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bwd2783
New Member

Already paid my RMD for 2020 including tax withholding. given recent change in the requirement for 2020, can I recoup that distribution?

 
6 Replies
HelenC12
Employee Tax Expert

Already paid my RMD for 2020 including tax withholding. given recent change in the requirement for 2020, can I recoup that distribution?

Yes, you may be able to reverse your RMD for 2020 if it's within the last 60 days.

 

Contact your plan custodian and inform them that WITHIN 60 DAYS, you are essentially “rolling” that distribution amount back into your account. Ask for a written confirmation. If taxes were withheld, you will not receive them back.

 

But they will be applied to next year’s tax return as a credit against taxes you subsequently owe.

 

Given the current date, that means you cannot reverse distributions taken in January, but get in under the wire for Feb and March distributions taken within 60 days.

 

Source: Reversing 2020 IRA RMD

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WeekendRider
Level 1

Already paid my RMD for 2020 including tax withholding. given recent change in the requirement for 2020, can I recoup that distribution?

I made RMD withdrawals from my traditional IRA in January, February, March, and April of 2020.  My financial advisor stated that it was too late to reverse the first two withdrawals, but that in accordance with 2020 RMD forgiveness he would reverse the last two withdrawals (and eliminate the withdrawals planned for the remainder of 2020).  He stated that the 1099-R would not show the reversals, but that he had made a “contribution” into this IRA on my behalf in the amount of $x (the total of the last two withdrawals).  He believed that my IRA—as well as my 2020 tax return—would be in the same state as if these two withdrawals had never been made.

 

As expected, the 1099-R showed the income for all four withdrawals.  However, when I used TurboTax to show the contribution of $x to this IRA, TurboTax rejected it because it exceeded my earned income ($0, as I am retired).  Here is what I entered via Deductions and Credits/Retirement and Investments/Traditional and ROTH Contributions:

  • checked “Traditional IRA only”
  • Is this a repayment...? Checked “no”
  • total 2020 contributions = $x (total in 2021 = $0)
  • change of mind?  selected “no”
  • retirement plan coverage? selected “no”
  • any excess contributions before 2020? selected “no”
  • any non-deductible contributions? selected “no”
  • value of all traditional IRAs: $y
  • statement that the contribution exceeds earned income (of $0)

My financial advisor said that the associated brokerage (Schwab) could not generate a “corrected” form 1099-R.  If all else fails I suppose I could pretend I had received a “corrected” form 1099-R and just remove the extra $x myself, but I would prefer not to tinker with official forms.  Is there a way for TurboTax to cater to this situation?

fanfare
Level 15

Already paid my RMD for 2020 including tax withholding. given recent change in the requirement for 2020, can I recoup that distribution?

if your distributions was a true COVID distribution (i.e. you meet the qualifications)

you have three years to put your RMD back in .

You'll have to ask the custodian for the forms to be used.

WeekendRider
Level 1

Already paid my RMD for 2020 including tax withholding. given recent change in the requirement for 2020, can I recoup that distribution?

None of my four distributions in 2020 had anything to do with COVID.  My question is how to use TurboTax to reverse RMD withdrawals without tripping over the limit on contributions (max of earned income).

Cynthiad66
Employee Tax Expert

Already paid my RMD for 2020 including tax withholding. given recent change in the requirement for 2020, can I recoup that distribution?

You must enter the Form 1099r as usual and follow these directions to show what was done with the Distribution.

Please follow these instructions:

  1. Open you return in TurboTax 
  2. Click on the Search magnifying glass on the right top and type “1099-R” in the box
  3. Click on “Jump to 1099-R”
  4. Continue until "About this Retirement Account. / Was this withdrawal an RMD for 2020?" and select "Nonone"
  5. Continue "What did you do with this money from this payer?" and select "I moved the money to another retirement account (or returned it to the same account" the select what applies to you.
  6. Continue answering the questions.

The Internal Revenue Service  announced that anyone who already took a required minimum distribution (RMD) in 2020 from certain retirement accounts now has the opportunity to roll those funds back into a retirement account following the CARES Act RMD waiver for 2020.  

Please use this link for more information:

IRS announces rollover relief for required minimum distributions from retirement accounts that were ... 

 

[edited 2/24/21 | 2:15 pst]

 

WeekendRider
Level 1

Already paid my RMD for 2020 including tax withholding. given recent change in the requirement for 2020, can I recoup that distribution?

Thank you.  After I supplied these answers, TurboTax gave me the opportunity to show how much of the distribution was returned back as a "rollover-to-same-account".  It was treated as any other rollover, thereby reducing my effective income (and my tax) correctly.  

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