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."

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