IRS Extends Rollover Deadline for 2020 RMDs
By Ian Berger, JD
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The IRS has extended the rollover deadline for required minimum distributions (RMDs) taken from IRAs or company plans in 2020. In Notice 2020-51, released on June 23, the IRS said that any unwanted 2020 RMDs can be repaid via rollover to an IRA or company plan by August 31, 2020.
Normally, RMDs cannot be rolled over. However, the CARES Act waived 2020 RMDs (and first-time 2019 RMDs delayed until 2020) from IRAs and defined contribution plans. For this reason, amounts received in 2020 that would have been RMDs are eligible for rollover since they are technically not RMDs.
Many individuals had already received RMDs before the CARES Act was signed into law and wanted to repay those amounts to avoid paying taxes on the RMD. Earlier this year, the IRS extended the 60-day rollover deadline until July 15, 2020 for distributions made after January 31, 2020. Individuals receiving RMDs in January 2020 were out of luck. In addition, the once-per-year rollover rule prevented those receiving monthly RMDs from rolling over each RMD. (That rule prohibits an IRA owner from making more than one traditional IRA-to-traditional IRA or Roth IRA-to-Roth IRA rollover in any 12-month period.) Finally, non-spouse beneficiaries were unable to roll over RMDs from inherited IRAs since non-spouse beneficiaries can never do rollovers.
Notice 2020-51 extends the rollover deadline to August 31, 2020. The extended deadline covers RMDs taken any time in 2020 – including in January 2020. The IRS also says that RMD repayments will not count against the once-per-year rollover rule. This will allow all 2020 monthly RMDs to be repaid. The IRS also carved out an exception to allow non-spouse beneficiaries to repay inherited IRA RMDs.
Notice 2020-51 applies to RMD payments only. Withdrawals of non-RMD funds are still bound by the usual 60-day rollover deadline (or the July 15, 2020 deadline for distributions made after January 31, 2020). In addition, distributions of amounts other than RMDs are still subject to the once-per-year rollover rule.
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