Did you take your 2020 Required Minimum Distribution before hearing that you weren’t required to take it in 2020? The window for relief closes on August 31.
If you reached age 70 ½ before 2020 (now the age is 72), you are required to take a certain distribution from your qualified defined-contribution retirement account. This includes your IRA, 401(k) or 403(b). You are required to take this distribution each year based on the value of your account as of December 31 of the prior year, multiplied by a mortality factor. If you fail to take enough of a distribution by the end of the year, you face a substantial penalty.
Due to the pandemic, the CARES Act passed earlier this year suspended required minimum distributions for 2020. Some individuals may have taken a full or partial distribution before this announcement, and would not have taken it had they known it was not required. As a result, the IRS announced a limited opportunity to roll these distributions back into the accounts with no penalty, as long as the money is back into the account it was taken from by August 31, 2020. This rollover also will not count toward the one rollover per 12-month period limitation. Typically, these rollovers must occur within 60 days of when the funds are removed from the account, but the IRS recognized that some individuals took their distributions more than 60 before the announcement of the suspension of the 2020 Required Minimum Distribution.
See IRS Notice 2020-51 for more details.
