CARESAct Returning RMDs taken in Jan | Ed Slott and Company, LLC

CARESAct Returning RMDs taken in Jan

Does anyone know if RMDs taken in January and the first week of February can be returned to an IRA account? The rules as I read them seem very broad. I know RMDs after Feb 15th can be treated as a rollover, but what solutions are there for those that took them earlier, if any? The "impacted by Covid" seems like it would apply to the entire US population.

The rules also seem to be evolving, my thought is to put the money back into the IRA, then re-visit in December. If the IRS decides it should have been taken, any thoughts on if/how they would apply a penalty?

Any links or resources for the technical data would be appreciated

  • You have until 7/15 to roll back any distributions taken from 2/1 to 5/16, but subject to the one rollover limit. There is no solution for January distributions to date, unless you qualify for a CRD (corona virus related distribution). The IRS is expected to broaden qualification for CRDs, and there also might be another stimulus bill that would address the January distribution problems for those who will not qualify for CRDs, but the one rollover limit will still apply if you do not qualify for a CRD. That means if you roll back a distribution taken later than January, you will have used up your one permitted rollover unless you qualify for a CRD.
  • If you roll back a distribution that later turns out not to be eligible, you will owe tax on that distribution and will have an excess IRA contribution to be corrected, ie withdrawn with any allocated earnings just like any other excess contribution. If you do not remove the excess by the deadline, you start to incur annual 6% excise taxes on the excess amount.

Note that IRS Notice 2020-50 has now broadened the eligibility to qualify for CRDs.  But still no rollover relief for January distributions without also qualifying for a CRD. See p 5 here:

  • The HEROES Act passed by the House, but not favored by the Senate majority leader or the President, would extend this relief to distributions in January that would have been required distributions but for the CARES Act.
  • Since this provisions shouldn't be partisan, it might be included in the next round of legislation.

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