317.735.2946 [email protected]
Aug. 31 is the Deadline to Return Distributions to Retirement Accounts

IRA owners, beneficiaries and workplace retirement plan participants who got a Required Minimum Distribution (RMD) this year have until Aug. 31 to rollover or repay the distribution in order to avoid being taxed on the payments.

The Coronavirus Aid, Relief, and Economic Security Act – also known as the CARES Act – waives RMDs during 2020 for IRAs and other retirement plans. It does the same for beneficiaries with inherited accounts.

The CARES Act waiver includes RMDs for individual who turned age 70 1/2 in 2019 and took their first RMD in 2020. Roth IRAs, however, don’t require withdrawals until after the death of the owner.

RMDs are eligible for rollover.

Individuals who took a Required Minimum Distributions in 2020 – including those who turned 70 1/2 during 2019 – have the option of putting their distribution back into the original account, or some other qualified plan.

Thanks to suspension of the RMD rule, RMDs taken during 2020 are considered eligible for rollover. So RMDs can be rolled over to another IRA, another qualified retirement plan, or returned to the original plan. But the rollover, no matter to what account, must be done by Aug. 31 to avoid paying taxes on the distribution.

IRS Notice 2020-51 also provides that the one-rollover-per-12-month-period limitation and the restriction on rollovers to inherited IRAs don’t apply to this repayment.

The CARES Act provisions apply to most retirement plans. This includes traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k) plans, 403(b) plans, 457(b) plans, profit sharing plans and other defined contribution plans.

The RMD suspension, however, doesn’t apply to qualified defined benefit plans.

Find more information on the CARES Act and retirement plans – including FAQs – visit the IRS’s Coronavirus-related relief for retirement plans and IRA questions and answers page.

Want to learn more about Drake Software products?

Call 800.890.9500 or visit the product-features pages for Drake Tax, Drake Documents, Drake Accounting, and Drake Portals to learn more about Drake Software products. Check out the Buy or Renew page if you’re ready to get started today.

Story provided by TaxingSubjects.com