The IRS this week issued Information Release 2020-187 to remind IRA owners and beneficiaries, as well as participants in workplace retirement arrangements, that they have until August 31 to return required minimum distributions (“RMDs”)received earlier this year and, thereby, avoid paying income tax on the distribution in 2020. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), enacted on March 27, 2020, provides that RMDs need not be made during 2020. A taxpayer who returns an unwanted RMD by August 31 can avoid paying income tax on that distribution, allowing the returned funds to be invested tax-free for another year. This opportunity applies to IRA owners and beneficiaries, including beneficiaries of “inherited” IRAs.
The CARES Act also expanded the ability of certain retirees and certain beneficiaries to withdraw or borrow from retirement arrangements under favorable terms.
For more information, please review the IRS website questions and answers at https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-answers
