IRS Extends 2020 RMD Waivers for Retirees
IRS Extends 2020 RMD Waivers for Retirees
By: Stacey Nickens
Offering some much needed relief, the IRS recently extended the required minimum distribution (RMD) waiver created under the CARES Act. The waiver initially allowed retirees to skip their RMD in 2020 but did not provide support to those who had already taken an RMD. However, according to new guidelines, anyone who took an RMD in 2020 can repay the withdrawn funds before August 31.
The IRS considers the repayment a tax-free rollover but will not subject the payback to the “one-rollover-per-year” rule. The waiver also extends payback relief to beneficiaries of inherited IRAs. However, individuals can only payback as much as would have been required for a normal RMD. Additionally, individuals with pensions do not qualify for this waiver.
Most years, retirees 72 years or older must withdraw a certain amount of funds from their traditional IRAs or 401(k)s. The CARES Act removed this requirement for 2020. Retirees no longer had to “sell low” but could instead allow their funds to accrue value before being withdrawn.
Initially, the IRS allowed retirees to repay RMDs before July 15; however, retirees could only repay RMDs taken between February 1 and May 15. Recently, the IRS extended payback waivers to those who took RMDs in January. The IRS also extended the payback deadline to August 31 and augmented the number of individuals who would qualify for this waiver.
What are the benefits of rolling over your 2020 RMD? The stock market has taken a huge hit this year, and removing money from a retirement account would likely involve taking a loss. However, money left or returned to your account can accrue value while you wait for the markets to improve. Additionally, you reduce your taxable income for 2020. It may also become easier to convert a traditional IRA to a Roth IRA.
We encourage you to contact ELM3 if you have any questions about your retirement accounts or RMDs. We are always here to support you and guide you as you navigate your way through your retirement years.
