RMD Rules for 2020 Changed with the Corona Virus Bill

Normally, if you are age 72 or over this year, you must take a Required Minimum Distribution (RMD) from your IRA each year.  This same requirement exists if you were required to take an RMD in 2019.  If you don’t take the annual RMD, there is a 50% penalty on the amount you were supposed to withdraw.

The coronavirus bill passed in March 2020 waives all RMDs for 2020.  So regardless of your age, you will not be required to take an RMD on any of your IRAs in 2020.  All RMDs are suspended, including those for inherited (beneficiary) IRAs as well as traditional IRAs and 401(k) IRAs, 403(b) IRA and 457(b) IRA plans.  The waiver might not apply to Roth 401(k), 403(b) and 457(b) accounts.

If you already took the 2020 RMD, you have to include it as part of your 2020 income and pay taxes on it.  However, you have up to 60 days to return a distribution to an IRA or deposit it in another qualified retirement account without owing taxes on it.  It can also be converted into a Roth IRA

Bottom Line

  • You will not be required to take a Required Minimum Distribution (RMD) on your Regular IRA in 2020, regardless of your age.
  • The waiver in 2020 applies to all IRAs,.
  • The waiver also applies to 401(k), 403(b), and 457(b) IRA plans.  It is not clear how they apply to these same plans if they are Roth plans.  This will be updated when more info is available.
  • If you already took an RMD in 2020, you have 60 days to return it to the same plan or in another qualified retirement plan.

Final Note

These provisions are in the Coronavirus Aid, Relief, and Economic Security bill (CARES).  I’m sure the bill is perfectly clear except for one part.  What department and who is in charge of coming up with such nice names for bills so that they have wonderful sounding acronyms?

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