RMDs Are Suspended For 2020, What if I Already Took Mine?

The CARES Act includes a provision that suspends ALL required minimum distributions (RMDs) for 2020. Given the market downturn we experienced in the first quarter, the value of retirement accounts dropped significantly. However, RMDs are calculated based on the value as of 12/31 of the prior year (before the economy began to feel the effects of COVID-19). Suspending RMDs allows the retirement account to recover some of the losses, rather than distribute funds during a downturn.

Q: I took my RMD in January before the CARES Act was signed. Can I undo my RMD?

A: Yes. If you took an RMD from an IRA, 401(k), 403(b), 457(b), or Inherited IRA, you can recontribute the amount of the total distribution back into your account and avoid paying taxes on the distribution. However, you must replace the funds by August 31, 2020. If you had taxes withheld, you would want to include them in the amount you deposit into the IRA.

Q: I had taxes withheld on my distribution. How do I get those back?

A: Any funds that were withheld for taxes were already sent to the IRS. They will count toward your 2020 tax bill. If you overpaid, then you will receive the funds back as a refund after filing your 2020 tax return.

Q: I have an Inherited IRA. Does that change anything?

A: No. The same rules apply to Inherited IRAs.

Q: I turned 70 ½ in 2019 and decided to defer my 1st RMD to 2020. Am I required to take an RMD?

A: No. The suspension applies to all RMDs that would have been required in 2020. The IRS specifically addressed this situation and confirmed that no RMD is required.

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