2020 IRA/401 (k) Required Minimum Distributions Update

The SECURE Act and the CARES Act have ‘paused’ individual taxpayers with IRAs and 401k investments from having to take a Required Minimum Distribution in 2020. Those who did so prior to the announcement that the RMDs are being waived for 2020, have until August 31, 2020 to return them if they wish. It is our understanding that if taxes were withheld from the early distributions those will not be returned. However, the withheld taxes will be credited to one’s 2020 tax obligations.

If one chose to take an RMD and donated the funds to qualified charitable organization/s, the RMD is not taxable to either the donor or the qualified charitable organization/s.

Others have inquired about the impact of the RMD waiver on one’s Medicare obligations. Per Kiplinger, the ‘income-related monthly adjustment amounts’ or IRMAAs, that determine how much one pays for Medicare Part B and Part D plans rely on a formula specified in the Social Security Act. This formula bases the rates on one’s adjusted gross income from two years before. Although one’s IRMAA will stay the same during 2020, one should see one’s lower AGI reflected in the rate/s one pays in 2022.

If you have any questions about the waiver and the best approach for you to take, it is recommended that you consult your financial adviser.

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