Still only ONE RMD rollover per year under ? - Spidell

Still only ONE RMD rollover per year under ?

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Message Board Still only ONE RMD rollover per year under ?

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    • #240521
      Michael Kelly
      Participant

      My client took a RMD from each of his 2 IRA’s. Can he replenish/rollover BOTH  RMD’s to their original accounts by July 15?

      I believe current law allows only one rollover per year.

      M Kelly

       

    • #240741
      Larry Pon
      Participant

      Only ONE rollover every 12 months.   Here’s suggestion – rollover over the larger distribution back into the IRA by 7/15/20 so it will not be taxable.  Roll the smaller one into a Roth IRA so it is a Roth conversion.  Normally you cannot do a Roth conversion with an RMD, but since RMDs are suspended for 2020 – this is not an RMD.

      Or maybe your client will do the Roth conversion on the entire distribution if he’s OK with paying tax on the distribution.

       

       

       

    • #257518
      Dan Leong
      Participant

      Following up on Larry’s point about doing a Roth conversion, our 80-year old client took a distribution from his Traditional IRA in January, 2020.  It was meant to satisfy his 2020 RMD (he does not need the funds currently), but since the CARES Act suspends RMDs for 2020, and he cannot do the 60-day rollover, because the distribution was taken before 2/1/20, (1) can he do a Roth conversion for the distribution taken in Jan., 2020?  I am checking myself here, because Taxpayer already has the funds, so it would not be a trustee-to-trustee transfer.  If he can do a Roth conversion, (2) Would the conversion amount be the amount distributed in 1/2020, or would it have to include the earnings on the amount distributed.  (3) What is the deadline for doing such a Roth conversion?  Thank you.

    • #257871
      Larry Pon
      Participant

      Sorry Dan, the Roth conversion had to be done within 60 days of the distribution.   It’s too bad we did not get any relief for the January distributions.     Too many clients take their RMDs in January so they would not forget about it for the year.  Who knew?   Now we need to remind our clients who have automatic RMDs later in the year to make sure they do not happen.

    • #258030
      Larry Pon
      Participant

      Dan you are in luck!   The IRS just issued Notice 2020-51.   Now you have until 8/30/20 to roll back your RMDs.   This means ALL RMDs!    Your client who took the January distribution is in luck.  I am sure Spidell will put out an alert about this.   I find this very welcome news.   A tax nerd like me gets excited about this stuff.

    • #258104
      Michael Kelly
      Participant

      Larry, You are a knowledgeable and on top of things tax guy. That is good news. Now to circle back to my original question, does this Notice open door to rolling back my client that took RMDs from two traditional IRA’s? thank you for your help!

       

    • #258185
      Larry Pon
      Participant

      Michael – yes, your client can roll both distributions back to the IRAs.   It does not have to go back to the original IRAs.   You can roll the 2 distribution amounts into one IRA.   However, if your client took distributions in kind, it needs to be recontributed in kind.  This means if shares of stock, mutual fund, or ETF was distributed, you need to put back in those specific securities.   Generally nearly all of our clients take their distributions in cash so that is not an issue.

    • #258880
      Anonymous

      I also have a client who took out RMD in January, so now with the new provision he is able to roll it back ….if he does not have the cash now to roll over the whole amount, can he roll back a portion of it? Not sure if that was addressed in the notification

    • #259392
      Larry Pon
      Participant

      The amount not rolled back to the IRA will be taxable.   He has until 8/31/20 to round up the money to roll it back.    Also, you’ll need to check the tax consequences of the distribution.   If he is in a low tax bracket, it may make sense to keep the distribution and skip the rollover.

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