The IRS has recently issued Notice 2020-51 to help bring more clarity on how the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) impacts Required Minimum Distributions (“RMDs”) and those individuals who have taken RMDs in 2020.
Congress passed the CARES Act on March 27, 2020 as a fiscal response to the COVID-19 pandemic. While the CARES Act was largely designed to aid individuals and businesses from the effects of COVID-19 through a stimulus relief package, the bill also included provisions suspending Required Minimum Distributions in 2020. Below we will discuss how IRS Notice 2020-51 impacts RMDs for 2020, and what options are available to an individual if they have already withdrawn RMDs in 2020.
Notice 2020-51 expands on the CARES Act by giving taxpayers the option to return any unwanted RMD taken in 2020. Pre-CARES Act, RMDs were not eligible for rollover into a retirement account. The CARES Act deemed RMDs eligible for rollovers to an IRA as long as they satisfied both the “60 Day Rule” (rollover had to occur within 60 days after the receipt of funds) and the “One-Rollover-Per-Year Rule” (only one rollover from an IRA to another, or any other IRA in any rolling 12-month period). Notice 2020-51 has relaxed compliance of both requirements as any unwanted 2020 RMDs will be allowed as rollovers into retirement plans, RMDs are not subject to the “One-Rollover-Per-Year Rule” and the notice also extends the 60 day Rule now allowing individual to return funds until August 31, 2020. As such, any individual who received RMDs from individual retirement accounts, employer retirement plans or inherited IRAs in 2020 has until August 31, 2020 to return that amount.
Additionally, Qualified Charitable Distributions (QCDs) can still be made in 2020 even though RMDs have been suspended. However, any QCDs will not offset any RMD amounts in 2020, but this would still allow the individual to make charitable contributions using pre-tax dollars as they see fit.
It is largely anticipated that the IRS will continue to issue guidance surrounding RMDs and QCDs in the coming months. If you have received RMDs from a qualified retirements plan and have questions on how you are being impacted by the new RMDs and CARES Act provisions, reach out to your trusted Henry+Horne advisor to get you on the right track.
Jesse Porras, Sr. Associate