IRS broadens rollover options for 2020 RMD distributions

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bsteiner
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Extension of time to repay "required" 2020 distributions

Post by bsteiner » Tue Jun 23, 2020 12:05 pm

In Notice 2020-51, the IRS extended to August 31, 2020, the time for IRA owners to repay distributions that would have been required distributions but for the waiver of required distributions for 2020: https://www.irs.gov/pub/irs-drop/n-20-51.pdf .

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IRS broadens rollover options for 2020 RMD distributions

Post by Alan S. » Tue Jun 23, 2020 1:01 pm

[Merged into existing thread on same topic in Personal Finance (Not Investing) forum- Mod Misenplace]

The IRS has now broadened rollover options for distributions that would have been RMDs for 2020 per IRS Notice 2020-51:

https://www.irs.gov/pub/irs-drop/n-20-51.pdf

Note that such January and later distributions may now be rolled back by 8/31 regardless of the 60 day rollover deadline, and irrespective of the one rollover limitation. This pretty much resolves the 3 technical impediments that left taxpayers holding 2020 distributions that would have been RMDs except for CARES and the Secure Act.

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NEWS: IRS pushed the 60-day rollover period for any RMDs already taken this year to Aug. 31

Post by GerryL » Tue Jun 23, 2020 1:28 pm

[Merged into existing thread on same topic in Personal Finance (Not Investing) forum- Mod Misenplace]

For those of you who took your RMD early in the new year:

The IRS on Tuesday announced that anyone who already took a required minimum distribution (RMD) in 2020 from certain retirement accounts now has the opportunity to roll those funds back into a retirement account following the CARES Act RMD waiver for 2020.
https://www.thinkadvisor.com/2020/06/23 ... cares-act/

I did my QCDs in January and have already determined that it would not make sense to return the $$ to my IRA and claim the contributions as a deduction. But if you missed the 60 day rollover deadline, now you have the option. (Figured this would happen, but it took a bit longer than I thought it would.)

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Re: IRS broadens rollover options for 2020 RMD distributions

Post by Penguin » Tue Jun 23, 2020 1:48 pm

Thank you, Alan S.
This has been on my mind, and you have relieved my concern.
Jon

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Re: IRS broadens rollover options for 2020 RMD distributions

Post by Alan S. » Tue Jun 23, 2020 2:24 pm

It is also noteworthy that an RMD distribution made to a BENEFICIARY of an IRA can even roll that distribution back to the distributing IRA (no other plan). Normally, non spouse beneficiary distributions can never be rolled over.

However, the above does not extend to the beneficiary of a non IRA plan. Such distributions that would have been beneficiary RMDs of non IRA plans still cannot be rolled over.

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Re: IRS broadens rollover options for 2020 RMD distributions

Post by PriceOfFreedom » Tue Jun 23, 2020 3:00 pm

Thank you, Alan S. from me as well.

I tried to assimilate Notice 51 to which you provided a link and I am not clear what this implies.
  • Does it now supersede Notice 50?
  • That is, as per Notice 50, if one qualified for a CRD, and wished to return a January 2020 RMD to one's IRA, one had to make sure that the returned funds were treated by the custodian as a repayment, not a rollover, then include Form 8915 E with the 2020 tax return.
  • Does Notice 51 now remove any CRD qualifying requirement requirement and simply grant everyone who took a 2020 IRA RMD since January 1 until August 31 to roll those funds back into the IRA as a rollover?
  • Does this mean that form 8915 E is no longer required when filing 2020 taxes since the distribution is "wiped out" with a now qualifying rollover?

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Re: IRS broadens rollover options for 2020 RMD distributions

Post by Mel Lindauer » Tue Jun 23, 2020 3:23 pm

Alan S. wrote:
Tue Jun 23, 2020 1:01 pm
The IRS has now broadened rollover options for distributions that would have been RMDs for 2020 per IRS Notice 2020-51:

https://www.irs.gov/pub/irs-drop/n-20-51.pdf

Note that such January and later distributions may now be rolled back by 8/31 regardless of the 60 day rollover deadline, and irrespective of the one rollover limitation. This pretty much resolves the 3 technical impediments that left taxpayers holding 2020 distributions that would have been RMDs except for CARES and the Secure Act.
Wow, thanks for sharing that awesome news, Allan!

My wife took her RMD in Jan., and until now, was not able to roll it back. As I understand your post, she can now roll it back as long as it's done by 8/31?
Best Regards - Mel | | Semper Fi

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Re: IRS broadens rollover options for 2020 RMD distributions

Post by cowdogman » Tue Jun 23, 2020 3:42 pm

Thanks.

Still no allowance of a rollover of a distribution from a non-spouse inherited IRA?

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Re: IRS broadens rollover options for 2020 RMD distributions

Post by Gill » Tue Jun 23, 2020 4:05 pm

Wonderful news from Alan and many thanks for posting. My wife was in a similar position as Mel's and I called Vanguard this afternoon in an attempt to roll it back. They were not at all up to speed on this and, after considerable time on hold, I was advised to call back in a few days so that it may be reviewed by their legal department. No rush I guess. We have until August 31.

Gill
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Re: IRS broadens rollover options for 2020 RMD distributions

Post by Sandwich » Tue Jun 23, 2020 4:28 pm

Gill wrote:
Tue Jun 23, 2020 4:05 pm
.... I called Vanguard this afternoon in an attempt to roll it back. They were not at all up to speed on this and, after considerable time on hold, I was advised to call back in a few days so that it may be reviewed by their legal department. No rush I guess. We have until August 31.

Gill
Saw this post as I was getting ready to phone Vanguard. Will wait until the legal department irons out a process. To add, I'll be rolling back the whole 2020 RMD for my Mom as her POA, which includes the amount withheld for federal income taxes and then she will receive a large income tax refund in 2021.

May consider doing a 2020 ROTH conversion of some of that RMD after reviewing her tax situation.

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Re: IRS broadens rollover options for 2020 RMD distributions

Post by Gill » Tue Jun 23, 2020 5:21 pm

Sandwich wrote:
Tue Jun 23, 2020 4:28 pm
Gill wrote:
Tue Jun 23, 2020 4:05 pm
.... I called Vanguard this afternoon in an attempt to roll it back. They were not at all up to speed on this and, after considerable time on hold, I was advised to call back in a few days so that it may be reviewed by their legal department. No rush I guess. We have until August 31.

Gill
Saw this post as I was getting ready to phone Vanguard. Will wait until the legal department irons out a process. To add, I'll be rolling back the whole 2020 RMD for my Mom as her POA, which includes the amount withheld for federal income taxes and then she will receive a large income tax refund in 2021.

May consider doing a 2020 ROTH conversion of some of that RMD after reviewing her tax situation.
I should have added, I first tried to do it online but it wouldn’t accept the transaction and told me to call. As outlined above, calling was also unsuccessful.
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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Re: IRS broadens rollover options for 2020 RMD distributions

Post by is50xenough » Wed Jun 24, 2020 4:37 am

So curious when someone completes this, please relay mechanics, especially if taxes withheld. Where did funds come from ? What happens with paid taxes?

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Re: IRS broadens rollover options for 2020 RMD distributions

Post by bsteiner » Wed Jun 24, 2020 6:05 am

is50xenough wrote:
Wed Jun 24, 2020 4:37 am
So curious when someone completes this, please relay mechanics, especially if taxes withheld. Where did funds come from ? What happens with paid taxes?
You would need to make up the withholding out of other money.

You could recoup the withholding by reducing your future withholding or your estimated tax payments, or on your tax return.

EDIT: or the custodian might be willing to reverse the withholding by offsetting it against their next payment of withheld taxes to the IRS.
Last edited by bsteiner on Thu Jun 25, 2020 6:08 am, edited 1 time in total.

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Re: IRS broadens rollover options for 2020 RMD distributions

Post by Mel Lindauer » Wed Jun 24, 2020 7:03 pm

Gill wrote:
Tue Jun 23, 2020 5:21 pm
Sandwich wrote:
Tue Jun 23, 2020 4:28 pm
Gill wrote:
Tue Jun 23, 2020 4:05 pm
.... I called Vanguard this afternoon in an attempt to roll it back. They were not at all up to speed on this and, after considerable time on hold, I was advised to call back in a few days so that it may be reviewed by their legal department. No rush I guess. We have until August 31.

Gill
Saw this post as I was getting ready to phone Vanguard. Will wait until the legal department irons out a process. To add, I'll be rolling back the whole 2020 RMD for my Mom as her POA, which includes the amount withheld for federal income taxes and then she will receive a large income tax refund in 2021.

May consider doing a 2020 ROTH conversion of some of that RMD after reviewing her tax situation.
I should have added, I first tried to do it online but it wouldn’t accept the transaction and told me to call. As outlined above, calling was also unsuccessful.
Gill
Good news! I was able to roll back my wife's Jan. RMD this evening via a Vanguard Flagship rep. He said they can do it even while their legal dept. checks the language to make sure they're doing it right. And he coded it as a rollover.

Since I felt confident that it was, indeed, legal, I went ahead and rolled it back (I have trading authority).
Best Regards - Mel | | Semper Fi

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Re: IRS broadens rollover options for 2020 RMD distributions

Post by Gill » Wed Jun 24, 2020 7:10 pm

Mel Lindauer wrote:
Wed Jun 24, 2020 7:03 pm
Gill wrote:
Tue Jun 23, 2020 5:21 pm
Sandwich wrote:
Tue Jun 23, 2020 4:28 pm
Gill wrote:
Tue Jun 23, 2020 4:05 pm
.... I called Vanguard this afternoon in an attempt to roll it back. They were not at all up to speed on this and, after considerable time on hold, I was advised to call back in a few days so that it may be reviewed by their legal department. No rush I guess. We have until August 31.

Gill
Saw this post as I was getting ready to phone Vanguard. Will wait until the legal department irons out a process. To add, I'll be rolling back the whole 2020 RMD for my Mom as her POA, which includes the amount withheld for federal income taxes and then she will receive a large income tax refund in 2021.

May consider doing a 2020 ROTH conversion of some of that RMD after reviewing her tax situation.
I should have added, I first tried to do it online but it wouldn’t accept the transaction and told me to call. As outlined above, calling was also unsuccessful.
Gill
Good news! I was able to roll back my wife's Jan. RMD this evening via a Vanguard Flagship rep. He said they can do it even while their legal dept. checks the language to make sure they're doing it right. And he coded it as a rollover.

Since I felt confident that it was, indeed, legal, I went ahead and rolled it back (I have trading authority).
Thanks, Mel. I’ll give it a try again tomorrow. Sure is nice to keep those RMD’s out of your tax return for 2020!
Gill
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Re: IRS broadens rollover options for 2020 RMD distributions

Post by Mel Lindauer » Wed Jun 24, 2020 7:12 pm

Gill wrote:
Wed Jun 24, 2020 7:10 pm
Mel Lindauer wrote:
Wed Jun 24, 2020 7:03 pm
Gill wrote:
Tue Jun 23, 2020 5:21 pm
Sandwich wrote:
Tue Jun 23, 2020 4:28 pm
Gill wrote:
Tue Jun 23, 2020 4:05 pm
.... I called Vanguard this afternoon in an attempt to roll it back. They were not at all up to speed on this and, after considerable time on hold, I was advised to call back in a few days so that it may be reviewed by their legal department. No rush I guess. We have until August 31.

Gill
Saw this post as I was getting ready to phone Vanguard. Will wait until the legal department irons out a process. To add, I'll be rolling back the whole 2020 RMD for my Mom as her POA, which includes the amount withheld for federal income taxes and then she will receive a large income tax refund in 2021.

May consider doing a 2020 ROTH conversion of some of that RMD after reviewing her tax situation.
I should have added, I first tried to do it online but it wouldn’t accept the transaction and told me to call. As outlined above, calling was also unsuccessful.
Gill
Good news! I was able to roll back my wife's Jan. RMD this evening via a Vanguard Flagship rep. He said they can do it even while their legal dept. checks the language to make sure they're doing it right. And he coded it as a rollover.

Since I felt confident that it was, indeed, legal, I went ahead and rolled it back (I have trading authority).
Thanks, Mel. I’ll give it a try again tomorrow. Sure is nice to keep those RMD’s out of your tax return for 2020!
Gill
Yep. Postpone the pain! :happy
Best Regards - Mel | | Semper Fi

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Re: IRS broadens rollover options for 2020 RMD distributions

Post by WoodSpinner » Wed Jun 24, 2020 10:29 pm

All,

I read the IRS document and am a bit lost....

In January, I took an RMD payment + a bit extra (about $500) from an Inherited IRA from my Mother. She passed in 2016 and I have been taking RMDs since 2017.

Am I correct that I can choose to roll the entire distribution back into the Inherited IRA?

Or am I only allowed to roll back the RMD portion itself.

Thanks in advance!

WoodSpinner

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Re: IRS broadens rollover options for 2020 RMD distributions

Post by Mel Lindauer » Thu Jun 25, 2020 12:10 am

WoodSpinner wrote:
Wed Jun 24, 2020 10:29 pm
All,

I read the IRS document and am a bit lost....

In January, I took an RMD payment + a bit extra (about $500) from an Inherited IRA from my Mother. She passed in 2016 and I have been taking RMDs since 2017.

Am I correct that I can choose to roll the entire distribution back into the Inherited IRA?

Or am I only allowed to roll back the RMD portion itself.

Thanks in advance!

WoodSpinner
I'm not a lawyer, but if it were me, I wouldn't risk it without a solid legal opinion, preferably from the IRS. I'd just roll back the RMD amount and pay tax on the $500.
Best Regards - Mel | | Semper Fi

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All 2020 IRA RMD's may be returned

Post by Seasonal » Thu Jun 25, 2020 6:24 am

[Thread merged into here, see below. --admin LadyGeek]

The IRS announced on June 23 "that anyone who already took a required minimum distribution (RMD) in 2020 from certain retirement accounts now has the opportunity to roll those funds back into a retirement account following the CARES Act RMD waiver for 2020.

"In addition to the rollover opportunity, an IRA owner or beneficiary who has already received a distribution from an IRA of an amount that would have been an RMD in 2020 can repay the distribution to the IRA by August 31, 2020. The notice provides that this repayment is not subject to the one rollover per 12-month period limitation and the restriction on rollovers for inherited IRAs."

https://www.irs.gov/newsroom/irs-announ ... -cares-act
Last edited by Seasonal on Thu Jun 25, 2020 7:37 am, edited 2 times in total.

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Re: RMDs May Not Be Required for 2020

Post by LadyGeek » Thu Jun 25, 2020 7:36 am

^^^ I had moved your thread into RMDs May Not Be Required for 2020, but this is a major expansion of the previous waiver of RMDs and should probably be in its own thread.

(Thanks for notifying the moderators about the move.)
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Re: All 2020 IRA RMD's may be returned

Post by golfer292 » Thu Jun 25, 2020 8:43 am

Seasonal wrote:
Thu Jun 25, 2020 6:24 am
The IRS announced on June 23 "that anyone who already took a required minimum distribution (RMD) in 2020 from certain retirement accounts now has the opportunity to roll those funds back into a retirement account following the CARES Act RMD waiver for 2020.

"In addition to the rollover opportunity, an IRA owner or beneficiary who has already received a distribution from an IRA of an amount that would have been an RMD in 2020 can repay the distribution to the IRA by August 31, 2020. The notice provides that this repayment is not subject to the one rollover per 12-month period limitation and the restriction on rollovers for inherited IRAs."

https://www.irs.gov/newsroom/irs-announ ... -cares-act
Is there a requirement that the person receiving the distribution or a family member suffered from Covid-19 to qualify for returning the distribution? I took my 2020 distribution in January 2020. I have not had any detrimental effect form Covid-19. I took the distribution from my traditional rollover IRA at Fidelity. A Fidelity rep told me in April I am not eligible to return the distribution.

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Re: All 2020 IRA RMD's may be returned

Post by Alan S. » Thu Jun 25, 2020 8:49 am

The original and longer thread for 2020-51 is this: viewtopic.php?f=2&t=318399

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Re: All 2020 IRA RMD's may be returned

Post by galawdawg » Thu Jun 25, 2020 8:53 am

golfer292 wrote:
Thu Jun 25, 2020 8:43 am
Seasonal wrote:
Thu Jun 25, 2020 6:24 am
The IRS announced on June 23 "that anyone who already took a required minimum distribution (RMD) in 2020 from certain retirement accounts now has the opportunity to roll those funds back into a retirement account following the CARES Act RMD waiver for 2020.

"In addition to the rollover opportunity, an IRA owner or beneficiary who has already received a distribution from an IRA of an amount that would have been an RMD in 2020 can repay the distribution to the IRA by August 31, 2020. The notice provides that this repayment is not subject to the one rollover per 12-month period limitation and the restriction on rollovers for inherited IRAs."

https://www.irs.gov/newsroom/irs-announ ... -cares-act
Is there a requirement that the person receiving the distribution or a family member suffered from Covid-19 to qualify for returning the distribution? I took my 2020 distribution in January 2020. I have not had any detrimental effect form Covid-19. I took the distribution from my traditional rollover IRA at Fidelity. A Fidelity rep told me in April I am not eligible to return the distribution.
The answer is in the announcement from the IRS that the OP linked in their post. Here is the text:
WASHINGTON — The Internal Revenue Service today announced that anyone who already took a required minimum distribution (RMD) in 2020 from certain retirement accounts now has the opportunity to roll those funds back into a retirement account following the CARES Act RMD waiver for 2020.

The 60-day rollover period for any RMDs already taken this year has been extended to August 31, 2020, to give taxpayers time to take advantage of this opportunity.

The IRS described this change in Notice 2020-51 (PDF), released today. The Notice also answers questions regarding the waiver of RMDs for 2020 under the Coronavirus Aid, Relief, and Economic Security Act, known as the CARES Act.

The CARES Act enabled any taxpayer with an RMD due in 2020 from a defined-contribution retirement plan, including a 401(k) or 403(b) plan, or an IRA, to skip those RMDs this year. This includes anyone who turned age 70 1/2 in 2019 and would have had to take the first RMD by April 1, 2020. This waiver does not apply to defined-benefit plans.

In addition to the rollover opportunity, an IRA owner or beneficiary who has already received a distribution from an IRA of an amount that would have been an RMD in 2020 can repay the distribution to the IRA by August 31, 2020. The notice provides that this repayment is not subject to the one rollover per 12-month period limitation and the restriction on rollovers for inherited IRAs.

The notice provides two sample amendments that employers may adopt to give plan participants and beneficiaries whose RMDs are waived a choice as to whether or not to receive the waived RMD.
Here is the actual Guidance on Waiver of 2020 Required Minimum Distributions: https://www.irs.gov/pub/irs-drop/n-20-51.pdf

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Re: IRS broadens rollover options for 2020 RMD distributions

Post by Seasonal » Thu Jun 25, 2020 8:57 am

A relative died earlier this year after taking a few RMDs from his IRA in 2020. His widow is about to send in paperwork to assume his IRA.

Can his 2020 RMDs be rolled back into his IRA?

Will her assuming the IRA make this more complicated so that she should wait? In other words, can she roll them back after assuming his IRA?

From Woodspiner's post and Mel's reply it looks like this should work, but I would like to make sure.

Vanguard this morning recommended consulting a tax advisor and does not yet have a position on the question.

BTW, the IRS announcement summarizing the new options is at https://www.irs.gov/newsroom/irs-announ ... -cares-act

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Re: All 2020 IRA RMD's may be returned

Post by Alan S. » Thu Jun 25, 2020 9:11 am

golfer292 wrote:
Thu Jun 25, 2020 8:43 am
Seasonal wrote:
Thu Jun 25, 2020 6:24 am
The IRS announced on June 23 "that anyone who already took a required minimum distribution (RMD) in 2020 from certain retirement accounts now has the opportunity to roll those funds back into a retirement account following the CARES Act RMD waiver for 2020.

"In addition to the rollover opportunity, an IRA owner or beneficiary who has already received a distribution from an IRA of an amount that would have been an RMD in 2020 can repay the distribution to the IRA by August 31, 2020. The notice provides that this repayment is not subject to the one rollover per 12-month period limitation and the restriction on rollovers for inherited IRAs."

https://www.irs.gov/newsroom/irs-announ ... -cares-act
Is there a requirement that the person receiving the distribution or a family member suffered from Covid-19 to qualify for returning the distribution? I took my 2020 distribution in January 2020. I have not had any detrimental effect form Covid-19. I took the distribution from my traditional rollover IRA at Fidelity. A Fidelity rep told me in April I am not eligible to return the distribution.
No. This Notice addresses rollover relief for RMDs and is not Covid related. Therefore, you have until 8/31 to roll your January distribution back to the distributing IRA account (must be same account). The one rollover limitation is disregarded for rollovers under this Notice. If any withholding was taken from your January distribution, you can replace it using other funds to make the rollover complete. You can also retain any portion of the distribution you want and roll back only the portion you do not need or wish to be taxed on.

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Re: IRS broadens rollover options for 2020 RMD distributions

Post by Alan S. » Thu Jun 25, 2020 9:30 am

Seasonal wrote:
Thu Jun 25, 2020 8:57 am
A relative died earlier this year after taking a few RMDs from his IRA in 2020. His widow is about to send in paperwork to assume his IRA.

Can his 2020 RMDs be rolled back into his IRA?

Will her assuming the IRA make this more complicated so that she should wait? In other words, can she roll them back after assuming his IRA?

From Woodspiner's post and Mel's reply it looks like this should work, but I would like to make sure.

Vanguard this morning recommended consulting a tax advisor and does not yet have a position on the question.

BTW, the IRS announcement summarizing the new options is at https://www.irs.gov/newsroom/irs-announ ... -cares-act
This will be quite challenging as it will require threading the needle through various regulations.

There have been a few IRS PLRs allowing a surviving spouse beneficiary to roll back within 60 days a distribution made to the decedent. A recent PLR (2015 14020) however required the distribution which was legally an estate asset of the decedent to be transferred to an inherited IRA in the name of the estate. As executor the surviving spouse could then have the estate inherited IRA assigned to her. Quite a hassle.

Now tack on Notice 2020-51 to the above. This notice requires that these 8/31 deadline rollovers be made ONLY to the distributing IRA account. Therefore, it might be easier to attempt to have the current inherited IRA custodian accept the rollover prior to electing ownership of the account. The custodian will probably be uncomfortable attempting to mesh prior letter rulings with the Notice, but if the amount justifies it, then it is worth pursuing.

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Re: IRS broadens rollover options for 2020 RMD distributions

Post by bsteiner » Thu Jun 25, 2020 10:03 am

Alan S. wrote:
Thu Jun 25, 2020 9:30 am
... A recent PLR (2015 14020) however required the distribution which was legally an estate asset of the decedent to be transferred to an inherited IRA in the name of the estate. As executor the surviving spouse could then have the estate inherited IRA assigned to her. ...
I obtained that ruling: https://www.irs.gov/pub/irs-wd/201514020.pdf .

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Re: All 2020 IRA RMD's may be returned

Post by bsteiner » Thu Jun 25, 2020 10:05 am

Alan S. wrote:
Thu Jun 25, 2020 8:49 am
The original and longer thread for 2020-51 is this: viewtopic.php?f=2&t=318399
Is there a way to merge this one into the other one?

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Re: IRS broadens rollover options for 2020 RMD distributions

Post by Seasonal » Thu Jun 25, 2020 10:31 am

Alan S. wrote:
Thu Jun 25, 2020 9:30 am
Seasonal wrote:
Thu Jun 25, 2020 8:57 am
A relative died earlier this year after taking a few RMDs from his IRA in 2020. His widow is about to send in paperwork to assume his IRA.

Can his 2020 RMDs be rolled back into his IRA?

Will her assuming the IRA make this more complicated so that she should wait? In other words, can she roll them back after assuming his IRA?

From Woodspiner's post and Mel's reply it looks like this should work, but I would like to make sure.

Vanguard this morning recommended consulting a tax advisor and does not yet have a position on the question.

BTW, the IRS announcement summarizing the new options is at https://www.irs.gov/newsroom/irs-announ ... -cares-act
This will be quite challenging as it will require threading the needle through various regulations.

There have been a few IRS PLRs allowing a surviving spouse beneficiary to roll back within 60 days a distribution made to the decedent. A recent PLR (2015 14020) however required the distribution which was legally an estate asset of the decedent to be transferred to an inherited IRA in the name of the estate. As executor the surviving spouse could then have the estate inherited IRA assigned to her. Quite a hassle.

Now tack on Notice 2020-51 to the above. This notice requires that these 8/31 deadline rollovers be made ONLY to the distributing IRA account. Therefore, it might be easier to attempt to have the current inherited IRA custodian accept the rollover prior to electing ownership of the account. The custodian will probably be uncomfortable attempting to mesh prior letter rulings with the Notice, but if the amount justifies it, then it is worth pursuing.
These RMDs were made in January, February and March. The March distribution was rolled back in early April. The distributions were made to a JTWROS account of the decedent and his wife.

It sounds as if the wife should wait before assuming (his IRA will be transferred into her IRA so that she can take RMDs based on her longer life expectancy). It also sounds as if it is ultimately Vanguard's decision to accept the return/rollover. Is that correct?

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Re: All 2020 IRA RMD's may be returned

Post by LadyGeek » Thu Jun 25, 2020 12:16 pm

bsteiner wrote:
Thu Jun 25, 2020 10:05 am
Alan S. wrote:
Thu Jun 25, 2020 8:49 am
The original and longer thread for 2020-51 is this: viewtopic.php?f=2&t=318399
Is there a way to merge this one into the other one?
Sure. I have merged Seasonal's thread into the original discussion.

Thanks to the member who reported the post, as well as a member who PM'd me.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

Sandwich
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Re: IRS broadens rollover options for 2020 RMD distributions

Post by Sandwich » Thu Jun 25, 2020 12:20 pm

I talked with a Vanguard Retirement Specialist today and asked if the RMD could be "returned / rolled over" from taxable brokerage account back into the brokerage IRA account.

I was informed that this process can not be done "directly" from a Vanguard account and that the funds must come from a "non-Vanguard" account.

Therefore, I am doing the following as guided by the Vanguard Rep :

1. Doing a withdrawal "Fund express redemption" from the taxable brokerage account (Prime Money Market Fund) to the linked local bank account. Amount will be a rounded figure of the entire RMD (including amount withheld for taxes).
2. Wait a few days until the money clears and is available at the local bank.
3. Phone Vanguard again and request a "rollover contribution" of funds from the local bank account to the Vanguard IRA brokerage account in the amount of the RMD. Will request that the rollover contribution be invested in the Prime MMF.

after "Rollover" complete, intend to do a ROTH Conversion, equal to the amount of the RMD, and then eventually move funds from Prime MMF to other funds within the ROTH IRA account.

Alan S.
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Re: IRS broadens rollover options for 2020 RMD distributions

Post by Alan S. » Thu Jun 25, 2020 2:03 pm

FYI-
When 2020-51 was released, I was surprised that the IRS was able to offer some aspects of this relief, since I understood they did not have such authority. One example is the rollover of a beneficiary RMD when such distributions are never rollover eligible.

As it turns out, much of this IS outside their authority. It's all good news this time, but what about next time? Here is today's paragraph from Michael Kitces' blog:
Ultimately, the new guidance just released by the IRS provides a fair and favorable outcome for people who took their RMDs earlier this year, as those individuals should not be penalized for being proactive and complying with the RMD rules early during the year. However, this is an unprecedented and potentially troubling move by the IRS, given that they do not actually have the legal authority to make this change (it is technically the job of Congress to create and amend laws). The IRS’s action can arguably be interpreted as circumventing well-defined statutes prescribed by the Tax Code, Tax Court decisions, and its own long-standing guidance via Private Letter Rulings (PLRs). While it’s unlikely that anyone will take issue with the IRS’ attempt to be fair and equitable, there’s little question that they seriously stretched their legal authority when issuing this Notice, which may set a troubling precedent moving forward.

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Re: IRS broadens rollover options for 2020 RMD distributions

Post by Alan S. » Fri Jun 26, 2020 4:33 pm

Seasonal wrote:
Thu Jun 25, 2020 10:31 am
Alan S. wrote:
Thu Jun 25, 2020 9:30 am
Seasonal wrote:
Thu Jun 25, 2020 8:57 am
A relative died earlier this year after taking a few RMDs from his IRA in 2020. His widow is about to send in paperwork to assume his IRA.

Can his 2020 RMDs be rolled back into his IRA?

Will her assuming the IRA make this more complicated so that she should wait? In other words, can she roll them back after assuming his IRA?

From Woodspiner's post and Mel's reply it looks like this should work, but I would like to make sure.

Vanguard this morning recommended consulting a tax advisor and does not yet have a position on the question.

BTW, the IRS announcement summarizing the new options is at https://www.irs.gov/newsroom/irs-announ ... -cares-act
This will be quite challenging as it will require threading the needle through various regulations.

There have been a few IRS PLRs allowing a surviving spouse beneficiary to roll back within 60 days a distribution made to the decedent. A recent PLR (2015 14020) however required the distribution which was legally an estate asset of the decedent to be transferred to an inherited IRA in the name of the estate. As executor the surviving spouse could then have the estate inherited IRA assigned to her. Quite a hassle.

Now tack on Notice 2020-51 to the above. This notice requires that these 8/31 deadline rollovers be made ONLY to the distributing IRA account. Therefore, it might be easier to attempt to have the current inherited IRA custodian accept the rollover prior to electing ownership of the account. The custodian will probably be uncomfortable attempting to mesh prior letter rulings with the Notice, but if the amount justifies it, then it is worth pursuing.
These RMDs were made in January, February and March. The March distribution was rolled back in early April. The distributions were made to a JTWROS account of the decedent and his wife.

It sounds as if the wife should wait before assuming (his IRA will be transferred into her IRA so that she can take RMDs based on her longer life expectancy). It also sounds as if it is ultimately Vanguard's decision to accept the return/rollover. Is that correct?
If she wants to pursue this, she should wait before assuming ownership until any potential rollover is approved and completed. If she assumes ownership by 12/31/2021 any 2021 RMD will be based on her owning the IRA the entire year, therefore the Uniform Table will apply.

Initially, the custodian (VG) will make a decision whether to accept prior PLRs allowing the surviving spouse to roll this money back, but technically any PLR only applies to the applicant. VG and most custodians will probably be inclined to deny acceptance of the rollover and ask the surviving spouse to pursue her own PLR. That would cost her at least 20k including legal costs, and since the outcome is uncertain, this would probably not be a good use of her time and money. Therefore, if VG declines (and I expect they will), she should probably drop this effort, and proceed with assuming the inherited IRA.

stlrick
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Re: IRS broadens rollover options for 2020 RMD distributions

Post by stlrick » Fri Jun 26, 2020 5:04 pm

Very good discussion of this over at Michael Kitces' blog:

https://www.kitces.com/blog/irs-notice- ... precedent/

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laserquest
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Re: IRS broadens rollover options for 2020 RMD distributions

Post by laserquest » Fri Jun 26, 2020 5:07 pm

After I read this thread and a related article on Forbes, I called Vanguard to ask that my 2020 inherited IRA distribution be rolled back. At first the employee didn't think I could do it, but I mentioned that the IRS updated its policy recently. I was put on hold for a little while and when the representative returned, I was told that Vanguard is working on this and to watch my email for an update. I was told I will be able to return the distribution I took earlier this year. Vanguard needs some time to modify its system to allow a contribution to an inherited IRA. Ordinarily, that is not permitted. I hope this good news will benefit others!

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Re: IRS broadens rollover options for 2020 RMD distributions

Post by barefootjan » Fri Jun 26, 2020 5:08 pm

laserquest wrote:
Fri Jun 26, 2020 5:07 pm
After I read this thread and a related article on Forbes, I called Vanguard to ask that my 2020 inherited IRA distribution be rolled back. At first the employee didn't think I could do it, but I mentioned that the IRS updated its policy recently. I was put on hold for a little while and when the representative returned, I was told that Vanguard is working on this and to watch my email for an update. I was told I will be able to return the distribution I took earlier this year. Vanguard needs some time to modify its system to allow a contribution to an inherited IRA. Ordinarily, that is not permitted. I hope this good news will benefit others!
Good to know! Thank you!

Seasonal
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Re: IRS broadens rollover options for 2020 RMD distributions

Post by Seasonal » Fri Jun 26, 2020 5:21 pm

Alan S. wrote:
Fri Jun 26, 2020 4:33 pm
If she wants to pursue this, she should wait before assuming ownership until any potential rollover is approved and completed. If she assumes ownership by 12/31/2021 any 2021 RMD will be based on her owning the IRA the entire year, therefore the Uniform Table will apply.

Initially, the custodian (VG) will make a decision whether to accept prior PLRs allowing the surviving spouse to roll this money back, but technically any PLR only applies to the applicant. VG and most custodians will probably be inclined to deny acceptance of the rollover and ask the surviving spouse to pursue her own PLR. That would cost her at least 20k including legal costs, and since the outcome is uncertain, this would probably not be a good use of her time and money. Therefore, if VG declines (and I expect they will), she should probably drop this effort, and proceed with assuming the inherited IRA.
The preliminary indication from Vanguard is that the withdrawals can be rolled back and that they are working on logistics. This seems consistent with what laserquest heard from VG.

Until VG has a definitive response, she is waiting. Seeking a PLR would not make sense.

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Re: IRS broadens rollover options for 2020 RMD distributions

Post by Alan S. » Fri Jun 26, 2020 6:03 pm

Seasonal wrote:
Fri Jun 26, 2020 5:21 pm
Alan S. wrote:
Fri Jun 26, 2020 4:33 pm
If she wants to pursue this, she should wait before assuming ownership until any potential rollover is approved and completed. If she assumes ownership by 12/31/2021 any 2021 RMD will be based on her owning the IRA the entire year, therefore the Uniform Table will apply.

Initially, the custodian (VG) will make a decision whether to accept prior PLRs allowing the surviving spouse to roll this money back, but technically any PLR only applies to the applicant. VG and most custodians will probably be inclined to deny acceptance of the rollover and ask the surviving spouse to pursue her own PLR. That would cost her at least 20k including legal costs, and since the outcome is uncertain, this would probably not be a good use of her time and money. Therefore, if VG declines (and I expect they will), she should probably drop this effort, and proceed with assuming the inherited IRA.
The preliminary indication from Vanguard is that the withdrawals can be rolled back and that they are working on logistics. This seems consistent with what laserquest heard from VG.

Until VG has a definitive response, she is waiting. Seeking a PLR would not make sense.
There isn't any question about rolling back an inherited IRA "would be" RMD taken by a beneficiary.

The challenge here is rolling back a distribution taken by a DECEDENT which has always been a challenge for years. Most custodians will not do it without a PLR secured by the current applicant, some will do it based on prior PLRs, and some custodians will outright decline it without even suggesting a PLR as a possibility.

Seasonal
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Re: IRS broadens rollover options for 2020 RMD distributions

Post by Seasonal » Fri Jun 26, 2020 6:29 pm

Alan S. wrote:
Fri Jun 26, 2020 6:03 pm
Seasonal wrote:
Fri Jun 26, 2020 5:21 pm
Alan S. wrote:
Fri Jun 26, 2020 4:33 pm
If she wants to pursue this, she should wait before assuming ownership until any potential rollover is approved and completed. If she assumes ownership by 12/31/2021 any 2021 RMD will be based on her owning the IRA the entire year, therefore the Uniform Table will apply.

Initially, the custodian (VG) will make a decision whether to accept prior PLRs allowing the surviving spouse to roll this money back, but technically any PLR only applies to the applicant. VG and most custodians will probably be inclined to deny acceptance of the rollover and ask the surviving spouse to pursue her own PLR. That would cost her at least 20k including legal costs, and since the outcome is uncertain, this would probably not be a good use of her time and money. Therefore, if VG declines (and I expect they will), she should probably drop this effort, and proceed with assuming the inherited IRA.
The preliminary indication from Vanguard is that the withdrawals can be rolled back and that they are working on logistics. This seems consistent with what laserquest heard from VG.

Until VG has a definitive response, she is waiting. Seeking a PLR would not make sense.
There isn't any question about rolling back an inherited IRA "would be" RMD taken by a beneficiary.

The challenge here is rolling back a distribution taken by a DECEDENT which has always been a challenge for years. Most custodians will not do it without a PLR secured by the current applicant, some will do it based on prior PLRs, and some custodians will outright decline it without even suggesting a PLR as a possibility.
It is quite possible Vanguard does not understand the situation, despite having possession of all of the facts and presumably being aware of the law and their own practices. The preliminary response was supposed to have originated with their IRA tax group. We shall see.

As you suggest, if they decline, she'll drop the effort.

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Re: IRS broadens rollover options for 2020 RMD distributions

Post by cowdogman » Sun Jun 28, 2020 9:21 am

laserquest wrote:
Fri Jun 26, 2020 5:07 pm
After I read this thread and a related article on Forbes, I called Vanguard to ask that my 2020 inherited IRA distribution be rolled back. At first the employee didn't think I could do it, but I mentioned that the IRS updated its policy recently. I was put on hold for a little while and when the representative returned, I was told that Vanguard is working on this and to watch my email for an update. I was told I will be able to return the distribution I took earlier this year. Vanguard needs some time to modify its system to allow a contribution to an inherited IRA. Ordinarily, that is not permitted. I hope this good news will benefit others!
Thanks. This is very helpful. I have a message into my Vanguard rep. I'll let you know if I hear anything.

Seasonal
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Re: IRS broadens rollover options for 2020 RMD distributions

Post by Seasonal » Mon Jun 29, 2020 10:24 am

Alan S. wrote:
Fri Jun 26, 2020 6:03 pm
The challenge here is rolling back a distribution taken by a DECEDENT which has always been a challenge for years. Most custodians will not do it without a PLR secured by the current applicant, some will do it based on prior PLRs, and some custodians will outright decline it without even suggesting a PLR as a possibility.
Vanguard says they will process rolling back the distribution into her IRA after she assumes the decedent's IRA into her IRA. They believe the tax issue is unclear, including due to the CARES Act, and recommend checking with a tax professional.

Is there any risk to rolling back the distribution? If so, would the risk be more than that it would get reversed?

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Re: IRS broadens rollover options for 2020 RMD distributions

Post by Alan S. » Mon Jun 29, 2020 11:42 am

Seasonal wrote:
Mon Jun 29, 2020 10:24 am
Alan S. wrote:
Fri Jun 26, 2020 6:03 pm
The challenge here is rolling back a distribution taken by a DECEDENT which has always been a challenge for years. Most custodians will not do it without a PLR secured by the current applicant, some will do it based on prior PLRs, and some custodians will outright decline it without even suggesting a PLR as a possibility.
Vanguard says they will process rolling back the distribution into her IRA after she assumes the decedent's IRA into her IRA. They believe the tax issue is unclear, including due to the CARES Act, and recommend checking with a tax professional.

Is there any risk to rolling back the distribution? If so, would the risk be more than that it would get reversed?
I don't know where VG is coming up with this. The Notice itself is very clear that the rollover must be made to the distributing IRA:
D. Permitted repayments of RMDs previously distributed from an IRA.
In the case of
an IRA owner or beneficiary who has already received a distribution of an amount that
would have been an RMD in 2020 but for section 2203 of the CARES Act or section 114
of the SECURE Act, the recipient may repay the distribution to the distributing IRA, even
if the repayment is made more than 60 days after the distribution, provided the
repayment is made no later than August 31, 2020. The repayment will be treated as a
rollover for purposes of § 408(d)(3) of the Code, but will not be treated as a rollover for
purposes of the one rollover per 12-month period limitation in § 408(d)(3)(B) and the
restriction on rollovers for non spousal beneficiaries in § 408(d)(3)(C).
The distributing IRA is the IRA account # for which the 1099R is issued. Once the surviving spouse submits the death Cert and beneficiary info, VG will transfer the balance to a new IRA beneficiary account under the spouse's SSN. If this has already been done, the beneficiary IRA is no longer the distributing IRA account. Assuming ownership is yet another step that could result in another IRA account, since VG may not wish to re title the beneficiary IRA as an owned IRA account.

The rollover contribution will generate a 5498 to offset the 1099R taxable distribution. The above notice suggests that the IRA account numbers should be the same. The IRS also has the ability to match the 5498 with the 1099R, but I doubt that they will or challenge this transaction if VG will process the rollovers. Worst case if the IRS rejects the rollover is that the distributions will be taxable, and an excess contribution will have to be processed to remove the funds from the spouse's new owned IRA account.

Again, the first hurdle is for VG to approve the rollover of decedent's distributions in the first place. That should be the largest hurdle since one that one is passed, Notice 2020-51 clearly allows waiver of the 60 days and the one rollover rule if the distributions are deposited by 8/31 into the "Distributing IRA". The second hurdle should be easier since VG still holds the distributing IRA even if it has a 0 balance and they could make the rollover contribution to it.

The challenge is finding a CSR who understands this and has the authority to approve it without the risk of the back room people reneging on the rollover for any possible number of reasons.

Has the original IRA already been re titled as a beneficiary IRA with the balance moved to a new account?

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Re: IRS broadens rollover options for 2020 RMD distributions

Post by Seasonal » Mon Jun 29, 2020 12:21 pm

Alan S. wrote:
Mon Jun 29, 2020 11:42 am
Has the original IRA already been re titled as a beneficiary IRA with the balance moved to a new account?
The mechanics are that the decedent's IRA will be moved into her existing IRA. They say that the decedent's IRA was frozen once they received notice of death and nothing can come in or out of that account, therefore returning the RMD must wait. They say they will not be able to process any funds into the old account, either now or when it has a zero balance.

Reportedly the advice comes from their "complex IRA team". She just sent in the paperwork, after hearing back from Vanguard.

If the worst case is that rolling back doesn't work, it seems worth trying even if the best they can do is put the money into her IRA after she assumes the decedent's IRA. On the other hand, if this is a red flag leading to an audit, then it may require rethinking.

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Re: IRS broadens rollover options for 2020 RMD distributions

Post by cowdogman » Mon Jun 29, 2020 1:01 pm

cowdogman wrote:
Sun Jun 28, 2020 9:21 am
laserquest wrote:
Fri Jun 26, 2020 5:07 pm
After I read this thread and a related article on Forbes, I called Vanguard to ask that my 2020 inherited IRA distribution be rolled back. At first the employee didn't think I could do it, but I mentioned that the IRS updated its policy recently. I was put on hold for a little while and when the representative returned, I was told that Vanguard is working on this and to watch my email for an update. I was told I will be able to return the distribution I took earlier this year. Vanguard needs some time to modify its system to allow a contribution to an inherited IRA. Ordinarily, that is not permitted. I hope this good news will benefit others!
Thanks. This is very helpful. I have a message into my Vanguard rep. I'll let you know if I hear anything.
My rep told me the same. Said he should be able to get back to me next week.

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Re: IRS broadens rollover options for 2020 RMD distributions

Post by Whakamole » Wed Jul 01, 2020 8:45 am

For those who have managed to get this done - what language are you using with customer service to get them to reverse the RMD?

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Re: IRS broadens rollover options for 2020 RMD distributions

Post by plover151 » Wed Jul 01, 2020 9:35 am

We have an account with Merrill Edge.
I called and they were familiar with the new IRS ruling and rolled back all 3 RMD's taken in January.
All was done on a recorded line.

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WoodSpinner
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Re: IRS broadens rollover options for 2020 RMD distributions

Post by WoodSpinner » Wed Jul 01, 2020 3:38 pm

WoodSpinner wrote:
Wed Jun 24, 2020 10:29 pm
All,

I read the IRS document and am a bit lost....

In January, I took an RMD payment + a bit extra (about $500) from an Inherited IRA from my Mother. She passed in 2016 and I have been taking RMDs since 2017.

Am I correct that I can choose to roll the entire distribution back into the Inherited IRA?

Or am I only allowed to roll back the RMD portion itself.

Thanks in advance!

WoodSpinner
*Update*

I successfully rolled back the RMD portion of the distribution back into the Inherited IRA at Merrill Edge. Took a couple of phone calls and UPSing a check, but it has been deposited as a Rollover.

Many thanks for the news!

I am going to increase my Roth Conversions for the year by Rollover amount which will be a much more effective use at the same tax cost.

WoodSpinner

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