RMD Suspension question

[BOBOT]

So I took a small part of my 2020 RMD in February and had 10% withheld for Fed. tax. The rest I put into our taxable account. Now with the CARES act I understand that I may roll the money back into the IRA as long as I do it by July 15.

My question is this: if I decide to do this - I haven't decided yet -would I tell VG to put the whole amount back or just the 90% net of tax withholding? If the 10% I had withheld was sent to the Feds already how does that get handled?

 

[Aerides]

It's probably answered somewhere in here, as there are other folks asking that same question:

https://www.early-retirement.org/forums/f28/no-rmds-in-2020-a-102895.html

 

[pb4uski]

No idea on that but I don't understand why people would suspend RMDs and create a bigger tax torpedo rather than just do the RMD and pay the tax and reinvest the proceeds in the same ticker that it was before the RMD. If that ticker rebounds then you're in the same place that you would have been as if you left it in and you've paid less tax.

 

[Rex]

We did this for DM and we could because it was within 60 days of when she had first withdrawn the RMD this year. We were told it could be put back if it was within 60 days.

You reference a withdrawal in February. You may want to check w/VG regarding that 60 day requirement if it was early February. Or hurry otherwise.

This is good for her as we are always looking for ways to reduce her taxes.

 

[BOBOT]

We did this for DM and we could because it was within 60 days of when she had first withdrawn the RMD this year. We were told it could be put back if it was within 60 days.

You reference a withdrawal in February. You may want to check w/VG regarding that 60 day requirement if it was early February. Or hurry otherwise.

This is good for her as we are always looking for ways to reduce her taxes.

It used to be 60 days, but has been extended to 7/15 for withdrawals between 2/1 and 5/15.
https://www.morningstar.com/articles/978225/article

 

[kaneohe]

https://www.morningstar.com/articles/978225/the-411-on-rmds-for-2020

another link........I couldn't see the article w/o signing up for some free trial on the other link.

 

[kaneohe]

that didn't work either tho I saw the article originally:

https://www.google.com/search?q=rol...ome..69i57.26843j0j7&sourceid=chrome&ie=UTF-8

perhaps type in your version of this search and see what happens

 

[harley]

No idea on that but I don't understand why people would suspend RMDs and create a bigger tax torpedo rather than just do the RMD and pay the tax and reinvest the proceeds in the same ticker that it was before the RMD. If that ticker rebounds then you're in the same place that you would have been as if you left it in and you've paid less tax.

Why not suspend the RMD, then do a Roth conversion for the same amount (at least) and pay the same taxes you would have anyway? Other than that option I would agree with you.

 

[SecondCor521]

My question is this: if I decide to do this - I haven't decided yet -would I tell VG to put the whole amount back or just the 90% net of tax withholding? If the 10% I had withheld was sent to the Feds already how does that get handled?

It's up to you. You can rollover (put back) any amount between $0 and the full amount of your RMD. Any amount that you do not roll over will be reported on your tax return as a taxable distribution and will be taxed at ordinary income tax rates at the federal level, and probably at the state and local level as well.

The 10% withheld has already been sent to the IRS. You of course should report that withholding on your tax return next year to reduce your amount due or increase your refund by that amount.

Since money is fungible, if you put back the entire amount, then the IRS will treat it as though the money you took out and the money you put back are the same dollars, and the additional 10% of your other money that you add to the recontribution to make up for the withholding is the money that went to the IRS for your withholding. That's not actually what happened, but in effect it's the same thing.