The Coronavirus Aid, Relief, and Economic Security Act, more commonly known as the CARES Act, has made some changes which could impact the 2020 tax return you file next spring, one of the changes has to do with RMD's.
Once you reach age 72, you must take required minimum distributions, known as RMDs, from most types of retirement accounts such as 401(k) plans and traditional IRAs. These distributions, mandated by Uncle Sam, are generally taxable. The RMD requirement has been waived for 2020, thanks to the CARES Act. If you don’t need the money, skipping an RMD can have many benefits. Not only do you avoid paying taxes on the RMD itself, but you also don’t have to worry about the distribution pushing you into a higher tax bracket. Plus, if your portfolio hasn’t performed well this year, you won’t have to lock in those losses by making a withdrawal. If you already took an RMD in 2020, you have until Aug. 31 to reverse that decision and repay the distribution.
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