Will rolling my 2020 RMD I took in January into a new IRA create any taxes?

[chalupsky]

The RMD was from a 401k.

[macuser_22]

That would seem to be allowed.    Be sure to tell the receiving financial institution that it is in accord with IRS notice 2020-51.

You would report it as a rollover on your 2020 tax return next year.

https://www.irs.gov/newsroom/irs-announces-rollover-relief-for-required-minimum-distributions-from-r...

IR-2020-127, June 23, 2020

WASHINGTON — The Internal Revenue Service today 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.

The 60-day rollover period for any RMDs already taken this year has been extended to August 31, 2020, to give taxpayers time to take advantage of this opportunity.

The IRS described this change in Notice 2020-51 (PDF), released today. The Notice also answers questions regarding the waiver of RMDs for 2020 under the Coronavirus Aid, Relief, and Economic Security Act, known as the CARES Act.

The CARES Act enabled any taxpayer with an RMD due in 2020 from a defined-contribution retirement plan, including a 401(k) or 403(b) plan, or an IRA, to skip those RMDs this year. This includes anyone who turned age 70 1/2 in 2019 and would have had to take the first RMD by April 1, 2020. This waiver does not apply to defined-benefit plans.

In addition to the rollover opportunity, an IRA owner or beneficiary who has already received a distribution from an IRA of an amount that would have been an RMD in 2020 can repay the distribution to the IRA by August 31, 2020. The notice provides that this repayment is not subject to the one rollover per 12-month period limitation and the restriction on rollovers for inherited IRAs.

The notice provides two sample amendments that employers may adopt to give plan participants and beneficiaries whose RMDs are waived a choice as to whether or not to receive the waived RMD.

[dmertz]

Taxes will continue to be deferred on whatever amount you roll over to the IRA.  To continue to defer taxes on the entire gross amount, if any amount was withheld for taxes you'll need to substitute other funds to complete the rollover of the entire gross amount.  The tax withholding will be credited on your 2020 tax return.

[chalupsky]

Something else

I plan to make an indirect rollover back to my IRA with like assets (exact number of share withdrawn and returned). The value has increased since the withdrawal. Since the value is more, how does this impact my next year's taxes? Will there be any income that will be taxable due to the increased value?

[dmertz]

You mentioned "like" assets.  If the distribution was from an IRA, the exact same shares must be rolled back (the same share lot).  You are not permitted to substitute other shares or the cash proceeds from the sale of the shares outside of the IRA.  When you roll the exact same shares back to the distributing IRA, any change in the value is irrelevant.  Whatever shares you redeposit will treated as having been rolled over at their value on the date of the in-kind distribution from the IRA.

(If the in-kind RMD distribution was instead from a qualified retirement plan like a 401(k), either the exact same shares or the cash proceeds (regardless of any change in the share value) from the sale of those shares can be rolled over to an IRA.  As with a distribution from an IRA, the amount of the distribution rolled over is the value of the shares on the date of the distribution.  For example, if you received a distribution of 100 shares of ABC with a share value of $10 on the date of the distribution and you sell those 100 shares at $9 per share, rolling the $90 cash proceeds over to an IRA is treated as having rolled over the entire $1,000 distribution.  Similarly, if you sell all of the shares at $11 per share, you would have to roll over the entire $1,100 of cash proceeds to be able to report the $1,000 distribution as having been rolled over.)