Sometimes the early bird doesn’t catch the worm.
In fact, sometimes being early can actually work against you. Like when you may have taken a required RMD (Required Minimum Distribution) at the beginning of 2020 as many conscience taxpayers did.
So… how can paying your RMD early actually be a problem? We’ll explain why this is the case and tell you how you can solve the “early bird problem” when you read my new article titled Tax Tips: IRS Creates New Path for Undoing RMDS.
Three ways our fact-filled article can help you:
- We’ll tell you what happened on March 27. Something big. That’s the date the CARES Act became law. One of its provisions stated that taxpayers no longer had to make their RMDs in 2020. This was terrific news! Why? Because taxpayers with tax-deferred accounts could put the money back and avoid paying taxes on the returned money. You see, RMDs are taxed as income that’s reported on IRS Form 1099-R. All will be explained when you read the full article.
- We’ll tell you what tripped up the early birders and cost them money. Many taxpayers made their RMDs before the waiver (described above) went into effect. This meant they didn’t get the benefits of the waiver, while taxpayers who took their RMDs after March 27 didn’t have to pay taxes on their withdrawn money. Early birders did! Unfair! We’ll explain the problem in more detail when you read the full article.
- We’ll tell you about the happy ending to this sad story. What happened to the early birders was clearly wasn’t right. So the IRS, yes the IRS, created a fix (as well as it should have!). This change allows early birders to repay their RMD and not have to pay taxes on that money. Fairness prevails! But you have to hurry because the fix lasts only unit the end of August. We’ll explain the rules that govern repayment when you read the full article.