Required Minimum Distribution Requirement
After a certain age, the beneficiaries of certain retirement accounts are required to withdraw money from their retirement accounts. That is because the IRS wants to collect tax on the income accumulated tax-free in these accounts. Before 2020, the required minimum distribution (RMD) applied to anyone over 701/2. Starting with 2020 the RMD beginning age is 72. If in 2019 you turned 701/2 you had until April 1st, 2020 to withdraw from your retirement account the 2019 distributions and normally you would have had until December 31st, 2020 to take out the 2020 RMD.
CARES Act Relief – 2020 RMDs Suspended
As part of the COVID-19 relief, the CARES Act suspended the 2020 RMD requirement. Thus anyone required to take RMDs in 2020 can skip them. The waiver applies to defined-contribution retirement accounts, such as: IRAs, SEP IRAs, 401(k), 403(b). The waiver does not apply to defined benefit plans. Roth IRAs are not subject to RMD rules and are unaffected by the waiver.
RMD Rollover Relief
What if you already took RMDs in 2020, prior to the enactment of the CARES act?
On June 23rd 2020 IRS announced rollover relief for RMDs from retirement accounts that were waived under the CARES Act.
Normally taxpayers are allowed to roll over only one distribution in a 12-month period and no later than 60th day following the day of receipt. In addition, an RMD can not to be rolled over.
But Notice 2020-51 extends the 60-day rollover period for any RMD already taken this year to August 31, 2020.
Retirement account owners who have already received distributions in 2020 now get an extended period until August 31st 2020 to repay such amounts back, without being subject to the one rollover per 12-month period limitation and the restriction on rollovers for inherited IRAs.
In addition, because the CARES Act allows you to skip RMDs for 2020, you might consider converting assets from a traditional IRA to a Roth IRA this year without first satisfying the typically required RMD.