Required Minimum Distribution Rules for 2020

Jul 2020


             There’s no doubt that our world has changed dramatically over the last few months.  The IRS has also changed.  Anyone who has dealt with the IRS knows that they are not necessarily taxpayer friendly.  However, in the midst of the Coronavirus crisis, the IRS has stepped up and has implemented some policies that make things easier for taxpayers.  One of those policy changes was just announced, and it deals with required minimum distributions for 2020.

The CARES Act, which was signed into law earlier this year, changed annual required minimum distribution requirements. For 2020, taxpayers are not required to take a required minimum distribution from their retirement accounts.  However, there was no legislation for those taxpayers who had already taken their required minimum distribution before the CARES Act took effect.  Luckily, the IRS is changing that.  The IRS announced that anyone who took a required minimum distribution in 2020 now has the opportunity to roll those funds back into their retirement account as long as the money is repaid by August 31st.  In addition, the IRS went further and said that this repayment is not subject to the one-rollover-per-12-month period rule.  The one-rollover-per-12-month period rule, implemented a few years ago by the IRS, has caused problems and issues for many taxpayers.

The bottom line is that if you took a required minimum distribution in 2020, you now have a decision to make. Do you want to keep the distribution or repay the money by August 31st?  The key is to look at your individual situation.


If you took your required minimum distribution and need the money to cover living expenses, in most cases it would make sense to not roll the money back into the IRA.  On the other hand, if you took a required minimum distribution only because the law required, you may want to consider putting the money back into your retirement account.  The issue to me is what effect the required minimum distribution has on your taxes.  If by taking the distribution it puts you into a higher tax bracket then, it probably makes sense to repay the money.  On the other hand, if it does not throw you into a higher tax bracket and you will not need the money for a few years, you may wish to put the money back into the retirement account and do a Roth IRA conversion.  This benefits you twofold – you will now have money growing tax free and you will have money that is not subject to the required minimum distribution rules.  The key is not to do what everyone else is doing but rather, what fits your individual situation.


The IRS also has benefited taxpayers by recently expanding the definition of who qualifies for special treatment regarding distributions from retirement accounts.  Under the CARES Act, a “qualified individual” can take up to $100,000 distribution from their retirement account without being subject to the 10-percent early withdrawal penalty.  In addition, a taxpayer would have three years to repay a Coronavirus related distribution without tax consequences.  The IRS expanded who is a qualified individual and now will consider such things as reduction in pay, recession of job offers and delayed start dates.  The previous rules had a much-limited definition of who was entitled to take advantage of this provision.


One last note about taxes. Don’t forget that July 15th is around the corner! Although you may have heard that there is talk to extend the deadline past July 15th, at this point in time July 15th is still the deadline to file your 2019 tax returns.  Of course, if you cannot complete your return on time you still can file for an automatic extension to October 15th.


Good luck!



Rick is a fee-only financial advisor.   If you would like Rick to respond to your questions, please email Rick at