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The Coronavirus Aid, Relief, and Economic Security (CARES) Act brought about many changes in 2020, and one of those changes impacts seniors and retirees that take Required Minimum Distributions (RMDs) each year.

An RMD is the minimum amount you must withdraw from your IRA, SEP IRA, SIMPLE IRA, or retirement plan account. If you turned age 70 ½ before January 1, 2020, you must take your first RMD by April 1, 2020. If you reach age 70 ½ during 2020 or later, you must take your first RMD by April 1 of the year after you reach age 72, according to the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019.

The CARES Act waived RMDs during 2020 for IRAs and defined-contribution retirement plans, including beneficiaries with inherited accounts. This waiver also includes RMDs for those who turned age 70 ½ in 2019 and would take their first RMD in 2020. There is no penalty for not taking an RMD in 2020. Depending on an individual’s unique tax situation, not taking an RMD can provide benefits such as: reducing taxable income, reducing taxable Social Security benefits, and maximizing the recovery rebate credit on the 2020 individual tax return.

If you or someone you know has already taken RMDs in 2020, that individual can repay the distribution to the distributing retirement plan no later than August 31, 2020 to avoid paying taxes on that distribution.

This is one of the many tax planning strategies with which RBF is proud to help clients. Please contact our office at (717)393-2700 with any questions.