Additional Relief For 2020 IRA Distributions

BY JAMES E. HALL JR., CFP®

Back in March, Congress passed the CARES Act.  This act was intended to provide much needed relief caused by the economic damage done by COVID-19 and the shutdown of much of our economy.

One provision in the new law provided relief to many IRA owners by suspending Required Minimum Distributions (RMDs) for tax year 2020.  The problem for some IRA owners was that the ACT was not passed until the end of March, and many had already taken their RMD for 2020.  Some IRA owners were able to use the 60-day rollover rule to undo the distribution and return the withdrawal to their IRA.  However, for many account owners, the 60 days had passed and they were unable to return the withdrawal to the IRA. Also, the provisions of the ACT did not apply to Inherited IRA distribution recipients.

On June 23rd, the IRS released Notice 2020-51 which provided additional relief to IRA owners who had taken an RMD in 2020.   The new guidance essentially allows anyone who took a distribution to rollover that amount back into their retirement account.  This can be done up to August 31, 2020.  The rule also provides relief to beneficiaries of inherited IRAs, who may also rollover distributions taken in 2020 from an inherited IRA up until August 31,2020.

In summary, this new guidance allows those of you who were ineligible to rollover any early year distributions, due to the 60 Day rule and those who have taken distributions from inherited IRAs the ability to do just that.

On another matter, the IRS announced that they would not be extending the tax filing deadline beyond July 15th, 2020.  However, if you do need more time to file you may file a form 4868, which will automatically extend your deadline until October 15th.  Please note that this is an extension of when you need to file your taxes, this is not an extension of paying any taxes that may be due for 2019.

If you have any questions regarding the additional relief for RMDs taken earlier in the year or the tax deadline, please give us a call.