Notice 2020-51 and IRA return of distribution rule
Taxpayer turned age 70-1/2 in 2019, but delayed her first IRA withdrawal until January, 2020. Will Notice 2020-51 allow her to return that withdrawal by August 31st even though it was for the 2019 tax year?
Permalink Submitted by Alan - IRA critic on Mon, 2020-07-27 19:26
Yes, since RMDs delayed to the RBD year (not taken in 2019) were waived, this January distribution can be rolled back into the IRA from which the Jan distribution was made, even though it would have been a 2019 RMD.
Permalink Submitted by Jay Epstein on Mon, 2020-07-27 20:20
Thank you for your answer. I assume the same rollover ability would apply to a first year (2019) RMD from a 401(k) plan not taken until January 2020. Correct? 401(k) plan custodian says “yes” (under normal circumstances).However that 401(K) plan document provides that contributions (including rollovers) can only be made to the plan by active participants (this participant had retired a couple of years ago and still maintained his plan account at with that custodian, which was allowed by the plan), so the plan will not accept a return of his January distribution. The plan custodian suggests this individual should roll over his January distribution by August 31st to another IRA account of his choice. Is that correct advice? Thank you.
Permalink Submitted by Alan - IRA critic on Tue, 2020-07-28 00:40
Yes. Only an IRA distribution must be returned to the distributing account. A 401k distribution can be rolled either back to the plan or to an IRA. In this case, an IRA is the only option.
Permalink Submitted by Jay Epstein on Tue, 2020-07-28 03:41
Thank you for your reply.