Tax Breaks

IRS Provides Additional RMD Relief for Retirees

Some seniors who withdrew money from a retirement account in 2020 before RMDs were suspended for the year can still roll the money back into an IRA.

People who took a required minimum distribution (RMD) in 2020 and want to roll it back into an IRA because of the RMD waiver, a reprieve granted by the CARES Act, may have a little more time to do it. Recent IRS guidance includes an extension until July 15, 2020, to complete time-sensitive actions, such as indirect rollovers of retirement account distributions. But the extension only benefits a select group — those who took a distribution in 2020 between February 1 and May 15 and haven't rolled over any other distribution in the past year.

The quirky timeline is because the guidance wasn't written for retirees who took an RMD early in the year and then couldn't pay it back because they didn't meet the 60-day rule. That rule only allows rollovers within 60 days of taking a distribution (and only one indirect rollover is generally allowed per person per year). The IRS guidance, says IRAhelp.com's Ed Slott, was written for "a laundry list of other time-sensitive deadlines. It was written for the bigger fish, and the smaller fish got caught up in it."

So the extension still doesn't help anyone who took an RMD in January 2020. Slott believes the IRS will eventually provide additional clarification that may help these people roll over their 2020 distributions, just not yet. "If they are going to do something fair, they should come out with blanket relief," he says. And there is still time for that to happen. "The tax on that RMD won't be due until April 15, 2021," says Slott. "The IRS has plenty of time to provide retroactive relief."

Most Popular

Don’t Be Tricked Into Voluntarily Paying Higher Taxes on Your IRA
IRAs

Don’t Be Tricked Into Voluntarily Paying Higher Taxes on Your IRA

Traditional IRAs are set up in a way that basically incentivizes you (and your heirs) into paying the highest tax bill possible. Don’t fall for it. Co…
July 4, 2022
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
Retirees, Make These Midyear Moves to Cut Next Year's Tax Bill
Tax Breaks

Retirees, Make These Midyear Moves to Cut Next Year's Tax Bill

Save money next April by making these six hot-as-July tax moves.
July 1, 2022

Recommended

Has Bad Economic News in 2022 Hurt Your Retirement Plans?
retirement

Has Bad Economic News in 2022 Hurt Your Retirement Plans?

How the right plan now can get you back on track and reduce the risk going forward.
July 6, 2022
With High Inflation and an Uncertain Stock Market, Do I Have Enough to Retire?
retirement

With High Inflation and an Uncertain Stock Market, Do I Have Enough to Retire?

If you’re at all concerned then it’s time to do some analysis, either with a financial professional or even just on your own. Answering a few question…
July 6, 2022
How to Go to Cash
investing

How to Go to Cash

What exactly does it mean to 'go to cash,' and what should you do once you have?
July 5, 2022
Age Magnificently with the Help of a Geriatric Care Manager
retirement

Age Magnificently with the Help of a Geriatric Care Manager

Geriatric care managers help families map the coming changes and explore the options before they are even needed.
July 5, 2022