The IRS just published IRS Notice 2020-51 which details how Required Minimum Distributions flexibility will work for 2020. The link to the notice is here https://www.irs.gov/pub/irs-drop/n-20-51.pdf. The CARES Act waived the requirement for most RMDs and now the IRS has provided great flexibility for taxpayers so they can take full advantage of those rules if they choose to.
New as part of the notice is that you can do a rollover of distributions from early in the year and return the RMD money and put it back so you don’t end up taxed on it. Normally an RMD is not eligible for a rollover, but since RMD are waived those distributions really aren’t RMDs after all, just a normal distribution. So the IRS is going to allow you until August 31st to put that money back and count it as a tax free rollover. If you wanted or needed to do the RMD, you can certainly keep it – this is just a unique situation for 2020. This is a great opportunity if you didn’t want to take the RMD so that you don’t need to include that income on your 2020 tax return if you return it by August 31st.
This flexibility applies both to individuals taking an RMD on their own accounts, but it also applies to beneficiaries taking an RMD from an inherited IRA.
If you also look at the IRS notice on coronavirus distributions, an RMD could alternatively be treated as a coronavirus distribution which carries with it even more flexibility in terms of when it’s taxed and when it can be returned. I’ve got a separate post about that, be sure to read that one, too. LINK HERE to other post
Be sure to look at your tax situation to see if this is right for you, but it’s a great opportunity for required minimum distribution flexibility for 2020. A taxpayer with options and choices is a taxpayer that can plan to reduce and plan for their tax situation. Contact me for more information at firstname.lastname@example.org.