the deadline for making a 2019 IRA contribution. This is true even if you have an extension to file your tax return. An extension does NOT give you extra time to make a traditional or Roth IRA contribution. So, if you are thinking about making a 2019 contribution, the clock is ticking.
Question:Hello,I am aware of the IRA one-rollover-per-year rule. What I can’t find is if a married couple that files jointly violates the rule if they each do a rollover from their own individual IRAs?For example: One person has an IRA in their name and takes a distribution and rolls it over within the 60-day limit avoiding the taxable distribution. Now, can the other spouse also take a distribution from their own IRA and do the same without incurring a taxable distribution?Thanks so much.Maggie
As we have written on many occasions, the “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act) waives required minimum distributions (RMDs) for 2020. This waiver applies to company savings plans and IRAs, including both inherited traditional and inherited Roth IRAs. While that sounds like a straightforward announcement, the RMD waiver has generated a landslide of inquiries and confusion since the CARES Act was passed in late March. Here are a dozen of the most popular and widely applicable Yes/No questions and answers:
