Via Internal Revenue Service Notice 2020-51, if you took your Required Minimum Distribution, there is still time to replace that distribution and avoid the tax hassle. But act now! The funds you withdrew must be returned to the retirement account by August 31, 2020.
On June 23, 2020, the IRS issued Notice 2020-51, which provided unprecedented relief for most unwanted RMDs. This one-time special ruling removed the 60-day rollover window, the once-per-year rollover rule, and allowed non-spouse IRA beneficiaries to return unwanted RMDs.
What’s the catch? You can only return the unwanted RMD, and it must be finished by August 31.
Let’s assume your RMD was $12,000, and you instructed the custodian to withhold $3,000 and send it to the government for income taxes. You won’t get credit for that $3,000 until you file your 2020 taxes. If you want to return the entire $12,000, you will need to get $3,000 from another account such as a savings account or brokerage.
Please remember that the ability to return the unwanted RMDs only applies to the amount of the RMD withdrawn — and it must be completed by August 31. After that time, all regular rollover rules return. Also, all returned RMD funds deposited to the retirement account should be coded as a “rollover contribution” to avoid future headaches and confusion.