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IRS Extends Relief For 2020 RMD

By Cheri Work, from Trout CPA

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted on March 27, 2020, waived required minimum distributions (RMDs) from tax-qualified defined contribution retirement plans (such as 401(k) and 403(b) plans) and individual retirement accounts (IRAs) that were otherwise due in 2020 to help Americans cope with the uncertainty caused by the COVID-19 pandemic.

This was a welcome relief for those who wanted to skip RMDs for the year and it has also created potential tax planning opportunities that could benefit some taxpayers and charitable organizations.

Taxable income would obviously be reduced if RMD was not taken in 2020, but the overall IRA account balance would not be reduced, which in turn could affect future RMD’s and inheritance/estate tax on the value at death.

In lieu of waiving RMD in 2020, why not contribute the RMD (up to $100,000 per taxpayer annually) through a qualified charitable distribution (QCD) that will not be included in taxable income and will benefit a non-profit entity in a time of need. If you are 70 ½ and the charitable organization qualifies, making a QCD is an excellent tax planning and philanthropic idea for 2020 and future years. 

Disclaimer: This article is general in nature and is not intended to be, nor should it be, treated as tax or legal advice.