In Notice 2020-51, 2020-29 I.R.B. __ (7/9/2020), the Internal Revenue Service has provided additional guidance on whether (and how) taxpayers may return or rollover required minimum distributions (RMDs) that were taken in 2020 but that were no longer required following the enactment of I.R.C. § 401(a)(9)(I) as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), P.L. 116-136 (“CARES Act). See “No Required Minimum Distributions in 2020.”
The Notice generally allows distributions from qualified defined contribution plans to be rolled over, so that no income is realized in 2020.
What is perhaps most significant is that the Notice allows the owner or beneficiary of an individual retirement account (IRA) to return an unnecessary distribution to the IRA. See paragraph D of Section III. This is an important concession by the IRS because distributions from an inherited IRA (i.e., distributions to the beneficiaries of the IRA following the death of the IRA owner) cannot be rolled over. The Notice therefore says that the recipient may “repay” the distribution to the distributing IRA, provided the repayment is made no later than August 31, 2020.