Extension of time to repay 2020 "required" distributions | Ed Slott and Company, LLC

Extension of time to repay 2020 "required" distributions

In Notice 2020-51, the IRS has extended to August 31, 2020, the time for IRA owners to repay distributions that would have been required distributions but for the waiver of required distributions for 2020: https://www.irs.gov/pub/irs-drop/n-20-51.pdf.

Thanks, Bruce. This will resolve complaints from January distributees, as well as those restricted by the 60 day deadline or the one rollover limitation. 

Does Notice 2020-51 allow a non-spouse beneficiary to repay what would have been a 2020 RMD from an inherited account in a qualified retirement plan distributed before or coincident with doing a direct rollover of the remainder of the account?  The notice seems to mention repayments by non-spouse beneficiaries only in regard to distributions from IRAs.

I understand the fix for the 60 day deadline plus adjusting to include RMD's for all of 2020, but does it fix the issue of mulitiple rollovers.  If a client was taking a monthly withdrawal, and the March withdrawal was rolled back in.  Does this now allow for the January and February withdrawals to be rolled back into the IRA without breaking a one in 365 rule?

Yes, 2020-51 fixes the rollover issues, but ONLY for amounts that would have been RMDs had RMDs been required in 2020.  The one rollover limit does not apply to the rollovers of these amounts, but it does apply to any other distributions taken.  Not stated in the Notice, but I expect that the first dollars distributed in 2020 are the distributions that must be treated as the would be RMD amounts. 

Does this update also allow inherited IRA beneficiaries to also rollback RMD's (one or multiple) distributed earlier this year?

Yes, but only to the distributing IRA account, not to any other plans. Deadline is 8/31.  

What if taxes were withheld?  Of one rolls back the RMD under the new guidance, what happens to the withheld tax?  Do they have to roll back in the gross RMD amount?  Thanks. 

They can either replace the withheld amount to make the rollover complete, or they could choose to just roll back the amount they actually received, or some other partial amount. 

Thank you.  To verify, just like any rollover, if they do not rollover the total gross amount, then the amount not rolled over (in this case the tax withheld amount) would end up being included in taxable income?

Yes, except to the extent that the distribution included post tax amounts that would not have been taxed had there been no roll back.

 

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