Smart Tax Planning

IRS eases rules on reversing required retirement savings withdrawals

Key Points
  • Although the CARES Act eliminated required minimum withdrawals from retirement accounts for 2020, some savers may already have taken their money earlier in the year.
  • The IRS says those withdrawals can now be rolled back into the accounts they came from.

In this article


If you took a required minimum distribution from your retirement account this year and want to reverse it, you now may be able to.

The IRS said Tuesday that anyone who already has taken an RMD in 2020 from certain retirement accounts has until Aug. 31 to put the money back. The announcement comes several months after the CARES Act eliminated those mandated distributions for the year — yet some people already had taken them before the law's passage.

"This is a really good piece of news for someone who wants to roll back their distributions," said certified financial planner and CPA Jeffrey Levine, director of advanced planning at Buckingham Wealth Partners in Long Island, New York.

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RMDs are mandated withdrawals that the government forces you to take from certain retirement accounts once you reach a certain age or inherit one of the affected accounts. Legislation passed late in 2019 raised the RMD age to 72 from 70½, effective this year. 

The CARES Act, signed into law in late March, enables any taxpayer facing an RMD in 2020 from their defined-contribution retirement plan — including a 401(k) or 403(b) plan — or their individual retirement account, to skip those withdrawals this year. This includes anyone who turned age 70½ in 2019 and would have had to take the first RMD by April 1, 2020. The waiver does not apply to defined-benefit plans (i.e., pensions.)

The IRS's new relief applies to individuals who face RMDs either due to their age or because they inherited an account that comes with those mandated withdrawals, Levine said.

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Although Levine questions the agency's legal authority to make the change, he said he doubts there will be an uproar over it.

"I think this is something no one will argue with," Levine said. "The IRS is saying a lot of people are complaining about this, so we're going to do what everyone wants."