Vanguard 2020 1099-R and Secure Act

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ScottyDog
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Vanguard 2020 1099-R and Secure Act

Post by ScottyDog »

Did an IRA distribution in 2020 and then returned in August per the Secure Act provisions...tax form received today does not reflect the return and VG says we need to do a form 8915E to advise IRS and their 1099 will not be corrected to show the return.
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arcticpineapplecorp.
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Re: Vanguard 2020 1099-R and Secure Act

Post by arcticpineapplecorp. »

looks right. just draft (https://www.irs.gov/pub/irs-dft/f8915e--dft.pdf) but line 18 would indicate repayments for IRAs (before filing 2020 tax return) and line 10 for other retirement plans (non IRA):

form:
https://www.irs.gov/pub/irs-dft/f8915e--dft.pdf
instructions:
https://www.irs.gov/pub/irs-dft/i8915e--dft.pdf
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Alan S.
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Re: Vanguard 2020 1099-R and Secure Act

Post by Alan S. »

ScottyDog wrote: Tue Jan 12, 2021 11:14 am Did an IRA distribution in 2020 and then returned in August per the Secure Act provisions...tax form received today does not reflect the return and VG says we need to do a form 8915E to advise IRS and their 1099 will not be corrected to show the return.
You need to define this distribution more clearly. Was it:
1) An amount that would have been your 2020 RMD had 2020 RMDs not been waived that could be rolled back through 8/31.
or
2) A corona virus related distribution (CRD) that you had to qualify for?

Only a CRD is reported on Form 8915 E, and if repaid within 3 years, the custodian must be informed that it is a CRD repayment.

As for custodian reporting, both situations result in a 1099R reporting the distribution, and a 5498 the following year to show either a rollover (would be RMD return) or CRD repayment.

Since you referred to August, you probably fall under 1) above.
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ScottyDog
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Re: Vanguard 2020 1099-R and Secure Act

Post by ScottyDog »

It was #1 example. So you say Form 8915E is not to be used?
jebmke
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Re: Vanguard 2020 1099-R and Secure Act

Post by jebmke »

ScottyDog wrote: Tue Jan 12, 2021 3:37 pm It was #1 example. So you say Form 8915E is not to be used?
I think you just process it as a rollover when you file your 2020 return.
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aristotelian
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Re: Vanguard 2020 1099-R and Secure Act

Post by aristotelian »

Sounds right. They made the distribution. I assume there is a process to record the return of distribution, similar to a rollover
Alan S.
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Re: Vanguard 2020 1099-R and Secure Act

Post by Alan S. »

ScottyDog wrote: Tue Jan 12, 2021 3:37 pm It was #1 example. So you say Form 8915E is not to be used?
Not for the return of a would be RMD.
Note that both of the listed scenarios above arose out of the CARES Act. The Secure Act was passed in late 2019 and had nothing to do with the Covid fallout.
clip651
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Re: Vanguard 2020 1099-R and Secure Act

Post by clip651 »

Alan S. wrote: Tue Jan 12, 2021 3:56 pm
ScottyDog wrote: Tue Jan 12, 2021 3:37 pm It was #1 example. So you say Form 8915E is not to be used?
Not for the return of a would be RMD.
So what is the proper procedure with the return of the RMD?

I handle RMDs for my parent (with appropriate permissions/authority to transact for them). Took RMD in January 2020, before we knew it wouldn't be required. Rolled it back to the same IRA account (via rollover) in August 2020. What forms should my parent be expecting to cover this scenario? Any tips on filing it properly?

cj
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ScottyDog
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Re: Vanguard 2020 1099-R and Secure Act

Post by ScottyDog »

I have a call in to VG to review with them this issue again, as I received the wrong answer.
You are correct in that 8915E has to do with a Covid issue, not just returning an RMD.
Seems like this issue is going to affect lots of customers with lots of calls to them asking what to do.
cas
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Re: Vanguard 2020 1099-R and Secure Act

Post by cas »

clip651 wrote: Tue Jan 12, 2021 4:27 pm
So what is the proper procedure with the return of the RMD?

I handle RMDs for my parent (with appropriate permissions/authority to transact for them). Took RMD in January 2020, before we knew it wouldn't be required. Rolled it back to the same IRA account (via rollover) in August 2020. What forms should my parent be expecting to cover this scenario? Any tips on filing it properly?

cj
I'm not a professional tax-preparer nor did I do this RMD roll-back manuever. With that caveat...

This IRS announcement says that the roll-back of the RMD is categorized as a 60-day rollover, with special lenient rules attached to the "60 day" requirement:
IR-2020-127, June 23, 2020

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 instructions for Form 1040, Lines 4a and 4b, cover how to report a 60-day rollover:
IRA Distributions

[. . .]

Exception 1. Enter the total distribution on line 4a if you rolled over part or all of the distribution from [. . . ]

- IRA (other than a Roth IRA) to a qualified plan or another IRA (other than a Roth IRA)

Also enter "Rollover" next to line 4b. If the total distribution was rolled over, enter -0- on line 4b. If the total distribution wasn't rolled over, enter the part not rolled over on line 4b unless Exception 2 applies to the part not rolled over. Generally, a rollover must be made within 60 days after the day you received the distribution. For more details on rollovers, see Pub. 590-A and Pub. 590-B.

If you rolled over the distribution into a qualified plan or you made the rollover in 2021, include a statement explaining what you did.
Also, this current boglehead's thread has discussion on how to report this in Turbotax. I assume other tax software will handle the situation in a similar way.: How to report RMD in Turbo Tax that was subsequently undone.

The IRS requires the custodian to report:
- the *distribution from an IRA* part of the 60-day rollover to be reported on Form 1099-R, sent to you and the IRS
- the *"rollover contribution" back to an IRA* part of the 60-day rollover to be reported on a Form 5498, to be sent to you and the IRS in May

The IRS computers will match up the 1099-R, the 5498, and what you claim on the Form 1040 Line 4a and 4b (that it was a 60 day rollover, so should not be taxed). So you'll want to keep your eye out for that Form 5498 in May and make sure that the return of the RMD is categorized as something like "Rollover Contribution."
Last edited by cas on Wed Jan 13, 2021 11:22 am, edited 1 time in total.
Topic Author
ScottyDog
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Re: Vanguard 2020 1099-R and Secure Act

Post by ScottyDog »

Yes...VG now tells me the 1099 is correct...no form 8915e is to be used...have tax preparer explain the return of $$ back to IRA.
cas
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Re: Vanguard 2020 1099-R and Secure Act

Post by cas »

ScottyDog wrote: Wed Jan 13, 2021 11:22 am Yes...VG now tells me the 1099 is correct...no form 8915e is to be used...have tax preparer explain the return of $$ back to IRA.
If you are going to use a tax preparer, make sure you are very precise in telling them exactly what you did:

- that you took an RMD of $x on [date]
- As allowed by the CARES act, you rolled back $y to the IRA on [date], which was by the CARES Act deadline of August 31,2020.
clip651
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Re: Vanguard 2020 1099-R and Secure Act

Post by clip651 »

cas wrote: Wed Jan 13, 2021 11:12 am
clip651 wrote: Tue Jan 12, 2021 4:27 pm
So what is the proper procedure with the return of the RMD?

I handle RMDs for my parent (with appropriate permissions/authority to transact for them). Took RMD in January 2020, before we knew it wouldn't be required. Rolled it back to the same IRA account (via rollover) in August 2020. What forms should my parent be expecting to cover this scenario? Any tips on filing it properly?

cj
I'm not a professional tax-preparer nor did I do this RMD roll-back manuever. With that caveat...
Thank you, cas. Very helpful.

cj
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