Capital Investment Advisors


Question: Results of a Google search on “stimulus bill” and “RMD” led me to several web sites that said the RMD suspensions are only available to people new to the RMD process. I’m 74 and have been taking them for several years. Am I exempt for 2020?

Answer: In regards to your question, you will be exempt from having to take your 2020 RMD, as Section 2203 of the CARES Act amends IRC Section 401(a)(9) to suspend Required Minimum Distributions (RMDs) during 2020. The relief provided by this provision is broad and applies to Traditional IRAs, SEP IRAs, and SIMPLE IRAs, as well as 401(k), 403(b), and Governmental 457(b) plans. Furthermore, the relief applies to both retirement account owners, themselves, as well as to beneficiaries taking stretch distributions.

Question: My question is about the up to $100k IRA withdrawal. In what YEAR does the ordinary income have to be reported? Is it $100k in 2020, $33k per year, etc. what happens if I put money back (modify prior returns,etc.). I find conflicting info. I know it is all new. Just want facts.

Answer: The way the distribution would work is that you can take up to $100K and it’s defaulted to be reported over the next 3 years (including 2020). You can elect to have all $100K reported in 2020 however.

If you do pay any of the distribution back, let’s say in 2022, then you would want to file an amended return to re-claim a refund of any tax paid attributable to the repaid amount.

Question: I was surprised to hear that RMDs for this year have been suspended. Can I somehow return money I have already withdrawn from our traditional IRAs? We’re both 73, and they are not inherited.

Answer: Yes, you can reinstate the money into your IRA, but when you took the IRA will determine how it is done. If you took the IRA in the last 60 days, this is still inside the window of doing an indirect rollover. You can open another IRA and deposit the funds in there (plus any taxes you may have had withheld). (Note that if you have done an indirect rollover in the last year this is not an option.) Now, if you took your RMD on January 1st for example, you are outside of this 60-day window. In this case, you would have to show that you were negatively impacted by COVID-19 to be able to replace the funds taken, but this would give you three years to deposit back. Another option in this scenario is to deposit in Roth and count it as a conversion. Normally you cannot convert the amount of your RMD, but in this case, it looks as though you can.

Question: You mentioned on your Sunday program that RMDs will be forgiven for 2020; however, I’ve already withdrawn mine and my husband has already withdrawn half of that. Are you aware of any provision or tax credit that we will be given to offset our withdrawal? Please advise. Thank you.

Answer: Please be advised Section 2203 of the CARES Act amends IRC Section 401(a)(9) to suspend Required Minimum Distributions (RMDs) during 2020. The relief provided by this provision is broad and applies to Traditional IRAs, SEP IRAs, and SIMPLE IRAs, as well as 401(k), 403(b), and Government 457)b) plans.

Returning Unwanted 2020 RMDs That Have Already Been Distributed

Despite the fact that we’re not quite yet through the first quarter of the year, a number of individuals have already taken their RMDs – or at least, what they thought was their RMD at the time – for 2020. Now, in light of the CARES Act, these individuals may wish to ‘return’ unwanted and no longer necessary RMDs.

For IRA, 401(k), and other retirement account owners, this may be possible in two different ways:

  1. In a best-case scenario, the ‘RMD’ distribution will have taken place within the last 60 days, and the distribution won’t be prevented from being rolled over due to the once-per-year rollover rule (either because it came from a plan, is going to a plan, or becuase no IRA-to IRA rollover has been made within the past 365 days). In such instances, an individual can simply write a check, or otherwise transfer an amount equal to the ‘RMD’ back into a retirement account before the end of the 60-day rollover window.
  2. For retirement account owners who took their RMD very early in the year, and for whom the 60-day rollover window has already expired, there is another potential approach. If it can be shown that the individual has been impacted by the COVID-19 crisis enough to qualify under the liberal guidelines outline for a Coronavirus-Related Distribution, then the rollover can still be completed…anytime for the next three years (from the date the distribution was received)!

Question: I am over 70.5 years and have started taking my MRD for 2020. Can I redeposit the amount back into my IRA even if I am outside the 60 day limit?

Answer: If you have taken your RMD and want to return it, but are outside of the 60 day indirect rollover window, you have two options:

  1. Claim a hardship for COVID-19 and put the money back into the IRA. Distributions from IRA/401ks are able to be returned by those “impacted by the Coronavirus” because they have been diagnosed with COVID-19, have a spouse or dependent diagnosed with COVID-19, experience adverse financial consequences as a result of the disease
    1. This last definition is what may enable you to return a distribution from a retirement account, and is intentionally liberal.
    2. Remember if you withheld taxes, you will need to put the gross amount back in (ex: you took out $10K, but withheld $2K, you would need to put $10K back in).
    3. You will want to make sure you work with a CPA to report everything correctly
  2. Convert the funds into a Roth IRA

Either will serve the purpose of putting the money back into a tax advantaged retirement account.

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