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Returning your RMD Thumbnail

Returning your RMD

If you have been taking a Required Minimum Distribution (RMD) every year, this year is different. RMDs have been suspended. However, what if you’ve already taken your RMD for 2020?

RMDs apply to retirement plan holders that are age 70½ or older (or those turning age 72 after June 30, 1949). Since the money in these pre-tax accounts have never paid tax, RMDs ensure that the IRS always gets their money.

While most retirees need some or all of their RMD to live on, some do not. So, having the flexibility to skip a distribution this year could be attractive for some people who have other sources of income. Because RMDs are treated as taxable income, avoiding the distribution usually lowers taxable income and taxes due.

I’ve already taken my RMD

Some retirees have already taken their RMD early in 2020. On June 23rd the IRS issued a notice indicating that an RMD can be put back. Prior to this notice, conditions for putting it back were more limited and, in some cases, unclear.

The “put back” option applies to RMDs from Traditional IRAs and 401(k)s and other pre-tax qualified retirement plan accounts including Beneficiary (inherited) IRAs.

Since tax is typically withheld on RMDs, the taxpayer has two options for putting the money back:

  1. Put back the distribution PLUS the tax paid and then wait for a refund of the tax withheld next April or,
  2. Put only the distribution back and then convert the account to a Roth.

Here’s an example:

RMD taken of $37,000

Tax paid of $11,100

Check received for $25,900

Option 1 – Requires taxpayer to have additional funds to pay back the full amount.

RMD taken of $37,000 = $25,900 received; $11,100 tax paid

RMD paid back $37,000

Extra tax refund $11,100 next year


Option 2 – Roth conversion may push taxpayer into higher tax bracket[1]

RMD taken of $37,000 = $25,900 received; $11,100 tax paid

RMD paid back $25,900

Amount converted to Roth $25,900 (Note: Conversion must be completed by 8/31/20.)

Extra tax refund $0 ($11,100 tax paid is put toward the tax cost of the Roth conversion)


What do I do?

If you want to put all of the money back, you’ll need to come up with the additional cash that was already withheld and sent to the government. If you don’t have the cash, you could put back what you have, convert it to a Roth and let the government keep your tax payments.

Keep in mind that this “pay back” option only applies to 2020 RMDs.

As with all tax strategies, please consult with your tax professional before implementing one of these options.

If you still have questions about paying back your RMD, give us a call. We’re here to help.


Lyman H. Jackson



Financial Planning Solutions, LLC (FPS) is a Registered Investment Advisor. FPS provides this blog for informational and educational purposes only. Nothing in this blog should be considered investment, tax, or legal advice. FPS only renders personalized advice to each client after entering into an advisory relationship. Information herein includes opinions and forward-looking statements that may not come to pass. Information is derived from sources believed to be reliable. Information is at a point in time and subject to change without notice. Such information may not be independently verified by FPS. Please see important disclosures link at the bottom of this page.


[1] Roth conversions have a number of special rules and requirements. To make sure your complete a proper Roth conversion, please contact us or your tax professional first to make sure that you do it right.

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