The Cares Act Gave A Waiver For Taking Rmds For 2020 But Is That For 2020 Balances Rmds?

paoli2 | Jan 7, 2021 | 2,641 posts since 2011

I was looking up info on one of my brokerage's webpage and noticed a note saying the Cares Act give a waiver for taking RMDs for 2020. I am confused. Is the 2020 RMD the one we use the balance from on 12/30/19 and withdraw in 2020 or is it the one we withdraw in 2021 from the 2020 year end balance? Thanks for any advice. I cannot get the brokerage on the phone or I would ask them.

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Answers

MY2CENTSWORTH | Jan 7, 2021 | 437 posts since 2016

I believe that the RMD that the waiver pertained to was for the tax year 2020 using the balance from December 31, 2019.

CuriousDave | Jan 11, 2021 | 233 posts since 2018

That's correct. There is a situation though that IRS has not yet addressed involving people who turned 70 1/2 in 2019 and were required to start taking 2019 RMDs no later than April 1, 2020 (using FMVs as of 12/31/2019), but delayed doing so when the CARES Act gave a waiver for all "2020" distributions. It's not yet clear whether (and by when in 2021) such people still need to take the regular RMD that should have been taken by 4/1/2020, in addition to whatever RMDs they need to take in 2021 based on their 12/31/2020 balances.

MY2CENTSWORTH | Jan 12, 2021 | 437 posts since 2016

I think there were two different actions passed regarding age and RMD requirements. I believe that there was nothing carried forward from the SECURE ACT pertaining to the age requirements for RMD's. So, the lack of grandfathering applied both to the age and the distributions themselves. An individual who turned age 70 ½ in 2019 would have normally needed to take their initial RMD by 4/1/2020, and then would also have needed to take their 2020 RMD by 12/31/2020. However, the CARES Act stated, that there were no longer any RMD's necessary in the calendar year 2020. So, the individual who had turned 70 ½ in 2019 no longer had to take either their 2019 or their 2020 RMDs. Hopefully, this helps and everyone gets back on track with their RMD's in 2021.

Thankfully, I squeaked by all of these complicated and confusing issues for now, and have gained a couple of extra years before I have to take RMD's, but who knows whether or not anything will change further in the not too distant future. I haven't looked at the IRS website but I'm sure there is plenty of information pertaining to your specific situation available.

Ratesaver | Jan 8, 2021 | 187 posts since 2013

I stopped my IRA payment for 2020 that was to be issued on Dec. 31 ot 2020.. This one yr waiver on the cares act will not be resumed for 2021 as of now anyway.If you have received your 2020 rmd this past yr. 2020 then it is to late now.

paoli2 | Jan 8, 2021 | 2,641 posts since 2011

Thank you for your replies. I missed out on a good chance but sometimes personal problems have to take precedent over financial matters. I withdraw all RMDs early in the year too which is not the most prudent way to do it but it works for me. Much appreciation for the info and replies.

Choice | Jan 16, 2021 | 937 posts since 2020

Pauli2. I was looking around at new tax info and found the following...suggest you also look at Ed Scott’s ira site...I believe he has a form he recommends...good luck

"I (that blogger, not Choice) took my RMD early in January, well before the 60 day window required to reverse it. I have been told I need to take that income and there’s no way out of it.

"Notice 2020-23 allowed any RMD recipient who had received an RMD as early as February 1, 2020 to roll the money back in by July 15, 2020. Notice 2020-51 later modified these dates to allow 2020 recipients taken as early as 1/1/2020 to return it by August 31, 2020. This date may further be extended by the Senate with the AMORE Act given there was a lot of confusion regarding this RMD reversal.There may be an option (if not extended) to reclassify the RMD as a COVID-related distribution or loan and return the money without tax consequences, but there must be a COVID reason for the distribution. Alternatively, a letter to the IRS documenting erroneous advice/reliance, inability to correct it within the given timeframe, medical illness affected the taxpayer, etc could potentially work in excluding the RMD from taxable income and returning it in full. This would be a last resort provided with the filing though and the taxpayer’s actions would need to parallel the intent."

paoli2 | Jan 16, 2021 | 2,641 posts since 2011

Choice: I usually make my financial decisions for a reason and stick by them even if our gov decides to change things midstream. The RMD was already paid out for other sources by the time I could even have redone it. At our age, we can't afford to keep all our funds working for us. We have to use them especially for all those unexpected bills which can hope up when you reach a certain age. As soon as some CDs mature that I bought to use for this year's RMDs, I will be calling our brokerages and having them deposit the money to our local account to be used and I won't change my mine no matter what the gov comes up with (unless it's "an offer I really can't refuse". :)

GreenDream | Jan 18, 2021 | 358 posts since 2019

Good reply there paoli2. Since RMDs are usually mandatory, a lot of people in your age group factor that into their budgets and thus rely on that money (along with SS, annuities, pensions and any other income streams they may be fortunate enough to have going for them) for their daily living expenses. Nothing wrong with that.

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