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Greetings,

My mom is 80 and has been taking automatic monthly RMD's from her traditional IRA, up until April 2 this year. When we found out about the RMD suspension for 2020, we stopped the automatic withdrawals. From what I can tell, she has until July 15 according to the CARES Act to re-deposit one (or some?) of these withdrawals. She has not done any sort of rollover within the past 12 months.

I have a few questions, as the info I find online often seems confusing and/or contradictory.

1) She took $5K monthly distributions, which were initiated by her brokerage on 1/2, 1/31, 3/2, and 4/2. The distribution initiated on 1/31 was not deposited in her checking account until 2/3. Would that distribution qualify to be re-deposited?

2) How many of her $5K distributions can be re-deposited? Is it only one, or is it potentially the February, March, and April distributions?

3) She has a Roth IRA account, which she has never funded. Would she be allowed to roll over some portion these RMD withdrawals into her Roth? If so, what would be the maximum? (She is retired, by the way.)

Any information or feedback is very much appreciated!!!

Todd
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Let me narrow down my question a bit.

My mom (age 80, retired) took RMD distributions from her traditional IRA on March 2 ($5000) and April 2 ($5000), before we realized RMD's were suspended for 2020.

Based on the CARES Act, if she rolls over the entire $10,000 into her Roth IRA before July 15, is it true she will not have to report the $10,000 as income in 2020?

Thank you!

Todd
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Based on the CARES Act, if she rolls over the entire $10,000 into her Roth IRA before July 15, is it true she will not have to report the $10,000 as income in 2020?

No, it's not true. She will have to account for the income as a conversion.

AJ
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if she rolls over the entire $10,000 into her Roth IRA before July 15, is it true she will not have to report the $10,000 as income in 2020?

No.

At the core, you're talking about taking money from a traditional IRA and putting it into a Roth. That would be a conversion and is a taxable event. The CARES act will not affect this.

--Peter
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Thank you AJ and Peter for your replies!

Does the CARES Act allow my mom to return the $10,000 ($5000 RMD on 3/2 and $5000 RMD on 4/2) back to the traditional IRA by July 15 and not have to include the $10,000 as 2020 income?

Todd
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Does the CARES Act allow my mom to return the $10,000 ($5000 RMD on 3/2 and $5000 RMD on 4/2) back to the traditional IRA by July 15 and not have to include the $10,000 as 2020 income?

That's the piece I'm not sure of. I think it might, but I haven't looked into that detail.

--Peter
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Does the CARES Act allow my mom to return the $10,000 ($5000 RMD on 3/2 and $5000 RMD on 4/2) back to the traditional IRA by July 15 and not have to include the $10,000 as 2020 income?

Well, she has taken control of the money from each distribution. Because of that, the return of each $5,000 distribution would be a separate non-trustee-to-trustee rollover. So, my take would be that, at most, one of the $5,000 distributions could be moved into another IRA. That's because she is only allowed to do one non-trustee-to-trustee rollover per year.

Per irasmilo's post from last month https://boards.fool.com/if-you-had-returned-the-money-on-or-... if the 60 day limit on the non-trustee-to-trustee rollover was to expire on or after April 1, 2020 and on or before July 15, 2020, she would have until July 15, 2020 to do the rollover. So, either the 3/2 distribution (+60 days = 5/1/20) or the 4/2 distribution (+60 days = 6/1/20) should be eligible. So, my take would be that she can choose one of those and roll it back into her IRA.

Please note - she could also choose to pay the taxes and do a conversion into her Roth IRA on one of those 2 distributions. But in either case (rolling back into her IRA, or converting into her Roth IRA), she can only take an action on one of the distributions, because of the limit on non-trustee-to-trustee rollovers each year.

I would strongly suggest that she consult a tax advisor before she makes any of these moves.

AJ
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Thank you AJ. I will definitely have my mom consult a tax advisor. The CPA she has used for many years sometimes tells her things that I'm not 100% sure of, so I thought I'd do a little background leg work first. :-)

You wrote,

Please note - she could also choose to pay the taxes and do a conversion into her Roth IRA on one of those 2 distributions. But in either case (rolling back into her IRA, or converting into her Roth IRA), she can only take an action on one of the distributions, because of the limit on non-trustee-to-trustee rollovers each year.

From what I read at the IRS, it sounds like it's possible to do unlimited conversions between a traditional IRA and a Roth IRA.

For instance, I read this: ( from https://www.irs.gov/retirement-plans/ira-one-rollover-per-ye... )

Beginning in 2015, you can make only one rollover from an IRA to another (or the same) IRA in any 12-month period, regardless of the number of IRAs you own (Announcement 2014-15 and Announcement 2014-32). The limit will apply by aggregating all of an individual’s IRAs, including SEP and SIMPLE IRAs as well as traditional and Roth IRAs, effectively treating them as one IRA for purposes of the limit.

- Trustee-to-trustee transfers between IRAs are not limited
- Rollovers from traditional to Roth IRAs ("conversions") are not limited


Could you let me know if I'm reading this incorrectly?

Todd
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Could you let me know if I'm reading this incorrectly?

I will refer you back to this thread https://boards.fool.com/ira-one-rollover-per-year-rule-34502...

AJ
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Wow, thank you AJ, that was helpful, and kind of eye-opening about the IRS Pubs being sometimes easy to misinterpret by non-professionals.

Appreciate the help.

Todd
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...the IRS Pubs being sometimes easy to misinterpret by non-professionals.

I suspect that professionals can suffer the same problem! 8-)
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only allowed to do one non-trustee-to-trustee rollover per year.

Per 12 months and not a calendar year
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One thing that I don't remember coming up in this thread is whether or not any of the money in the Traditional IRA was contributed with After Tax Dollars. If so, and for the benefit of anyone else in a similar situations, this would change many of the answers on this thread.
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One thing that I don't remember coming up in this thread is whether or not any of the money in the Traditional IRA was contributed with After Tax Dollars. If so, and for the benefit of anyone else in a similar situations, this would change many of the answers on this thread.

rosewine,

I believe all the money in my mom's Traditional IRA is pre-tax.

But could you give an example or examples of money that could be in a Traditional IRA that would be after-tax?

Todd
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But could you give an example or examples of money that could be in a Traditional IRA that would be after-tax?

Todd


It depends on the taxpayers income in the year contributed. Form 8606 should be filed with the tax return to establish the tax basis.
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