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By Andy Ives, CFP®, AIF®
IRA Analyst

Question:

Once the RMD’s for 2020 were suspended, I withdrew what would have been my RMD from my traditional IRA and deposited it in my Roth IRA.  Can I now withdraw that amount from my Roth and repay it to my traditional IRA?

Thank you.

Russ

Answer:

Russ,

Once you deposited the RMD amount into your Roth IRA, it became a conversion. Roth conversions can not be reversed (“recharacterized”). Therefore, you cannot withdraw the dollars from the Roth and return them to the traditional IRA. On a positive note – those dollars are now in a Roth IRA growing tax-free. In addition, that amount has been removed from your traditional IRA, which will result in a lower RMD next year.

Question:

With IRS Notice 2020-51, can inherited IRA RMD’s taken in 2020 be rolled over (or repaid) back to the inherited IRA account? In section III D, the IRS mentions “in the case of an IRA owner or beneficiary who has already received a distribution of an amount that would have been an RMD in 2020 but for section 2203 of the CARES Act or section 114 of the SECURE Act, the recipient may repay the distribution to the distributing IRA…”

The word “beneficiary” is causing many to think inherited IRA’s are now included, but I’m not so sure that is the case…  Thank you!

Answer:

Yes, IRS Notice 2020-51 allows RMDs from inherited IRAs to be repaid. However, there are some strict guidelines: Only the RMD can be repaid; it must be repaid to the same IRA where it came from; and the repayment of the inherited IRA RMD must be done by August 31, 2020. If you miss the cutoff, then you are stuck with the RMD and any possible taxes due.

https://www.irahelp.com/slottreport/rmds-2020-todays-slott-report-mailbag