On July 17, the IRS issued a notice to taxpayers that could be important to you or a family member relating to retirement accounts.


The Coronavirus Aid, Relief, and Economic Security (CARES) Act waived the “Required Minimum Distributions” (RMDs) for the year 2020 for IRAs and retirement plans. The waiver applies to all RMDs for individuals who would otherwise be required to take this taxable annual distribution from a retirement plan or IRA because they had previously turned age 70 ½. For those who turned age 70 ½ in 2019 and were therefore required to take their first RMD in 2020, the individual may choose to postpone the required distribution for 2020.

Ordinarily, an RMD can be “rolled over” to the account (or another qualified retirement account) within sixty days to avoid paying income tax on the distribution. Since the CARES Act suspended RMDs, RMDs taken in 2020 are considered eligible for rollover. Therefore, RMDs can be rolled over to another IRA, another qualified retirement plan, or returned to the original plan.

But what if you are a taxpayer who already took an RMD in January 2020, only to learn the distribution was not required after all, but you have missed the sixty-day deadline for returning the distribution to your retirement account?  You now have the option of returning the payment to your IRA or other qualified plan any time before August 31, 2020.

Ordinarily, IRA account owners have the option of taking their IRA RMDs in twelve monthly installments each year. What if you already took three monthly installments for the first three months of 2020, before the CARES Act went into effect? The rule is generally that you may only repay one installment per twelve-month period. You have already taken three. Notice 2020-51 says you can repay the RMD and the one rollover per year rule will not apply. This option is only available for IRAs, not for other types of plans.

The suspension of RMDs for 2020 also applies to inherited IRAs, so if your parent or spouse passed away, and you inherited his or her IRA, your 2020 RMD is not required. Usually, inherited IRAs can only be rolled over by the surviving spouse. Non-spouse beneficiaries do not have this option. But, after CARES, at least for IRAs, you are permitted to repay a 2020 RMD you took previously anytime from now until August 31, 2020. The repayment will be treated as a tax-free rollover. (This dispensation does not apply to other types of retirement accounts, unfortunately.)

In all of the above circumstances, if the owner died after taking a 2020 RMD, the executor of his or her estate can roll over the distribution.

There are some limitations on the rollover option, however. If the distribution was in excess of the RMD, the excess cannot be rolled over. If the account owner or plan participant took the RMD but has now passed away, the executor can repay the funds into the original account or plan but cannot change the designated beneficiary for that plan. Finally, if the individual took his 2020 RMD in the form of a “qualified charitable distribution,” (e.g. the funds were distributed to a qualifying charity, so that the funds are excludible from the individual’s gross income for the year), the charity is not likely to want to return the payment. However, the qualified charitable distribution provides the individual with an opportunity to reduce the balance in her IRA at tax rates lower than the IRA’s designated beneficiary will later pay, at the death of the individual. This is something to discuss with your CPA if you have a sizeable IRA.


The CARES Act allows “qualified individuals” to take “Coronavirus-related Distributions” (CVDs) penalty-free from eligible retirement plans. This means, if you are under 59 ½, you can access funds from your tax deferred retirement accounts without the usual 10% penalty for early distributions. A “qualified individual,” can take an aggregate of distributions of up to $100,000 from your eligible retirement plans or IRAs in 2020 and characterize such distributions as a CVD; you will then have three years to pay the funds back and avoid the early-distribution penalty of 10%. (Note that for a SIMPLE IRA, the ordinary 10% penalty is increased to 25% if the distribution is made from a SIMPLE IRA that has not been funded with a SIMPLE IRA contribution for at least two years.) To be a “qualified individual’, you must fall into one of these categories:

  • You are diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention;
  • Your spouse or dependent is diagnosed with SARS-CoV-2 or with COVID-19 by a test approved by the Centers for Disease Control and Prevention;
  • You experience adverse financial consequences as a result of being quarantined, being furloughed or laid off, or having work hours reduced due to SARS-CoV-2 or COVID-19;
  • You experience adverse financial consequences as a result of being unable to work due to lack of child care due to SARS-CoV-2 or COVID-19; or
  • You experience adverse financial consequences as a result of closing or reducing hours of a business that you own or operate due to SARS-CoV-2 or COVID-19.

You must pay income tax on the money you receive in the CVDs. When you take the CVD, however, you can elect to pay the income tax on the entire amount in 2020, or you can pay the income tax ratably over three years. You have three years from the date of receipt to “rollover” the CVD distribution. If you are desperate for cash, and want access to your retirement accounts for temporary liquidity due to hardship from the pandemic, this may be an option to consider.

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