2020 RMD

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Viewing 15 posts - 1 through 15 (of 19 total)
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  • #5387
    jimfrombx
    Participant

    Forbes, per Investor Village, has an article stating that 2020 RMD’s are suspended for 2020.
    Is that true, haven’t seen any other articles saying that?

    #5394
    Alan S.
    Participant

    Yes, that is correct. If someone already took their 2020 RMD and qualifies to do a 60 day rollover, they can roll it back to the IRA. In addition for someone reaching 70.5 in 2019, their first RMD can be deferred until 4/1/2020. For the portion deferred into 2020, that RMD is also waived.

    #5395
    jayhawk70
    Participant

    Forbes says that an RMD already taken can be rolled back, but I just called Fidelity about that. They said not now, but their lawyers are looking into that. In my case, I’d like to just change it to a conversion to Roth.

    I’d sure like to hear if anyone has successfully done either a roll back or been able to move a recent RMD into their Roth.

    #5408
    Alan S.
    Participant

    2020 distributions are not RMDs, so can be converted within 60 days. The one rollover limit does not apply.

    Fidelity may be checking to see if your distribution was still within 60 days for the rollback or if you have already done one rollover in the last 12 months. Many people have already rolled back earlier distributions that were originally planned as RMDs. Vanguard is accepting them after you verify that you qualify. If Fidelity does not change their mind and you are getting close to 60 days, you can roll it over to another IRA that you may need to open.

    #5409
    jubilee12
    Participant

    Hi Alan,
    Talking about RMD. I am over 70s I have not been converting from my IRA to ROTH for the past 6 years. So I am free to withdraw my ROTH without paying taxes. Yesterday I decided to convert my 2020 RMD To ROTH. I regret afterwards because I heard that all my ROTH will be subject to 5 years rule and have to pay penalty and taxes if I withdraw less than 5 years. Is this true?

    #5411
    Alan S.
    Participant

    No, it is not true. Since your Roth IRA is fully qualified, you can withdraw whatever amount you wish tax and penalty free at anytime.

    #5412
    jubilee12
    Participant

    Hi Alan,

    Thank you so much. What a relief!

    #5418
    ruth
    Participant

    Hi Alan

    Vanguard told a friend of mine that only one distribution of the three that he’d taken this year can be rolled back because of the one-year rule. I haven’t seen anything indicating the one-year rule doesn’t apply. I haven’t seen anything that specifically addresses this. Can you please provide a source for your statement? Thanks.

    #5422
    Alan S.
    Participant

    Ruth, not sure which statement you are referring to. If someone took 3 distributions that cannot be treated as corona virus related, they can only roll one of them back. But a conversion does not count with respect to the one rollover limit, therefore in one can be converted, one can be rolled back and one cannot be rolled back. That said, it is very possible that the IRS will eventually issue guidance that expands CV related distributions in a much broader way and the CARES Act gives them that authority. As just one example, they could allow all RMDs to be rolled back and all other distributions taken after a certain date. Hopefully the IRS will publish guidance on this soon.

    #5423
    ruth
    Participant

    Hi Alan. Thanks for your reply. I was referring to your statement that “The one rollover limit does not apply.” My apologies for the lack of clarity.

    In Notice 2009-82, relating to the 2009 RMD waiver the IRS stated

    “Rollover relief for IRAs. In the case of IRA owners who have already received distributions of 2009 RMDs in 2009, the Service, under the authority of § 408(d)(3)(I), is hereby extending the 60-day rollover period for any such distribution so that it ends no earlier than November 30, 2009. However, because of the one-rollover-per-year rule in § 408(d)(3), which was unchanged by WRERA, no more than one distribution from an IRA in 2009 will be eligible for this rollover relief.”

    Based on this statement, it appears that as of now, only one corona virus distribution can be rolled back. Also note that the wording reflects that the IRS interpreted the one-year rule differently at that time. The one-year rule applied separately to each IRA rather than to all the owner’s traditional IRAs.

    I agree that the IRS will issue additional guidance later this year.

    Thanks for your time.

    #5424
    Alan S.
    Participant

    With respect to the “one rollover limit does not apply” I was replying to someone wanting to convert the distributions to Roth, not roll them back to a TIRA, so that would be correct.

    The CARES Act also specifies that if a distribution qualifies as CV related, it can be rolled back anytime in the following 3 years, and that all such rollovers will be treated as “direct trustee to trustee transfers” made within 60 days, and that eliminates the one rollover limitation.

    However, if a 2020 “RMD” distribution does not qualify as CV related, is not converted, and Congress does not pass additional relief from the one rollover rule, then only one such distribution could be rolled back. The IRS does not have the authority to waive the one rollover limit, but they could certainly propose a technical corrections provision to Congress to address the one rollover issue. Note that the one rollover problem is more acute now than in 2009 as well since the rollover limitation applied to each separate account back then, but now to all IRA accounts.

    This rollback problem particularly impacts those who set up monthly RMD service distributions with their custodian, and now have 3 distributions to deal with.

    • This reply was modified 1 year, 5 months ago by Alan S..
    #5428
    wj
    Participant

    I took an RMD in March consisting of 100 shares of xyz stock. These shares, now in my taxable account, have since dropped 30% in value.

    Can I put these shares back into my IRA, like nothing ever happened? Since RMD’s are no longer required on 2020.

    in effect a recharacterization from my taxable account back to my IRA?

    #5429
    Alan S.
    Participant

    You can do a 60 day rollover as long as you qualify and have not done a prior such rollover in the last 12 months. Note that when an in kind distribution is taken from an IRA, the same property that was distributed must be the property rolled back, so it is fortunate that you did not sell the shares or you could not complete this rollover.

    Even though the shares have dropped, when you report the rollover on your 2020 return, you would ignore the reduced value of the shares. You would therefore have done a complete rollover with no tax due.

    #5431
    wj
    Participant

    Thank you. Very helpful. In effect the loss (or any future gain) on these shares will be taken in my IRA and not in my taxable account.

    Is this rollover reported as a separate item on my 2020 return?

    #5434
    Alan S.
    Participant

    Not necessarily separate. The distribution goes on line 4a of Form 1040 along with any other distributions you may have taken before year end. You would enter “rollover” on the line next to 4b and the amount of the distribution rolled back would not go on 4b. In a simple case where this was the only distribution, the gross value of the shares (will be on your 1099R) will go on 4a, nothing on 4b, and “rollover” entered next to 4b.

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