The IRS just released a notice that all early distributed 2020 IRA RMDs are eligible for a rollover to avoid paying tax on that distribution under the COVID rules. The notice is pretty understandable but appears to leave out one particular situation. Let's say one took the RMD in January 2020 and had 25% of the RMD sent directly to the IRS as withholding. Say the total distribution was $40,000 -- the taxpayer received $30,000 and the IRS (US Treasury) received $10,000. Now the taxpayer wants to "undo" the RMD by returning the money to the trustee. But the taxpayer only has $30,000 available to return. How does the taxpayer get the $10,000 tax payment returned from the IRS? Or does he just have to come up with the other $10,000 from other available funds? Or can he just return $30,000 and treat the other $10,000 as a normal distribution and have to wait until he files his 2020 return to get a refund of the taxes?
