If you took a required minimum distribution (RMD) from your retirement account in 2020, you now have until August 31, 2020 to return the money without incurring any tax consequences. This new guidance was issued by the IRS on June 23 and corrects previous legislation that excluded retirees who took RMDs prior to the passing of the CARES Act in March.
The CARES Act suspended RMDs for 2020 to allow retirement accounts to recover in an increasingly turbulent market. However, if a retiree took a distribution in 2020 prior to the passing of the CARES Act, they were excluded from that benefit until now.
Returning an RMD will reduce your tax liability from the distribution withdrawal and will give the funds more time to grow as the economy recovers. If you’ve taken an RMD, you can return the money to the same account it came from or put the money into another tax-deferred account.