Dear Clients:

With the CARES Act, Congress decided to waive all 2020
required minimum distributions (RMDs).

What if you already took out your annual RMD before Congress
changed the law?

The IRS just granted you brand-new mercy to fix the issue,
but you need to take action before August 31, 2020.

2020 RMD Waiver

The CARES Act waived all 2020 RMDs for IRAs and defined
contribution plans. This waiver applies to your RMD if you

• turned age 70.5 during tax year 2019 and had to take your
  first RMD by April 1, 2020, and waited until 2020 to take it;
• turn age 72 during tax year 2020 and have to take your
  first RMD by April 1, 2021; or
• inherited an IRA or retirement account and have to take an
  RMD for tax year 2020.

Relief Provided

Let’s say you did not know about the waiver and you took
your RMD. You want to put it back and avoid paying taxes on it. You have two
ways to undo your 2020 RMD:

• Do an indirect rollover to another account, or
• Repay the funds to the same account.

Indirect rollover. You generally have 60 days from
the distribution date to complete an indirect rollover. But in Notice 2020-51, the
IRS extends this indirect rollover deadline so that you have until August 31,
2020, for RMD distributions you took earlier in tax year 2020.

As a reminder, you can’t do an indirect rollover from an
inherited non-spousal IRA. Instead, to avoid being taxed on your RMD, you have
to use the repayment method.

Repayment. You can repay the RMD to the original
account by August 31, 2020, and pay no tax on it. And when you make this repayment
under Notice 2020-51, it doesn’t count as the “one” indirect rollover per year
that you can use.

Important note. These rules apply only to RMD amounts
distributed (taken out of the IRA). Any amounts you took out exceeding your RMD
amount aren’t eligible for relief.

Example. Jo-Ann had a $4,000 RMD requirement for her
traditional IRA for tax year 2020 and took out $5,000 on January 15, 2020.

Jo-Ann has two options:

1.      Jo-Ann
can put $4,000 in another traditional IRA by August 31, 2020, or

2.      Jo-Ann
can put $4,000 back into the same traditional IRA by August 31, 2020.

In either scenario, Jo-Ann must pay tax on the $1,000 she
took above and beyond her RMD amount.

The August 31 date is coming soon. If you would like my help
with your RMD, please call me on my direct line at 408-778-9651.