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Ask the Expert: What if I've already taken an RMD for 2020?

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At the end of March, 2020 required minimum distributions (RMDs) were suspended by the CARES Act. This allowed people to keep that money in their retirement accounts, avoiding taxation. However, many people had already withdrawn their RMDs. Under the "rollover" rule, an IRA withdrawal may be reinvested in the same IRA or another IRA tax-free within 60 days. Has that rule also been suspended this year for people who want to redeposit their RMDs, but have passed the 60-day limit?

Yes; but not in all cases.

The suspension of 2020 RMDs applies to IRAs and inherited IRAs, as well as to employer-sponsored 401(k), 403(b) and 457 retirement plans. But as you say, some people took RMDs before the law passed. Non-RMD retirement account distributions normally qualify to be reinvested in a tax-deferred retirement account within 60 days. But that window in some cases is now closed.

The good news: Internal Revenue Service Notice 2020-23, released on April 9, indirectly waives the 60-day rollover rule for RMDs taken between Feb. 1 and May 15, 2020, provided they are redeposited in an IRA by July 15, 2020, says Ed Slott, a Rockville Centre tax accountant.

The bad news: RMDs taken in January don't qualify for that waiver, nor will RMDs taken after May 15. And other key provisions of the 60-day rule still apply: You can only do one 60-day rollover every 12 months; and with few exceptions, you can't roll over distributions from an inherited IRA. (Note: The 60-day rule applies only to reinvestment of retirement account distributions. There's no annual limit on direct trustee-to-trustee transfers, in which you move money between retirement accounts without taking a distribution.)

The bottom line

Under current tax rules, people who took their 2020 RMDs in January can't redeposit them despite the suspension of 2020 RMDs.

More information

nwsdy.li/rolloverinfo

https://nwsdy.li/waiverinfo

TO ASK THE EXPERT Send questions to Ask the Expert/Act 2, Newsday, 6 Corporate Center Dr., Melville, NY 11747, or email act2@newsday.com. Include your name, address and phone numbers. Questions can be answered only in this column. Advice is offered as general guidance. Check with your own consultants for your specific needs.

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