2019 RMD: Notice 2020-51 & taxes

Submitted by VK W on Mon, 2020-06-29 16:13

Is 2019 RMD taken in 2020 considered a 2020 RMD and fall under Notice 2020-51?

My custodian messed up my Dec 2019 RMD (I’m in my 80s) and didn’t distribute it until 10 January 2020. When I filed my 2019 1040 income tax, I asked for a waiver of the 50% penalty on the missed Dec 2019 RMD, armed with a letter from my custodian, and as expected got it.

Now it’s June 2020 and RMDs for 2020 are fully waived by Notice 2020-51. Is my 10 January 2020 distribution (taken to fulfill my 2019 RMD) considered a RMD for 2020 and therefore waived and eligible for rollover?

A large part of the 10 January 2020 distribution was for my 2019 withholding, which unfortunately went into 2020 rather than 2019. ls there a way to reverse it or to apply 2020 tax payments to my 2019 taxes due July 15th?

Thanks in advance for your help.



Submitted by Alan - IRA critic on Mon, 2020-06-29 17:00

  • Since you did not reach 70.5 in 2019, your 2019 RMD is not part of the RMD waiver and it cannot be rolled over even though it was late and distributed in 2020. The penalty for being late has been waived and that is the most important issue.  Since there is no 2020 RMD required, you will not have two RMDs taxable in 2020, just the late 2019 RMD.
  • There is no way to change withholding to a prior year. However, with your RMD not being fully completed in 2019, your 2019 taxes will be lower. While the 2020 distribution will be taxable in 2020, the withholding can be used to pay the taxes on the 2020 distribution. If you are overwithheld in 2020, you will get a tax refund next spring.
  • Therefore, there is nothing further to do unless you have more withholding scheduled later this year. If you are overwithheld, you can cancel future 2020 withholding. 


Submitted by VK W on Tue, 2020-06-30 04:52

Would a 2019 RMD taken in 10 January 2020 for someone over 70.5 be considered a 2020 RMD and fall under the Notice 2020-51 and be eligible for a rollover?  See above for details.



Submitted by David Mertz on Tue, 2020-06-30 11:58

No.  It’s a late-taken 2019 RMD, not a 2020 RMD, even though it is taxable on your 2020 tax return.  Except for 2019 RMDs taken in 2020 by someone who reached age 70½ in 2019 (which is not your situation), the CARES Act did not waive 2019 RMDs, whether taken timely or not.  Only RMDs waived by the CARES Act can be rolled over.



Submitted by Mark S. Littleton Sr. on Tue, 2020-06-30 22:45

(Note: My first RMD) On 3-30-2020 I took the balance of my 2019 RMD of $7,404.86 from my traditional IRA CD account. Since then I have learned I can actually rollover that same amount by Aug. 31,2020 to a new IRA avoiding the tax on my 2020 return. Secondly I need to open a new SEP IRA by my extended date of Oct 15, 2020 of $9,658.00. Question is can I rollover the $7,404.86 into the new SEP IRA adding $2,253.14 to it to obtain the SEP IRA amount I need of $9,658.00. 



Submitted by Alan - IRA critic on Tue, 2020-06-30 22:54

No, you cannot do that for two reasons. First, per Notice 2020-51 your RMD distribution must be rolled back to the “distributing IRA”, meaning the same account that it was distributed from. That may be difficult with a CD IRA if it is a bank or CU issued CD, and you may have to explain the provisions of the above Notice to them. The second reason it that your SEP contribution that you will claim a deduction for on your 2019 return cannot be a rollover contribution, it must be from new non IRA money. Another option you may use if the bank will not accept the rollover contribution is to forget the rollover and use the money to subsidize your 2019 SEP IRA contribution. The RMD distribution will be taxable, but the SEP deduction will offset that tax.



Submitted by Mark S. Littleton Sr. on Wed, 2020-07-01 18:59

Sorry for the multiple posts. Being a first timer I realized after posting twice in the wrong areas I should have just created a new tropic and did. Thank you again for the great advise.



Submitted by Alan - IRA critic on Wed, 2020-07-01 19:01

No problem. First time posting can be tricky.



Submitted by Mark S. Littleton Sr. on Thu, 2020-07-02 02:10

Alan the below chart indicates a traditional IRA can roll to a SEP IRA what am I not understanding?https://www.irs.gov/pub/irs-tege/rollover_chart.pdf https://www.irs.gov/pub/irs-tege/rollover_chart.pdf  



Submitted by Alan - IRA critic on Thu, 2020-07-02 02:16

A SEP IRA is actually a traditional IRA with special contribution provisions. Generally, rollovers can be done between SEP IRAs and other IRAs, however Notice 2020-51 addresses a special situation and for these rollovers of IRA RMD distributions, it says that the rollover must be made to the distributing account. Otherwise, the 8/31 deadline will not apply, the 60 day deadline and the one rollover limitations will apply and such distributions will probably no longer qualify for rollover at all. 



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