CARES RMD Repayment

[mikult]

I took my RMD for this year back in January 2020. I have two IRAs and took the  yearly required amount from one of them. I would like to pay the money back (According to the CARES act) but not into the IRA I took the money from, but into the other IRA which is handled by a bank. Can I do this or does the payment need to go back into the IRA it was originally taken from?

[RobertG]

 In the case of an IRA owner or beneficiary who has already received a distribution of an amount that
would have been an RMD in 2020 but for section 2203 of the CARES Act or section 114
of the SECURE Act, the recipient may repay the distribution to the distributing IRA, even
if the repayment is made more than 60 days after the distribution, provided the
repayment is made no later than August 31, 2020. 

IRS Notice 2020-51

[Edited 06/29/2020|1:56 PST]

@mikult

[dmertz · Accepted solution]

A repayment of a January 2020 distribution that would be an RMD were it not for section 2203 of the CARES Act is permitted to be repaid under IRS Notice 2020-51 only to the distributing IRA.  You are not permitted to make the repayment to a different IRA.  After making the repayment to the distributing IRA you can do a non-reportable trustee-to-trustee transfer of any amount you wish from one IRA to another.

[GAAZ]

1099R for distribution from traditional IRA.  Taxable amount not determined checked, taxable amount = gross 

distribution, distribution code 7, IRA box checked.

Part of distribution was a QCD and the bulk of the distribution was returned to the IRA since the RMD not is required in 2020.  I answered the questions correctly but TurboTax want to tax all but the QCD.  

Suggestions?

[DaveF1006]

It depends. If you continue through the interview process in Turbo Tax after reporting your QCD donation, you will reach a screen that says Tell us if you moved the money through a rollover or conversion. Here you will indicate that you rolled some of it over to an IRA or other retirement account.  I included a screenshot that demonstrates this. After selecting the first entry of the screen, there will be additional questions on how much of it was a rollover. What ever amount you enter will become non-taxable at this point. 

[fanfare]

@dmertz    

 only to the distributing IRA.  

well that wasn't made clear, at least to me, in all the discussion posts that went on last summer about how to do the rollover.

[dmertz]

IRS Notice 2020-51 was pretty specific with regard to this sort of rollover which wasn't done as an ordinary rollover within 60 days of the distribution:   "... the recipient may repay the distribution to the distributing IRA, ..."

[fanfare]

What about IRS Notice 2020-23 which is the one I'm relying on.?

[dmertz]

Notice 2020-23 doesn't apply to the question originally asked above.  Notice 2020-23 allowed the regular 60-day rollover deadline to be extended to July 15, 2020, but only for those where the 60th day was April 1, 2020 or later, meaning that the distribution would have to have occurred no earlier than February 1, 2020.  In the case of the question above, the distribution occurred in January 2020, making Notice 2020-23 inapplicable.

[pjbgolf]

what you are saying is correct regarding the steps TT goes through howver when I did this the "paid back RMD" still showed as taxable on the 1040 line 4b. The only way I was able to fix it was to said the original distribution was not part of the RMD. Dors anyone know if the FI's will be issuing another 1099-r reflecting an IRA rollover for the payback?

[macuser_22]

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@pjbgolf wrote:

what you are saying is correct regarding the steps TT goes through howver when I did this the "paid back RMD" still showed as taxable on the 1040 line 4b. The only way I was able to fix it was to said the original distribution was not part of the RMD. Dors anyone know if the FI's will be issuing another 1099-r reflecting an IRA rollover for the payback?

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Correct - you MUST say that the distribution was NOT a RMD.     It could not have been since there were NO 2020 RMD's at all.    You must check the box that says  "none of this distribution was a RMD".

[GAAZ]

There is no reason for another 1099R.  The financial institution issues the 1099R for the total amount distributed from the IRA account during the past year.  TT asks the appropriate questions to help you determine how much of the distribution should be reported as taxable income.   TT will also create a statement attached to your return explaining why all or part of the distribution is not taxable.  In this case you rolled over all or part of your distribution back to the IRA and that amount will not be included in the taxable amount.   

[pjbgolf]

Are you sure about saying there were no 2020 RMD’s ? I believe the option was to not take the RMD but if you actually did take it it’s still considered RMD and is taxable I believe.

what I still don’t understand is if someone did take their full RMD and tells TT that it was repaid when it wasn’t how does the IRS know it wasn’t repaid.

[VolvoGirl]

If you take an RMD or a plain distribution both are taxable.  Even if you say it wasn't a RMD it will still be taxable.  For 2020 nobody needs to know it was the RMD.  There is no RMD Requirement.  So it's really not an RMD in the first place.

I assume if you put back a distribution they will send a 5498 to the IRS the same as if you rolled over a distribution to another account or made a new contribution.

https://www.irs.gov/pub/irs-pdf/f5498_20.pdf 

[pjbgolf]

thanks, I get it now.