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IRS Provides Clarity: Further Relief for Retirement Distributions Thumbnail

IRS Provides Clarity: Further Relief for Retirement Distributions

Tax Planning

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) passed in late March provided considerable relief to taxpayers who did not want to take required minimum distributions (RMDs) from a retirement account. The Act suspended RMDs for 2020 and allowed taxpayers to repay certain previously taken retirement distributions. On June 23, the IRS issued Notice 2020-51 providing greater clarity and further relief for retirement distributions.



Before IRS Notice

After IRS Notice

Repayment Deadline for Previously Completed Retirement Distribution 

Later of 60 days or July 15, 2020 Later of 60 days or August 31, 2020

Eligibility for Repayment

For distributions completed between February 1, 2020 – May 15, 2020

(Not applicable for defined benefit distributions)

For already-completed 2020 distributions

(Not applicable for defined benefit distributions)

Once-per-12 Months Rollover Restriction

Prior guidance generally held that only one retirement distribution could be repaid within a 12-month period.

Not applicable, per the most recent IRS notice.

Taxpayers who had previously spread retirement distributions over several months may repay the entire balance by the August 31 deadline.

Repayment of Distributions from an Inherited Retirement Account

No guidance Ordinarily, non-spouse beneficiaries cannot repay such distributions, however, the most recent IRS notice allows beneficiaries to repay retirement distributions by the August 31 deadline

Additional Notes for Employers

No guidance Per the IRS, “the notice provides two sample amendments that employers may adopt to give plan participants and beneficiaries whose RMDs are waived a choice as to
whether or not to receive the waived RMD”


Taxpayers who already completed 2020 retirement distributions but, in hindsight, no longer need them may consider repaying the distribution by the August 31 deadline to avoid taxes that would ordinarily be due for such distributions.

Additional Resources:

IRS Announces Rollover Relief for Required Minimum Distributions from Retirement Accounts that were Waived under the CARES Act (June 23, 2020)

https://www.irs.gov/newsroom/irs-announces-rollover-relief-for-required-minimum-distributions-from-retirement-accounts-that-were-waived-under-the-cares-act

IRS Provides Relief for Retirees on Required Distributions (By Anne Tergesen, June 23, 2020)

https://www.wsj.com/articles/irs-provides-rmds-relief-for-retirees-11592935108

As Of Today, 2020 RMD Suspensions Are Finally Good For All, Says IRS (By Julie Jason, June 23, 2020)

https://www.forbes.com/sites/juliejason/2020/06/23/as-of-today-2020-rmd-suspensions-are-finally-good-for-all-says-irs/#2334c7133476


This report is intended for the exclusive use of clients or prospective clients of Legacy One Financial Advisors, L.L.C. Content is privileged and confidential. Any dissemination or distribution is strictly prohibited. Information has been obtained from a variety of sources which are believed to be accurate though not guaranteed. Past performance does not indicate future performance. This paper does not represent a specific investment recommendation. Please consult with your advisor, attorney and accountant, as appropriate, regarding specific advice.