CARES Act and Roth IRA withdrawals / redeposits

[Darren72]

Hello Intuit Community,

In 2020 I withdrew $60,000 from my Roth IRA because of hardships created by the pandemic.  The $60,000 equals about the same as what I've contributed to my Roth IRA over the past 20 years.  I am trying to find out how long I have to redeposit the funds. I know that under the CARES Act, distributions from traditional IRAs can be redeposited within three years.  And I also know that under normal circumstances, I have 60 days to redeposit funds into a Roth IRA. But I've read conflicting articles about the Roth IRA withdrawals / redeposits in relation to the CARES Act.  Not even my investment company (T Rowe Price) or my bookkeeper seems to know for sure.  Thanks. 

[macuser_22]

See:  https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-...

This will be reported on a new 8915-E form that is still being developed by the IRS and will be available in TurboTax after the IRS releases it (might take a month or two).

Q7. May I repay a coronavirus-related distribution?

A7. In general, yes, you may repay all or part of the amount of a coronavirus-related distribution to an eligible retirement plan, provided that you complete the repayment within three years after the date that the distribution was received. If you repay a coronavirus-related distribution, the distribution will be treated as though it were repaid in a direct trustee-to-trustee transfer so that you do not owe federal income tax on the distribution.

If, for example, you receive a coronavirus-related distribution in 2020, you choose to include the distribution amount in income over a 3-year period (2020, 2021, and 2022), and you choose to repay the full amount to an eligible retirement plan in 2022, you may file amended federal income tax returns for 2020 and 2021 to claim a refund of the tax attributable to the amount of the distribution that you included in income for those years, and you will not be required to include any amount in income in 2022. See sections 4.D, 4.E, and 4.F of Notice 2005-92 for additional examples.

 

[dmertz · Accepted solution]

Even though the Roth IRA distribution would not otherwise be taxable because it is no more than your contribution basis, the distribution must be reported as a CRD on Form 8915-E which will make it eligible for 3-year repayment and allowing it to be disregarded with respect to the one-rollover-per-12-months limitation.  If you don't report it as a CRD, say, because you do not meet the requirements to be an affected individual, putting it back in the Roth IRA would be an ordinary rollover subject to the 60-day rollover deadline and the one-rollover-per-12-months limitation.

As a side note, I'll bet that TurboTax will not be properly adjust your Roth IRA contribution basis when you repay the distribution, so you'll want to pay attention to that.

[Darren72]

Hello dmertz,
I greatly appreciate your quick and helpful reply. Just so that I can ease my anxiety over this issue, can you please let me know what your source is for stating "the distribution must be reported as a CRD on From 8915-E which will make it eligible for 3-year repayment and allowing it to be disregarded with respect to the one-rollover-per-12-months limitation."? I'm not doubting your expertise, but since I've never heard this before, I'd like to learn more and share it with a few of my friends and colleagues who are in similar situations, if you don't mind. Thanks.

[NCperson]

these FAQs may help

https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-...

[macuser_22]

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@Darren72 wrote:

Hello dmertz,
, I'd like to learn more and share it with a few of my friends and colleagues who are in similar situations, if you don't mind. Thanks.

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See the draft 8915-E instructions under "Who Must File"  on page 1.

https://www.irs.gov/pub/irs-dft/i8915e--dft.pdf

[Darren72]

thanks

[dmertz]

To be more clear, I should have said, "the distribution must be reported as a CRD on Form 8915-E to make it eligible for 3-year repayment and allowing it to be disregarded with respect to the one-rollover-per-12-months limitation."  You don't have to report it as a CRD, but by not doing so you would be subject to the 60-day rollover deadline and it would be considered with respect to the one-rollover-per-12-months limitation.  If you don't report it as a CRD, you aren't claiming it to be a CRD and it won't be treated as a CRD.  If you qualify for this to be reported as a CRD, there is no downside to reporting it as a CRD (other than the delay in filing your tax return that will inevitably result from the amount of time it takes for this form to be implemented in TurboTax).