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2020 Required Distribution Rollover

July 27, 2020

The CARES Act passed earlier this year allows retirement account owners to suspend their Required Minimum Distributions (RMDs) for the 2020 tax year. However, due to the timing of the CARES Act which passed on March 27, 2020, some taxpayers had already taken their RMDs for 2020 and therefore were unable to “suspend” their RMDs for the year.

As of June 23, 2020, the IRS has expanded the CARES Act and now allows taxpayers who already taken their RMDS between January 1, 2020 to June 23, 2020 from certain retirement accounts to rollover the funds by putting them back into the account and “undo” the taxable event. This also applies to beneficiaries of Inherited IRAs. The deadline to return to distributed funds back to the account it was distributed from is August 31, 2020.

This rollover option could be beneficial for account owners who do not need the income from their IRA distribution because it would allow them to reduce their taxable income while also allowing their account to potentially recover its value by keeping more invested. Account holders who decide to return their distributions should factor in any taxes that were withheld from the distribution because those amounts may need to be included in the rollover back into the account.