In Notice 2020-68, issued September 2, 2020, the IRS gave limited guidance on certain retirement provisions of the Setting Every Community Up for Retirement Enhancement Act (the “SECURE Act”). The SECURE Act was signed into law on December 20, 2019.
Notice 2020-68 does not address one of the most significant SECURE Act changes: the elimination of the stretch IRA for most non-spouse beneficiaries and its replacement with a 10-year payout period.
Question:
I had taken an RMD in January 2020 from an IRA account. Then in July, I returned a portion back to the same IRA. Now I want to return another portion back to the IRA.
Are multiple transactions for reversal allowed?
Thanks for your quick reply in advance.
Piyush
Answer:
Hi Piyush,
You are allowed to pay back an IRA distribution with multiple partial rollovers.
Some of you may have received an RMD (required minimum distribution) from an IRA or employer plan earlier this year that you don’t want to keep. Since the CARES Act waived RMDs for 2020, “RMDs” received in 2020 are technically not RMDs and are eligible for rollover.
The IRS has relaxed the usual 60-day rollover rule if an RMD is repaid by August 31. (The IRS also waived the once-per-year rollover rule for an IRA RMD that is repaid back to the same IRA before August 31.) With just a few days to go, you may not be able to time to meet the August 31 deadline. But all may not be lost.
Many of you may have already received, or may be receiving, an RMD (required minimum distribution) from your employer plan this year. If the CARES Act waived 2020 RMDs from plans and IRAs this year, how could a company plan be making RMD payments? The answer is a little complicated.
Under the tax code, plans are allowed to force participants to receive a distribution without their consent at a certain age. For most plans, that is age 65. The CARES Act did not change that rule. So, plans are legally permitted to pay out RMDs at age 70 ½ or later – even in 2020. Plans may be continuing to pay RMDs to avoid modifying their procedures for processing distributions just for this year.
Question:
I can't find the answer to this question anywhere, so I thought I'd go straight to the experts.
Does the CARES Act waive the requirement for a surviving spouse to distribute the RMD in 2020 prior to re-registering the IRA in the surviving spouse's name? The deceased spouse had reached their required beginning date.
I've read Notice 2020-51, but it does not address this issue specifically.
Thanks!
Hidden within the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) signed into law last December is a provision giving businesses extra time to establish certain new tax-qualified retirement plans.
Prior to the SECURE Act, a new workplace plan had to be adopted by the last day of the employer’s tax year. Despite that deadline for adopting a new plan, businesses were always allowed extra time to make retroactive employer contributions for any year (including the plan’s first year). The employer contribution deadline is the due date (including extensions) of the company’s federal tax return.
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:
For COVID "special" Aug 31 rollovers, am I allowed to return my 401(k) required minimum distribution (RMD) to my IRA?
Thank you,
Maria
Answer:
Hi Maria,
Yes, the CARES Act and subsequent IRS guidance allows unwanted
Question:
Hi Ed,
If a person takes that 100k distribution, can they elect to split evenly in 2020-2022 as income? Or can they determine how to apply the income?
Shannon
Answer:
Hi Shannon,
Those persons who qualify for up to $100,000 of 2020 coronavirus-related distribution (not everyone does) can spread out income evenly over their 2020-2022 tax returns.
The IRS has extended the rollover deadline for required minimum distributions (RMDs) taken from IRAs or company plans in 2020. In Notice 2020-51, released on June 23, the IRS said that any unwanted 2020 RMDs can be repaid via rollover to an IRA or company plan by August 31, 2020.
Normally, RMDs cannot be rolled over. However, the CARES Act waived 2020 RMDs (and first-time 2019 RMDs delayed until 2020) from IRAs and defined contribution plans. For this reason, amounts received in 2020 that would have been RMDs are eligible for rollover since they are technically not RMDs.
