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08.26.20   |   Insights

For Retirees with Required Minimum Distributions of Retirement Accounts … a Reminder!

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You have until Monday, August 31, 2020, to re-contribute any 2020 required minimum distributions from your IRA or 401(k) back to your retirement account if you wish to defer taking the 2020 distribution.

Per IRS Notice 2020-51, the CARES Act allows this contribution back to your retirement account to be counted as a qualified rollover to your account, so there are no penalties for taking advantage of this option. Exercising this option will reduce your income tax liability by reducing 2020 taxable income. Unfortunately, if any taxes are withheld from your required minimum distribution, you may only retrieve those taxes in an income tax refund. As an example, if you had withholding of $5000 on a $50,000 IRA required minimum distribution in 2020 and you desire to return $50,000 to your retirement account, you will have to find the additional $5000 by August 31, 2020, then get a refund of the withheld taxes in your 2020 income tax return, due next year. This option to return retirement funds is not available for defined benefit plans (traditional pension which is not your own retirement account). Feel free to contact attorney Jim Lanham in our Wooster office [ or 330.264.4444] should you have questions about this tax-saving opportunity.

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