• Thomas Schorn

2020 RMD Repayment Rules

Updated: Jan 31

The IRS issued adjusted 2020 RMD repayment rules at the end of June.

You can now repay RMD withdrawals even if the withdrawal was in January. The repayment is considered a tax-free rollover, but it isn't subject to the "one-rollover-every-12-months" rule. Tax-free rollovers are also now available for 2020 RMDs taken by beneficiaries of inherited IRAs. Before the new IRS guidance, inherited IRAs weren't included in the relief measures.

These repayment rollovers are limited to the amount that would have been required as an RMD. Rollovers aren't available for 2020 distributions from a traditional pension (i.e., a "defined-benefit plan"), either.

The IRS also extended the rollover deadline for RMDs already taken this year (usually, rollovers must be completed within 60 days). The original due date for rollovers was July 15, 2020, for RMDs taken between February 1 and May 15. Now, retirees, who took an RMD between January 1 and June 30, have until August 31, 2020, to repay the distributed funds. That gives everyone a little more time to put the money back into an IRA or 401(k) plan to avoid paying tax on a previous 2020 distribution.

Contact us if you have any questions.

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