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Re: RMD requirement suspended

Update from the IRS

It seems there are a few upgrades to the rules on RMD suspensions, if I'm reading the just released Notice 2020-51 correctly

  1. The 'window' for returning the RMD amount to the IRA has been extended on both ends. From Feb 1 to Jan 1 and from July 15 to Aug 31, 2020
  2. It also seems that if the RMD is being taken as a series of substantially equal periodic payments to be paid a minimum of 10 years, the amount returned to the IRA can be the cumulative amount withdrawn for the year, not just the most recent payment. see III B 1
  3. Another interesting change is the RMD amount, even though there is technically no RMD for 2020, if put back into the IRA is not treated as a rollover for purposes of the 'one rollover per year' rule.
  4. Another change is the ability to return a RMD within this time period of an inherited IRA (see III D). Formerly the IRA beneficiary could skip the RMD for 2020, but if already taken, could not roll it back into the IRA.

Just some interesting info

One of things I don't see is how multiple withdrawals are treated for the year. So if client A has an RMD of $5,000 for 2020, and takes out $5oo in January, $1,500 in April and $300 in May, can the client rollover the total of $2,300 back to the TIRA or is he limited to just one of the RMD withdrawals to roll back to the TIRA?

BruceM

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Re: RMD requirement suspended

That is good news.

I took 3 RMDs from 3 different accounts in January [2 403b, 1 T-IRA], but 1 RMD per account. So I should be able to reverse all 3?

I also had federal taxes withheld and that part may not be reversible. May be I can put back the original amounts and claim fed tax w/h in 2020 tax return.

I will ask sponsors/providers when their systems will be ready to do this.

Edit/Add: Reading the IRS release and related media articles, it seems that RMD reversal doesn't have to go back into the account that it came from. So, I will have to explore whether I could put my 3 RMDs into a single T-IRA.

YBB
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Frequent Contributor

Re: RMD requirement suspended


@BruceM wrote:

Update from the IRS

It seems there are a few upgrades to the rules on RMD suspensions, if I'm reading the just released Notice 2020-51 correctly

  1. The 'window' for returning the RMD amount to the IRA has been extended on both ends. From Feb 1 to Jan 1 and from July 15 to Aug 31, 2020
  2. It also seems that if the RMD is being taken as a series of substantially equal periodic payments to be paid a minimum of 10 years, the amount returned to the IRA can be the cumulative amount withdrawn for the year, not just the most recent payment. see III B 1
  3. Another interesting change is the RMD amount, even though there is technically no RMD for 2020, if put back into the IRA is not treated as a rollover for purposes of the 'one rollover per year' rule.
  4. Another change is the ability to return a RMD within this time period of an inherited IRA (see III D). Formerly the IRA beneficiary could skip the RMD for 2020, but if already taken, could not roll it back into the IRA.

Just some interesting info

One of things I don't see is how multiple withdrawals are treated for the year. So if client A has an RMD of $5,000 for 2020, and takes out $5oo in January, $1,500 in April and $300 in May, can the client rollover the total of $2,300 back to the TIRA or is he limited to just one of the RMD withdrawals to roll back to the TIRA?

BruceM


Thanks Bruce...

bump for others

R48

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Frequent Contributor

Re: RMD requirement suspended

Followup #1: 

One of my RMDs was from Fido 403b. Its website NetBenefits doesn't have a feature to send secure email [one can only receive; Fido Brokerage is different], so I called them.

I do have a bank account linked to Fido 403b and that is where I received my RMD. But the Rep said that Fido cannot just do RMD reversal from my bank account [if I put in the right amount there]. He said that I would have to mail a check made out to "FIIOC" and state in the letter that I don't want RMD for 2020 and am returning it [or rolling it over]. He was particular about the check to be made to FIIOC and that stands for Fidelity Investment Institutional Operations Corporation. In fact, he said not to use other forms such as "Fidelity FBO MyName", etc.

I have secure emails pending to TIAA and Vanguard on their procedures.

YBB
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Re: RMD requirement suspended

Followup #2.

Called Vanguard. Rep said that VG legal department will issue formal guidelines/procedures within days. But it was her understanding too that rollover(s) of January RMDs, including multiple RMDs [from other IRAs, 401k/403b] was/were OK. This was because both 60-day rollover rule and one rollover per year were waived for now.

Vanguard mutual fund website has a click to indicate if the money into T-IRA is "Rollover from an employer sponsored plan or IRA?". If the answer is Yes, it allows moving money online from an external linked bank or a mailed check.

BUT, it doesn't allow moving money online from a taxable VG fund to T-IRA and that has to done manually on phone request.

I also asked what is the risk if I moved the money now, using the bank route above. She thought that there wasn't a big risk. If VG legal came out against, then I will just have to remove excess contributions from T-IRA.

YBB
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Frequent Contributor

Re: RMD requirement suspended

Yogi

Been having detailed discussion on this at the FPA and a tax site on the new Notice. The consensus is that the number of withdrawals doesn't matter, its the total IRA withdrawals, and as long as this total does not exceed the RMD amount, then the reversal should be fine. Of course, the next question is what if the total of reversals exceeds the RMD amount, or there are other withdrawals? And what happens if there are multiple IRA custodians and how would the IRS know the total of returns do not exceed the RMD. So I'd imagine each custodian will have to have their own reversal process and will likely have to issue a 1099R with a special code showing the amount returned does not exceed the amount distributed.

Of course, it would be much easier to allow each IRA owner to simply mail a check or make an online transfer to the IRA withdrawn from or any TIRA for that matter....but there would be no accounting for what was a contribution (which now has no age limit) vs what would be a return of RMD.

And I'd also assume this is not like a recharacterization where the earnings must be included....only the actual dollar amount withdrawn.

BruceM

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Re: RMD requirement suspended

According to Vanguard Rep, each 401/403b/T-IRA sponsor will issue 1099 after the yearend to indicate RMD withdrawals, and the receiving sponsor(s) will issue 5498 [typically by mid-year next year] to indicate rollover amount(s) received. If the totals on 1099 and 5498 don't match, the taxpayer would have to deal with IRS.

YBB
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Re: RMD requirement suspended


@BruceM wrote:

Yogi

Been having detailed discussion on this at the FPA and a tax site on the new Notice. The consensus is that the number of withdrawals doesn't matter, its the total IRA withdrawals, and as long as this total does not exceed the RMD amount, then the reversal should be fine. Of course, the next question is what if the total of reversals exceeds the RMD amount, or there are other withdrawals? And what happens if there are multiple IRA custodians and how would the IRS know the total of returns do not exceed the RMD. So I'd imagine each custodian will have to have their own reversal process and will likely have to issue a 1099R with a special code showing the amount returned does not exceed the amount distributed.

Of course, it would be much easier to allow each IRA owner to simply mail a check or make an online transfer to the IRA withdrawn from or any TIRA for that matter....but there would be no accounting for what was a contribution (which now has no age limit) vs what would be a return of RMD.

And I'd also assume this is not like a recharacterization where the earnings must be included....only the actual dollar amount withdrawn.

BruceM


IRS has never been able to calculate what the RMD is for an IRA so it will be up to taxpayers to determine Correct  RMDs to be returned. Since the distributions can be returned to any IRA the custodian will accept the amount of the distribution as correct.

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Re: RMD requirement suspended

There is time to hang loose until, in my case, Vanguard legal sorts things out. 

My TIAA T-IRA was stopped in the first wave.

Bob

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Re: RMD requirement suspended


@yogibearbull wrote:

According to Vanguard Rep, each 401/403b/T-IRA sponsor will issue 1099 after the yearend to indicate RMD withdrawals, and the receiving sponsor(s) will issue 5498 [typically by mid-year next year] to indicate rollover amount(s) received. If the totals on 1099 and 5498 don't match, the taxpayer would have to deal with IRS.


Why will there be a problem if 1099 and 5498 don’t match? 2020 RMD withdrawals will be entered in Line 4a of the 1040 from which the amount rolled over back to the IRA will be Subtracted to determine the taxable amount in line 4B. For example if $30k is withdrawn as an RMD reported in line 4a and $28k is rolled back to an IRA the Taxable amount in line 4B will be 2k.

 

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Re: RMD requirement suspended

Thanks @BruceM for bringing this to our attention! My wife completed her Inherited IRA RMD in January and was out of luck but not any more. I messaged Vanguard and referenced the IRS Notice with a link but their reply ignored that and said beneficiary RMD repayments can't be done. I wrote back and asked them to check with their legal/tax people. Even Kiplinger wrote about it. I just want to know what procedure Vanguard settles on. 

If only recharacterizations for January/February Roth conversions (my bad) could be done!

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Re: RMD requirement suspended

@wayoutwest 

This is happening fairly quickly so I'd imagine the large custodians will require some time for their large machinery to be reprogrammed.

Sorry about your January Roth conversion. Sometimes timing smiles upon us...other times it does not. We just can't control it.

BruceM

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Re: RMD requirement suspended

Followup #3.

TIAA replied to my secure mail.

It said that my TIAA 403b contract doesn't allow RMD reversal/rollover* but there are options and I should call. My guess is that it would suggest rollover into a new TIAA T-IRA. [*There is fix suggested by IRS but it seems that TIAA doesn't want to do this for its various (hundreds?) 403b contracts.]

But I have already decided to do RMD reversals/rollovers of my 2 403b [Fido and TIAA] and 1 T-IRA [Vanguard] all into Vanguard T-IRA. I specifically asked VG Rep about this and she thought that this was possible.

Funny that the TIAA response starts addressing me by name, but refers to another name within the text. I assume that others have asked about this too and the TIAA Rep overlooked fixing the name within the text. 

As for VG response to secure mail, it got it but it just said that I have already talked to a VG Rep on phone, so that took care of response unless I have other questions.

YBB
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Re: RMD requirement suspended

@yogibearbull 

"But I have already decided to do RMD reversals/rollovers from my 2 403b [Fido and TIAA] and 1 T-IRA [Vanguard] all into Vanguard T-IRA. I specifically asked VG Rep about this and she thought that this was possible."

There should be no reason you could not create a TIRA (or use an existing one) to take a deposit equal to the RMD amount(s) withdrawn during 2020 from one or several retirement plans, if done by Aug 31. The problem will be with accounting and reporting to control abuse.

The simple way, I would think, is just to put another box for one year in the 5498, say, 2A, titled something like 'Rollover of RMD'.  This would prevent confusing the RMD return with a direct contribution which is now possible with the removal of the maximum contribution age.

BruceM

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Re: RMD requirement suspended

@BruceM , Vanguard will code it as rollover into T-IRA.

I wanted to move/rollover a specific amount [= total of my 3 RMDs in January] from my VG taxable into existing VG T-IRA. As I noted earlier, this required a call to VG for proper coding as rollover; this isn't allowed online by VG. Strangely, VG didn't ask about the other sources of RMDs but only cared to know the total of RMDs involved.

If I wanted to use my linked bank as source of funds, I could do it online as there is a click in VG mutual fund IRA to indicate if the amount was a rollover. I think that VG is unique in this as others [Fido, TIAA] allow only annual contributions to IRA online; phone call or paper form would be needed for rollovers.

In my 2020 tax return, I will include an explanation of my 3 RMDs in January 2020 and reversals/rollovers of all into a single existing T-IRA in June 2020. 

As for the federal taxes already withheld in RMDs, I should get a good refund unless I modify my existing tax withholding [obviously, I would skip any estimated taxes that I would have made].

YBB
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Re: RMD requirement suspended

VG's response to my follow-up email regarding inherited IRA RMDs was lacking but at least acknowledged their error: "I am sorry for providing incorrect information. Vanguard and the industry are currently reviewing the operational impact to determine how these repayments will be handled. Please continue to check vanguard.com for information." 

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Re: RMD requirement suspended


@yogibearbull wrote:

I suggested in another thread to continue RMD but reduce or skip tax on it.


This is what I would like, but not holding my breath.

It would be convenient, yet less than economically prudent. 

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Re: RMD requirement suspended

Thanks wayouwest. That's just what I expected.

There is too much going on on the fly and the last thing I want to do is try to explain to an understaffed IRS why I did thus and so.

Sometimes doing nothing is the prudent course of action. I do not wish to be too clever by half.

I suspended one RMD with a monthly payment but I will leave alone a second lump sum RMD taken in January 2020.

Bob

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Re: RMD requirement suspended


@FatKat wrote:

@yogibearbull wrote:

I suggested in another thread to continue RMD but reduce or skip tax on it.


This is what I would like, but not holding my breath.

It would be convenient, yet less than economically prudent. 


That comment was made in March.

But now we have clarity for 2020 - 1. RMDs are not required for 2020, 2. RMDs taken between 1/1/20-8/31/20 can be reversed/rolled-over by 8/31/20 into accounts where they came from [if allowed by plans], or into T-IRA [this is because 60-day rollover and 1/yr rollover rules are waived for 2020].

There may not be any further changes for RMDs for 2020.

YBB
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Re: RMD requirement suspended

@Intruder 

Trudy,

 I turned 70.5 in first half of 2019. I took a partial distribution in September 2019. I completed my 2019 RMD in Jan 2020.

1.) Would I be allowed to return Jan 2020 ( for 2019 RMD ) to TIRA?

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