United States: IRS Provides Additional Required Minimum Distribution Relief For Taxpayers Affected By The Coronavirus Pandemic

On April 9, 2020, the IRS issued Notice 2020-23, which postponed due dates with respect to Federal tax returns and payments, and certain time-sensitive actions. This Client Alert addresses how this notice applies to required minimum distributions (RMDs) for retirement plans and IRAs.

60-day rollover period extended for 2020 Required Minimum Distributions

The Coronavirus, Aid, Relief, and Economic Security (CARES) Act enacted on March 27, 2020 waived 2020 RMDs, but left open the question of whether RMDs already withdrawn may be reversed by redepositing them. Normally, RMDs may not be rolled over under any circumstances.

Since the passage of CARES Act, many have assumed that the RMD waiver meant that amounts already withdrawn in 2020 were no longer considered RMDs and could be reversed and rolled over to a retirement plan or IRA using the 60-day rollover rule. This is true assuming RMDs withdrawn prior to CARES Act are now classified as normal distributions.

The IRS notice incidentally answered this question by extending the 60-day rollover period to July 15. What this means is that the extension allows RMDs withdrawn between February 1 and May 15 to be rolled over to a retirement plan or IRA by July 15.

Although January RMDs may be considered as normal distributions, the 60-day rollover rule was not extended to include them. RMDs withdrawn in January 2020 may not be rolled over.

In addition, the waiver does not apply to RMDs withdrawn from inherited IRAs. This is because money from inherited accounts may never be rolled over under tax law.

Should you wish to redeposit your 2020 RMD to your IRA, keep in mind that you are allowed only one rollover in a 12-month period. If you have had a rollover in the past year, you will not be able to take advantage of the extended 60-day rollover period. The once-per-year rollover rule does not apply to a retirement plan rollover.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.