No RMD's in 2020

[gerntz]

Part of stimulus bill:

"The one-year suspension of required distributions will help retirees, who would otherwise have been forced to base their minimum withdrawals for 2020 on their account balances as of Dec. 31, 2019, when the stock market was near record levels."

https://www.wsj.com/articles/retirees-get-relief-in-senate-coronavirus-stimulus-package-11585224800

I thus presume there's no such thing as QCD's for 2020 either. Maybe a bad presumption.

 

[friar1610]

Part of stimulus bill:

I thus presume there's no such thing as QCD's for 2020 either. Maybe a bad presumption.

I sure hope that's not true as I've already done a few. Not sure they could change it retroactively. I'll eagerly await any clarification as it will have an impact on giving for the remainder of the year.

 

[OldShooter]

I think the QCDs will be safe. They really aren't directly tied to RMDs anyway. Moe importantly, if they were killed the charities will scream loud enough that the QCDs will be reinstated in the inevitable errors and corrections bill.

At least I hope so.

 

[pb4uski]

I don't see why a one-year hiatus on RMDs would prevent one from doing QCD's.

 

[SecondCor521]

Part of stimulus bill:

"The one-year suspension of required distributions will help retirees, who would otherwise have been forced to base their minimum withdrawals for 2020 on their account balances as of Dec. 31, 2019, when the stock market was near record levels."

https://www.wsj.com/articles/retirees-get-relief-in-senate-coronavirus-stimulus-package-11585224800

I thus presume there's no such thing as QCD's for 2020 either. Maybe a bad presumption.

RMDs and QCDs are two different things. I believe RMDs are suspended for 2020 in the bill passed in the Senate this morning, but QCDs are not mentioned. Therefore it seems you could do QCDs in 2020. Consult your tax advisor, yadda yadda.

 

[youbet]

Part of stimulus bill:

"The one-year suspension of required distributions will help retirees, who would otherwise have been forced to base their minimum withdrawals for 2020 on their account balances as of Dec. 31, 2019, when the stock market was near record levels."

https://www.wsj.com/articles/retirees-get-relief-in-senate-coronavirus-stimulus-package-11585224800

I thus presume there's no such thing as QCD's for 2020 either. Maybe a bad presumption

.

Perhaps they're not banning RMD's for the year but rather just making them optional in some way? If you gave $1k via QCD's, that would still amout to a $1k RMD with no taxes because the income was offset by an equal QCD.

I really doubt they're going to outlaw RMD's for the year. And however they word it, I'll bet that tax free QCD's will be OK.

 

[The Cosmic Avenger]

Has anyone seen one way or the other whether this will apply to inherited IRAs also? I would assume so, as most people don't even think about those if they haven't had one, so my guess is that the legislation will apply to all RMDs.

 

[misanman]

If RMDs are suspended, how does this impact Roth conversions? Before, the RMDs had to come first, then you could convert above and beyond. If there is no RMD, are you free to convert from dollar 1?

 

[SecondCor521]

Has anyone seen one way or the other whether this will apply to inherited IRAs also? I would assume so, as most people don't even think about those if they haven't had one, so my guess is that the legislation will apply to all RMDs.

I believe it will.

The text of the bill that passed the Senate says RMDs don't apply to, among other things,

"an individual retirement plan"

Source: https://www.scribd.com/document/453273118/Cares-Act-Final-Text, page 168.

This phrase would seem to me to apply to all IRAs, whether traditional or Roth and would seem to include both originally owned IRAs and inherited IRAs.

Note that with the SECURE Act, the way that is written you have 10 years to withdraw the entire balance, so this coronavirus relief bill doesn't seem to apply to that scenario - you would not get an extra year.

But if you're someone who inherited an IRA from an owner who died in 2019 or earlier and are doing RMDs based on your lifetime, it would seem to apply to you and you could skip your RMD this year if you wanted to.

Consult your tax advisor, yadda yadda.

 

[SecondCor521]

Perhaps they're not banning RMD's for the year but rather just making them optional in some way? If you gave $1k via QCD's, that would still amout to a $1k RMD with no taxes because the income was offset by an equal QCD.

I really doubt they're going to outlaw RMD's for the year. And however they word it, I'll bet that tax free QCD's will be OK.

They're suspending RMDs. So withdrawals from IRAs would be optional. I haven't seen any language indicating that QCDs are suspended, so you can still do QCDs if you want (provided you comply with the QCD rules, of course).

If RMDs are suspended, how does this impact Roth conversions? Before, the RMDs had to come first, then you could convert above and beyond. If there is no RMD, are you free to convert from dollar 1?

It would seem so. (I'm not sure if, technically speaking, the RMDs ever had to come first, although I've heard people say that.)

 

[The Cosmic Avenger]

Note that with the SECURE Act, the way that is written you have 10 years to withdraw the entire balance, so this coronavirus relief bill doesn't seem to apply to that scenario - you would not get an extra year.

But if you're someone who inherited an IRA from an owner who died in 2019 or earlier and are doing RMDs based on your lifetime, it would seem to apply to you and you could skip your RMD this year if you wanted to.

Consult your tax advisor, yadda yadda.

Oh, yes, mine are (unfortunately) from a few years ago, when my parents passed away. (I actually took the smaller one already because I wanted to fund my kid's Roth IRA, as I've mentioned in other threads, by matching their earned income. But I'd love to delay the larger one now.)

 

[SecondCor521]

Oh, yes, mine are (unfortunately) from a few years ago, when my parents passed away. (I actually took the smaller one already because I wanted to fund my kid's Roth IRA, as I've mentioned in other threads, by matching their earned income. But I'd love to delay the larger one now.)

Yeah, then I think it would apply to you.

Also, you're probably aware that the IRS is in the process of updating the RMD tables. It'll be a slight change, but you'll be able to take out less because they're increasing the divisors in the RMD tables.

Note that if you do switch over to the new tables, you have to go through a sort of convoluted process to figure out your new divisor. Basically you figure out what your original divisor would have been on the IRA using the new table, then subtract one for the appropriate number of years to get your current year divisor.

The new tables are published but not through the regulatory process yet. They'll probably be in place for 2021 RMDs.

 

[BarbWire]

If RMDs are suspended, and if you've already taken part of the 2020 RMD, can you stop? Or is it an "all or nothing" proposition?

I take 1/12th of my RMD from an inherited IRA near the end of each month. At the beginning of the year I sold holdings to cover the RMDs, and put the proceeds in a MMF within the iIRA, and each month distribute cash from the MMF to my brokerage account.

The end-of-March transaction is already in motion so I would suspend RMDs for the remaining 9/12 of the year, correct?

 

[SecondCor521]

If RMDs are suspended, and if you've already taken part of the 2020 RMD, can you stop? Or is it an "all or nothing" proposition?

I take 1/12th of my RMD from an inherited IRA near the end of each month. At the beginning of the year I sold holdings to cover the RMDs, and put the proceeds in a MMF within the iIRA, and each month distribute cash from the MMF to my brokerage account.

The end-of-March transaction is already in motion so I would suspend RMDs for the remaining 9/12 of the year, correct?

You certainly can if you want to. It is not an all or nothing proposition.

You may want to wait until the bill becomes law (probably this weekend).

You didn't ask, but you can also buy back your holdings within your IRA with the MMF cash if that makes sense in the context of your financial plan.

 

[Another Reader]

If RMDs are suspended, and if you've already taken part of the 2020 RMD, can you stop? Or is it an "all or nothing" proposition?

I take 1/12th of my RMD from an inherited IRA near the end of each month. At the beginning of the year I sold holdings to cover the RMDs, and put the proceeds in a MMF within the iIRA, and each month distribute cash from the MMF to my brokerage account.

The end-of-March transaction is already in motion so I would suspend RMDs for the remaining 9/12 of the year, correct?

That is my plan. I suspect you can't put back the money you already took out.

 

[BOBOT]

Not sure if this has been addressed: if you have already made withdrawals this year will they be taxed?

 

[euro]

Not sure if this has been addressed: if you have already made withdrawals this year will they be taxed?

For sure! Unless you "put it back" as Another Reader suggests above (I don't know how you would do that or if it is even possible, but I'm quite confident that if you DO take the distribution, you WILL owe taxes.

 

[cathy63]

That is my plan. I suspect you can't put back the money you already took out.

You have 60 days to return a distribution to your IRA without having it taxed. You have to return the full amount, including any tax that was withheld at the time of the original withdrawal. For tax purposes, this is the same as a rollover, even if it goes back into the same account.

 

[Amethyst]

If you don't return it quickly, it will be taxed, because it is considered income. And income tax revenue is gonna be scarce on the ground, in a year with 30% unemployment.

 

[Another Reader]

You have 60 days to return a distribution to your IRA without having it taxed. You have to return the full amount, including any tax that was withheld at the time of the original withdrawal. For tax purposes, this is the same as a rollover, even if it goes back into the same account.

Does that apply to inherited IRA's? Because I'm going to do this if it does.

 

[SecondCor521]

Does that apply to inherited IRA's? Because I'm going to do this if it does.

It would seem to apply. I don't know of any IRS rule that it wouldn't apply. However, your IRA custodian may not be set up to accept a rollover into an inherited IRA, as that is something that normally would not happen.

It is worth noting that rollovers of the kind described here are limited to one per 12 month period, so if you choose to do this you would need to make a single re-deposit and that rollover could constrain your ability to do the same thing over the next twelve months. You'd also be prevented from doing this if you already had done a rollover of this type in the last 12 months. See https://www.irs.gov/retirement-plans/ira-one-rollover-per-year-rule.

Note that this would also cause problems for someone who was taking RMDs from multiple inherited IRAs, although those people are probably pretty rare.

 

[Another Reader]

If Fidelity balks, perhaps the Schwab folks will be more accommodating. By the time the bill is signed and becomes law, it will be too late for the first two monthly distributions. But March and April can go back. and I can cancel the remaining distributions.

Of course, if all my tenants go on a rent strike, this could be a moot point. So far, so good.

 

[ITTN]

I already completed my RMD, it’s was 30K. Can I return the 30K to my TIRA and then take out 30K as a Roth Conversion?

 

[The Cosmic Avenger]

Hm. I've got maybe 2 or 3 days to put back the smaller RMD, and I had Fidelity withhold tax on it, I'm not sure how that would work...I might just leave it, and be glad I can (probably) forego the larger RMD this year. It would be nice to roll that one back and reinvest it now, though.

 

[CRLLS]

Hm. I've got maybe 2 or 3 days to put back the smaller RMD, and I had Fidelity withhold tax on it, I'm not sure how that would work...I might just leave it, and be glad I can (probably) forego the larger RMD this year. It would be nice to roll that one back and reinvest it now, though.

I'd call Fidelity and tell them what you want to do. Their customer service should be able to do it for you.