Are you one of the many retirement account holders who took a mandatory distribution this year? If so, you may be able to manage the taxes associated with Required Minimum Distributions (RMDs) from traditional IRAs and 401(k)s. There are some essential details to keep in mind, however. Here’s what you need to know.
Don’t forget the withholding. Thanks to the Coronavirus Aid, Relief, and Economic Security (CARES) Act, those who hold certain retirement accounts can bypass the required minimum distributions for 2020. To do so, though, you’ll need to return the full amount of your RMD to your retirement account. Keep in mind, many retirement account custodians often withhold income tax, which will need to be returned as well—not just the net amount you receive.
Remember August 31st. August 31st is the deadline by which you must return your RMD. But considering the widespread disruption caused by COVID-19, it may be wise to begin this process sooner rather than later. After all, with industries shuttering doors or modifying their hours of operation, it may be difficult to contact the various institutions necessary. If you’re not sure where to begin, speaking with your banking or financial professional is always a wise move.
It pays to be sure. These are just some of the most important factors to keep in mind, but the longer you wait, the greater the potential for delay or mishap. In this case, it literally pays to work with your financial, tax, and banking professionals to make sure your RMDs are returned correctly.