April 24, 2020 – Are you kicking yourself because you took some or all this year’s Required Minimum Distribution (RMD) from your IRA or 401(k) earlier this year? Now that the Cares Act has eliminated RMDs for 2020, you have reason to be upset, especially because all of your distribution is taxable income. Fortunately, there might be some relief.
Act before May 15
The CARES Act just passed as part of the coronavirus relief package has a provision that eliminates all required minimum distributions (RMDs) for 2020. Unfortunately, if you took RMD in January of this year, you probably can’t reverse that decision without jumping through a lot of hoops. But, if you took one on or after February 1 and May 15, 2020, you can still roll it back, if you act by July 15. The rollback option isn’t available if the plan was inherited. Issued on April 9, IRS Notice 2020-23 provides limited relief by allowing an extension of the 60-day rollover period. You cannot rollback any taxes you had withheld, although you can probably get a refund or adjustment when you pay your 2020 taxes. There is only one IRA rollback every 365 days.
People who turned 70 and 1/2 before Jan. 1, 2020 must take Required Minimum Distributions each year. The proceeds are taxable as ordinary income. Folks younger than that are not required to take RMDs until they reach age 72, that was one of the features of last year’s SECURE Act.
Comments? Is this the one time in your life you didn’t wait until the last minute to do something? Or, are you happy you were slow on the trigger? If you took it early, will you try to get it reinstated? Let us know in the Comments section below.