How to do a CARES Act RMD waiver: simply return the RMD(s) to issuing account(s), then file amended return w/o the income? Does issuing bank file amended 1099?

[CHW47]

I took several RMDs in January, filed 1040 in July.  Now IRS changed the rules: says you can return your RMDs up to Aug 30.  Will amended return prompt IRS to stop processing original return, switch to new return?  How will IRS know that RMD income has been rolled over and returned?

[macuser_22]

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@CHW47 wrote:
I took several RMDs in January, filed 1040 in July.  Now IRS changed the rules: says you can return your RMDs up to Aug 30.  Will amended return prompt IRS to stop processing original return, switch to new return?  How will IRS know that RMD income has been rolled over and returned?

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There should be nothing to change for 2019.    The RMD waiver does not affect 2019 RMD's** reported on a 2019 tax return, it is a waiver for *2020* RMD's that will be reported in a 2020 1099-R next January when you file your 2020 tax return in 2021.

[** UNLESS you turned 70 1/2 in 2019 and this was your *first* RMD that you elected to take before Apr 1, 2020 and not in 2019.   If the first RMD was taken in 2020 then the CARES act will allow the waiver, but, again, that will be reported in a 2020 1099-R next year.   There is nothing to report for 2019.]

You simply return the money to the IRA custodian and tell them that it is a 2020 CARES act RMD rollover.   The IRA custodian will issue a 1099-R showing the distribution, *you* report it as a rollover when you enter that 1099-R next year.    The IRA custodian will report it as a rollover on a 5498 form that they send to the IRS.

[rjs]

The tax return that you filed in July 2020 was for 2019. Any RMDs that you took in January 2020 should not have been reported on your 2019 tax return. Any 1099-R forms that you got in January 2020 were for RMDs or other distributions that you took in 2019, and should have been reported on your 2019 tax return. Your 2019 RMDs are not waived and cannot be put back in the account. That's why macuser_22 says there is no change to your 2019 tax return.

The RMDs that you took in January 2020 will be reported on your 2020 tax return, that you file in 2021. You will get the 1099-R forms for your 2020 RMDs in January 2021. As macuser_22 said, if you roll the 2020 RMDs back into the accounts by August 30, 2020 you will simply indicate on your 2020 tax return that you did a rollover for the amount that you put back.

If you do return RMDs that you took in January 2020, make sure that the account custodian (bank or other financial institution) records it as a rollover contribution, not a regular contribution.

[jrfrerichs]

In Turbotax 2020 I indicated that I received an IRA 1099-R and completed the input dialogs including the dialog asking what I'd done with the money - I rolled it back into my IRA . The program still shows the distribution as income. Is this a program problem or have I missed something?

[rjs]

@jrfrerichs  Where are you looking at the income? The TurboTax screen "Your 2020 Income Summary" shows the amounts that you entered, not the taxable amount on your tax return. Look at the actual tax forms, not the summary screens in TurboTax. On Form 1040, the amount of your IRA distribution should be on line 4a, and line 4b should be zero. The word "rollover" should appear somewhere on line 4a or 4b. You have to report the distribution on line 4a, but only line 4b is included in your taxable income.

[jrfrerichs]

That is the way it should work, I agree. However, here is the sequence:

Step-by-step selected - 

1099-R (Schwab) / not inherited

"was this an RMD for 2020?" - YES

-ALL -None to charity

-Money returned to same account

-rolled over - ALL

"You won't have to pay tax on the distribution"

-Funded withheld taxes from external source

-received all RMD's

Switch to "Forms"

Line 4b shows distribution as taxable

[VolvoGirl]

Since there is no RMD required for 2020,  After you enter the 1099R say IT WAS NOT an RMD and then that you rolled it over (even if back into the same account).  Was any withholding taken out?  If it was then did you replace the withholding with your own money?  Otherwise the withholding will be a taxable distribution itself.

[jrfrerichs]

That was the key. Thanks!

[amrgrp40]

I received my 1099 from Fidelity

I withdrew a 25,000 RMD in January and returned it in July

The 1099 shows the amount taxable in in box 2b

The Form 5498 shows a rollover contribution of 25,000

How will the tax return handle this ?

[VolvoGirl]

It will show the whole amount on line 4a or 5a and the word ROLLOVER by the taxable amount on the b line for 0.

Didn't you see my post above?  

Since there is no RMD required for 2020,  after you enter the 1099R say it was NOT an RMD and then that you rolled it over (even if back into the same account).  Was any withholding taken out?  If it was then did you replace the withholding with your own money?  Otherwise the withholding will be a taxable distribution itself.

[DawnC]

Since RMDs were waived for 2020, no part of the distribution was actually an RMD even though it was taken with the intention of satisfying an RMD.  In TurboTax, indicate that the distribution was not an RMD.  Indicate that you moved the money to another retirement account (or returned it to the same account), then indicate how much of the distribution you returned to the IRA.  TurboTax will include the entire gross amount on Form 1040 line 4a but exclude the amount rolled over from the amount on line 4b.  TurboTax will also include the word ROLLOVER next to the line.

If you did not substitute other funds for the amount withheld for taxes so as to complete the rollover of the entire gross amount of the distribution, the amount of the withholding remains distributed, not rolled over, and subject to tax; it's too late to complete a rollover of that portion of the distribution.  If the overall tax liability determined on your tax return is less than your total withholding, including the amount withheld from the IRA distribution, you'll get a tax refund.    @amrgrp40

[jrfrerichs]

That did the trick! Thanks.

[rstaxss]

So how does Turbo Tax handle the 2020 RMD rollover on the 2020 Form 1040SR?  As of now the software reports the distribution on the 1099-R that has the Code 7 and IRA information thereon, but does not report it as non- taxable  on the Form 1040SR with "rollover" printed next to Box 4D.  Please explain.

[VolvoGirl]

Again.....say No, not a RMD.

Since there is no RMD required for 2020,  after you enter the 1099R say it was NOT an RMD and then that you rolled it over (even if back into the same account).  Was any withholding taken out?  If it was then did you replace the withholding with your own money?  Otherwise the withholding will be a taxable distribution itself.

[cfuller603]

If you kept some of the RMD, then stopped the rest of the distribution, but did not return any for a rollover, how do you handle it?  Part of it is RMD and part of it isn't?  TurboTax asks if you took all or part of the RMD.  But then you have to calculate the remainder you didn't take?  Taxes were taken out of the RMD I kept.