Community Chat

[FrostyBabe1]

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@novamc1 wrote:

Our appointment with our accountant is next week.  I'll bet other people over age 70 face the same issue we do in one minor area.

In 2020, due to perceived hardship created by the pandemic,  the federal government cancelled the required  annual minimum distribution from  retirement accounts for people over a certain age..

We had already made taxable withdrawals from those accounts, but  paid the money back into the funds when we learned about the exemption.

According to Form 1099 tax forms for 2020,  received from our two fund custodians, we're   still on the hook for tax on money we withdrew but paid back.  To escape being taxed on that money, (which could bump us up into a higher tax bracket), we need to prove we paid it back to the custodial institutions, BUT an IRS form confirming this  payback isn't due to be mailed out until May. 

That's because so-called "rollover funds" and any other money can be deposited in retirement accounts through April 15.  It's a messy item for us 

I hope our accountant has an answer so we don't have to pay any more tax than we do already, when we don't even have the money being taxed.

Or we will have to file an amended return when the proper paperwork arrives in May which will be a pain in the rear end,

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The deadline for re-deposting RMD's that were taken in 2020 prior to the implementation of the CARES act was August 31, 2020, per the IRS website:

"The Internal Revenue Service today reminds IRA owners, beneficiaries or workplace retirement plan participants who received a Required Minimum Distribution (RMD) this year that they have until August 31 to rollover or repay the distribution to avoid paying taxes."

https://www.irs.gov/newsroom/irs-deadline-to-return-distributions-to-retirement-accounts-is-aug-31 

I have a small inherited IRA that I took an RMD from in early 2020. When the act was expanded to included inherited IRA's, I redeposited it in August. I received both the 1099 and form 5498 in the same tax package from the brokerage firm. Taxwise, the small amount I'm required to take probably wouldn't have made a difference, but it opted to put it back anyway.