Tax Tip: Reporting a 2020 RMD From an IRA That You Later Returned

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Did you return a 2020 required minimum distribution (RMD) from an IRA after learning that RMDs were waived last year? If so, you need to know how to report it on your 2020 tax return – but it's a tad tricky.

RMDs from IRAs, 401(k)s and certain other retirement accounts were suspended for 2020. But some people took out an RMD in early 2020 before the waiver was enacted in late March. Those people had until the later of August 31, 2020, or 60 days after the payout to put the money back into the account and treat the distribution and subsequent redeposit as a tax-free rollover.

This story was adapted from the February 19 issue of The Kiplinger Tax Letter. Get a free sample issue now to see how the Tax Letter can help you claim all the tax benefits you can.

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Form 1099-R

If you took an RMD from an IRA last year and then paid it back in time, the Form 1099-R you get this year from your IRA custodian will show the original payout – but it won't account for the later return of the funds. In other words, the tax-free rollover won't show up on the form.

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Don't worry, though. The 1099-R is not wrong. Rollovers are generally not reflected on the 1099-R because custodians know only about the distributions. They're generally not aware of a future rollover.

Your 2020 Tax Return

When filling out your Form 1040 or Form 1040-SR for the 2020 tax year, you should include the total amount of IRA distributions shown on your Form 1099-R on Line 4a of the 1040 form. Then you subtract the amount that you properly and timely returned to the IRA and report the remainder – even if $0 – on Line 4b of the 1040. Write "Rollover" next to line 4b so the IRS knows why the numbers don't match.

This story was adapted from the February 19 issue of The Kiplinger Tax Letter. Get a free sample issue now to see how the Tax Letter can help you claim all the tax benefits you can.

If federal income taxes were withheld from the original distribution and reported on the 1099-R form, remember to claim the withholding on Line 25b of the 1040 or 1040-SR form.

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Joy is an experienced CPA and tax attorney with an L.L.M. in Taxation from New York University School of Law. After many years working for big law and accounting firms, Joy saw the light and now puts her education, legal experience and in-depth knowledge of federal tax law to use writing for Kiplinger. She writes and edits The Kiplinger Tax Letter and contributes federal tax and retirement stories to kiplinger.com and Kiplinger’s Retirement Report. Her articles have been picked up by the Washington Post and other media outlets. Joy has also appeared as a tax expert in newspapers, on television and on radio discussing federal tax developments.