Here is the latest guidance about RMD distributions in 2020: news, plus a few questions and answers.

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To our clients and friends:

We remain hopeful that you and everyone close to you are safe and healthy. March feels like a lifetime ago but we wanted to update you on the CARES Act that was passed March 27, 2020 specifically the topic of Required Minimum Distributions (RMDs).

As you may know, the CARES Act waived all RMD obligations for 2020. For those of you that turned 70.5 in 2019 and did not take your first distribution then, you would normally need to take both your 2019 and 2020 distributions now. The new guidance says you can skip both distributions in 2020. If you were 70.5 before 2019 you can skip up to your entire 2020 RMD.

A question we fielded when the Act passed was “What if I took my RMD in 2020 and was past the 60-day window to reverse it?” The update released this week now allows you to reverse any 2020 RMD by August 31, 2020. The IRS extended the 60-day rollover period for any RMDs already taken this year to Aug 31 so that taxpayers have time to take advantage of this opportunity.

We often advise clients to use their RMDs to pay their income tax. If you withheld all or part of your federal tax for 2020 from an RMD you already took, you can use other funds to replace the withholding when you put the RMD back into your deferred account. You will then have a credit on your 2020 tax return. Please talk to us about how that affects your tax plan for the rest of the year!

What do you need to do if you took your RMD – contact us and your financial advisor. Together we can determine if it makes sense to return your RMD or let it be part of your 2020 income.

We are committed to keeping you informed of tax law changes. If you have any questions, please reach out to a member of our team.

We appreciate your trust,
All of us at Werner & Company CPAs, PC