topic Re: CARES RMD Repayment in Retirement tax questions

CARES RMD Repayment

mikult — Sat, 27 Jun 2020 16:38:59 GMT

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?

Re: CARES RMD Repayment

RobertG — Mon, 29 Jun 2020 20:59:29 GMT

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

Re: CARES RMD Repayment

dmertz — Sun, 28 Jun 2020 01:30:27 GMT

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.

Re: CARES RMD Repayment

GAAZ — Thu, 21 Jan 2021 17:20:28 GMT

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?

Re: CARES RMD Repayment

DaveF1006 — Thu, 21 Jan 2021 19:27:38 GMT

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.

Re: CARES RMD Repayment

fanfare — Thu, 21 Jan 2021 22:25:22 GMT

@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.

Re: CARES RMD Repayment

dmertz — Fri, 22 Jan 2021 00:46:48 GMT

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, ..."

Re: CARES RMD Repayment

fanfare — Fri, 22 Jan 2021 05:51:28 GMT

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

Re: CARES RMD Repayment

dmertz — Fri, 22 Jan 2021 13:22:48 GMT

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.

Re: CARES RMD Repayment

pjbgolf — Sun, 24 Jan 2021 01:22:09 GMT

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?

Re: CARES RMD Repayment

macuser_22 — Sun, 24 Jan 2021 01:37:54 GMT

@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?

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".

Re: CARES RMD Repayment

GAAZ — Sun, 24 Jan 2021 01:38:55 GMT

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.

Re: CARES RMD Repayment

pjbgolf — Sun, 24 Jan 2021 02:44:11 GMT

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.

Re: CARES RMD Repayment

VolvoGirl — Sun, 24 Jan 2021 02:56:17 GMT

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

Re: CARES RMD Repayment

pjbgolf — Sun, 24 Jan 2021 03:04:07 GMT

thanks, I get it now.

Re: CARES RMD Repayment

macuser_22 — Sun, 24 Jan 2021 03:21:35 GMT

@pjbgolf wrote:

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.

NO distribution taken in 2020 was a RMD. You could not take a RMD if you wanted to. Of course you can always take a IRA distribution and it will be taxable but the IRA custodian is prevented by law (the CARES act) form reporting or counting it as a RMD.

SeeL

https://www.irs.gov/newsroom/irs-seniors-retirees-not-required-to-take-distributions-from-retirement-accounts-this-year-under-new-law

Re: CARES RMD Repayment

pjbgolf — Sun, 24 Jan 2021 16:26:37 GMT

You are correct except for "The RMD suspension does not apply to qualified defined benefit plans."

Re: CARES RMD Repayment

DianeW777 — Sun, 24 Jan 2021 17:16:22 GMT

It depends. When the CARES Act passed, it suspended RMDs from many types of retirement accounts including IRAs, inherited IRAs, 401(k)s and inherited 401(k)s in 2020. Defined benefit plans are not exempt from RMDs for 2020, as noted.

If your plan qualifies, you could put it into your other IRS handled by a bank if it is rolled over within 60 days of distribution. If not, then you should contact your plan administrator about how to go about putting it back into your account.

IRS Retirement Topic RMDs and COVID

Re: CARES RMD Repayment

dmertz — Sun, 24 Jan 2021 17:20:59 GMT

Most people don't even realize that their distributions from defined benefit plans are RMDs, so those asking about rolling over "RMDs" are almost invariably asking in regard to distributions from accounts in defined contribution plans or IRAs.

What TurboTax is actually asking with the RMD question is, "How much of this distribution is ineligible for rollover?" Unfortunately, the TurboTax developers chose to ask this question in a way that obscures its actual intent and is subject to misinterpretation.