April 29, 2020 10:55 pm

Answers to Questions About IRAs

Tax legislation—the SECURE Act in December 2019 and the CARES Act in March 2020—each contain rules impacting IRAs. Because of law changes, there is much confusion about what to do with these accounts. Here are the answers to some questions that have been raised.

What’s the deadline for making a 2019 IRA contribution?

Because the IRS changed the filing deadline for 2019 income tax returns for individuals, which normally is April 15, 2020 (“Tax Day”), to July 15, 2020, the deadline for contributing to an IRA for 2019 is also July 15. However, obtaining a filing extension for a 2019 income tax return to October 15, 2020, does not extend the time for making a 2019 IRA contribution.

Can a person who attained age 70½ in 2019 contribute to an IRA for 2019?

The age cap on contributing to a traditional IRA has been lifted, effective for 2020. This means that someone who was at least 70½ in 2019 is barred from making a 2019 contribution to a traditional IRA.

There was never any age cap to making a contribution to a Roth IRA. Thus, someone age 70½ can make a 2019 Roth IRA contribution by July 15, 2020, provided income is below set limits.

Can an RMD taken from an IRA for 2020 be put back?

The CARES Act waived required minimum distributions for 2020. For those who took a distribution before this rule was enacted, there is possible relief. Distributions between February 1, 2020, and May 15, 2020, can be redeposited by July 15, 2020. This rollover undoes the RMD. But this rollover rule can’t be used by non-spouse beneficiaries who received RMDs from inherited IRAs. Also, the CARES Act does not change the one-rollover per year rule, which means that if another rollover had already been be made in the past 12 months, then the RMD replacement—which is essentially a rollover—cannot be made.

Distributions prior to February 1, 2020, probably can’t be redeposited. The situation does not qualify for an automatic extension of the 60-day rollover period. And it does not qualify for the self-certify relief described in Rev. Proc. 2016-47; it does not meet any of the situations eligible for this type of relief. There is one other option: Taxpayers who want an extension of the usual 60-day rollover period can make a private letter ruling request, but this entails a user fee of $10,000.

Can I take a distribution from my IRA penalty free in 2020?

Usually, there’s a 10% early distribution penalty for withdrawals from an IRA prior to age 59½ unless a penalty exception applies. Under the CARES Act, COVID-19-related distributions up to $100,000 won’t be penalized. This exception applies if you, your spouse, or your dependent is diagnosed with the virus or you’ve suffered financial consequences due to the virus (your income has been reduced because of being quarantined, furloughed or laid off, being unable to work because of lack of childcare, or closing/reducing hours if you’re the business owner).

But the distribution is taxable. You can spread the tax over 3 years or report it all at once. And you can recontribute the distribution within 3 years.

Can I take a loan from my IRA?

The CARES Act liberalized the rules for borrowing from a qualified retirement account, such as a 401(k) plan, but it didn’t change the rules for IRAs. No loans are permitted from IRAs. However, if funds are withdrawn from an IRA, they won’t be taxed as long as they are replaced within 60 days (and there hasn’t been another rollover previously made within one year). But missing the replacement deadline for any reason makes the distribution taxable.

Does the increase in the age requirement for starting RMDs to 72 mean that I can’t make QCDs until that age?

The SECURE Act changed the age at which required minimum distributions (RMDs) must begin from the old age 70½ to 72, effective for anyone who attains age 70½ after 2019. However, the age requirement for making qualified charitable distributions (QCDs) from IRAs has not changed. It remains age 70½. Once you attain this age, you can transfer up to $100,000 from your IRA to a charity on a tax-free basis.


There likely will be other confusing matters with respect to IRAs during 2020 as a result of law changes, economic conditions, and personal needs.