United States

IRS gives more individuals more time to roll over RMDs

TAX ALERT  | 

Notice 2020-51, issued on June 23, 2020, affords welcome additional flexibility for individuals to decide how to deal with any required minimum distributions (RMDs) they took from 401(k)s or other employer-sponsored defined contribution qualified plans and/or IRAs in 2020. The Notice does four important things:

First, it extends from July 15, 2020 to Aug. 31, 2020, the date by which these individuals who took RMDs in 2020 can roll the amount of the distribution back into the plan or IRA from whence it came or into another qualified retirement account.

Second, the Notice provides that even those individuals who took RMDs before February 2020 can put those RMDs back into the accounts. This group of individuals is likely to include those who turned 70½ in 2019, planned to take their first RMD before April 1, 2020 and, for whatever reason, decided to take their RMDs in January. Much to the subsequent chagrin of those who took the RMD because they had to and not because they needed to, the CARES Act waived all RMDs for 2020, including those first RMDs taken before April 1, 2020. Adding to that chagrin, Notice 2020-23 gave individuals who took RMDs in 2020 until July 15, 2020 to put the money back into the accounts but only if the RMDs were taken after Feb. 1, 2020. Now, even the January 2020 RMDs are fair game for rollovers. See More who took those RMDs before they were waived can now put them back.

Third, the Notice expands the types of beneficiaries of inherited IRAs who are entitled to put the RMDs that they took in 2020 back into the accounts. Previously, only a surviving spouse of a deceased account owner could roll the RMDs back into the account. Now, any beneficiary can do the rollover, by Aug. 31, 2020 of course. 

Fourth, and finally, Notice 2020-51 even extends its relief to those who had done an IRA-to-IRA rollover within the past 12 months.

Notice 2020-51 truly does give more individuals a respite from unneeded RMDs as well as more time to work through the logistics of putting that money back into the accounts.  

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