[Can you reverse a RMD made before the CARES act?]

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mcblum
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[Can you reverse a RMD made before the CARES act?]

Post by mcblum »

If you have taken the RMD before the CARE act was initiated. Can you get it reversed and get a refund?
Marty

[edited title and post to correct typos, and replies made before the correction have been removed to keep clarity on the topic - moderator prudent]
Alan S.
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Re: refund on red

Post by Alan S. »

mcblum wrote: Sat Mar 28, 2020 11:12 am If you have taken the RMD before the CARE act was initiated. Can you get it reversed and get a refund?
Marty
If you have already taken your 2020 RMD, and have a rollover available you can roll the distribution back within 60 days of receipt.

If over 60 days because you took the distribution in January, then you can still roll it back if you qualify for a Coronavirus distribution by being affected in certain ways. That rollover could be done over a 3 year period, and opens up complex tax planning issues
earlyout
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Re: [Can you reverse a RMD made before the CARES act?]

Post by earlyout »

You could also take all or part of the distribution and add it to a Roth IRA. You will still pay taxes on the distribution but it will now be in a Roth and future RMDs from your traditional IRA will be reduced.
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PriceOfFreedom
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Re: [Can you reverse a RMD made before the CARES act?]

Post by PriceOfFreedom »

You could also take all or part of the distribution and add it to a Roth IRA. You will still pay taxes on the distribution but it will now be in a Roth and future RMDs from your traditional IRA will be reduced.
earlyout, I'm not sure what this means. In my case, I took the RMD from my IRA in early January, so I'm past the 60-day window. I had federal and state taxes withheld so there was a net amount distributed to me which was smaller than the gross RMD amount. Also, I have done a number of IRA to Roth conversions since then.

Can I simply deposit the gross amount of the RMD into my Roth IRA now, or is it more complex than that? What will happen to the taxes withheld? Will they still be remitted to the federal and state governments (I would like this to be the case to satisfy my tax withholding for 2020)?
pshonore
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Re: [Can you reverse a RMD made before the CARES act?]

Post by pshonore »

AFAIK, there's no way to deposit money into an existing Roth account unless you're making a current or previous year contribution (or rolling from another existing Roth). That means your broker is going to have to reprogram their systems to allow it and get the taxes right. That is going to take time and will cause some incorrect 1099R forms to be produced next January. Same with returning RMDs. They will need a new form or changes to the UI to allow for that. Might be easier though to just return the RMD and just do a regular Roth conversion. Lots of things to work out. And will they allow labeling a distribution as "Corona" if it was taken prior to the passage of CARES? Look for a lot of new Box 7 codes.
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PriceOfFreedom
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Re: [Can you reverse a RMD made before the CARES act?]

Post by PriceOfFreedom »

I would love to return the RMD to my IRA but assume I cannot since more than 60 days have elapsed since the RMD occurred in early January. Is that correct? Or are they waiving the 60-day rule for 2020 RMDs already taken?
pshonore
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Re: [Can you reverse a RMD made before the CARES act?]

Post by pshonore »

pshonore wrote: Sat Mar 28, 2020 4:29 pm AFAIK, there's no way to deposit money into an existing Roth account unless you're making a current or previous year contribution (or rolling from another existing Roth). That means your broker is going to have to reprogram their systems to allow it and get the taxes right. That is going to take time and will cause some incorrect 1099R forms to be produced next January. Same with returning RMDs. They will need a new form or changes to the UI to allow for that. Might be easier though to just return the RMD and just do a regular Roth conversion. Lots of things to work out. And will they allow labeling a distribution as "Corona" if it was taken prior to the passage of CARES? Look for a lot of new Box 7 codes.
I doubt anyone knows for sure at this point
Gill
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Re: [Can you reverse a RMD made before the CARES act?]

Post by Gill »

PriceOfFreedom wrote: Sat Mar 28, 2020 4:42 pm I would love to return the RMD to my IRA but assume I cannot since more than 60 days have elapsed since the RMD occurred in early January. Is that correct? Or are they waiving the 60-day rule for 2020 RMDs already taken?
Did you see Alan S’s post above on this point? There’s a good chance you can do it. The language for a Coronavirus distribution are very broad.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
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