If you have an IRA or 401k and you are over 70 1/2 year old, you need to take a required minimum distribution, or RMD, from your retirement account each year. However, with the coronavirus pandemic, Congress passed specific relief for certain kinds of retirement accounts creating different rules for your 2020 RMD.
New 2020 RMD Rules
Normally, taxpayers over the age of 70 1/2 years old have to take money out of their retirement accounts like IRAs and 401k plans. The reason is simple. The IRS doesn’t want that money sitting there untaxed forever. So, when you get into retirement, it wants to tax that money that you enjoyed paying no taxes on for all of those years.
With the coronavirus pandemic of 2020, however, Congress looked to provide some relief to taxpayers in the form of $1,200 payments, small business loans, and relaxing the rules on accessing and using retirement plan money. One of those benefits is the suspension of required minimum distributions, or RMDs for 2020.
All RMDs, regardless of the owner’s age, or how many required minimum distributions have already been taken are suspended for 2020. In other words, there are no required distributions during 2020. If you took an RMD in 2019, you still have to report and pay taxes on it as you file your 2019 income taxes, which are now due by July 15, instead of April 15, 2020.
The elimination of RMDs for 2020 includes IRA plans, including SEP-IRAs, as well as 401(k) plans, 403(b) plans and 457(b) plans.
What If I Already Took 2020 RMD?
Unfortunately, Congress didn’t make it easy to “put back” an RMD that had already been taken. The most likely folks to have taken an “early” RMD are those that turned 70 1/2 during 2019 who took advantage of the ability to defer that RMD into the next year (2020). Those people had to take the RMD by April 15, and not everyone likes waiting until the last minute.
There is the possibility that if your withdrawal is eligible for a rollover that the RMD could be rolled into another tax-advantaged account. However, if there was a withholding there is no way to get that money back. In order to fully exempt the entire withdrawal, the amount withheld would have to be made up out of other funds and rolled into the new account.