Ask Bob: Answering a Reader's Question About the CARES Act

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The CARES Act, which became public law on March 27, is in response to the coronavirus outbreak and its impact on the economy, public health, state and local governments, individuals and businesses, according to Denise Appleby, CEO of Appleby Retirement Consulting.

And the response, which is intended to provide aid, relief and economic security, includes a waiver of required minimum distributions (RMD) for 2020 as part of the solution. That’s the easy part of the waiver. The devil is in the details. And those details are complicated.

In this episode of Ask Bob, a reader writes with two questions:

As an IRA owner, I withdrew the majority of my required minimum distribution in January 2020 (and I am now past the 60-day rollover limit) and I put that distribution in a high-yield savings account with no federal income tax withheld. Can I take these funds and convert them into my Roth account without paying a federal income tax for 2020?

And two, with the balance of my 2020 required minimum distribution, I have set up a qualified charitable distribution with equal payments starting in January 2020 on a monthly basis. I have made four payments so far this year to the charity with no federal income tax withheld. I can stop making the payments from my RMD and continue making my payments with non-qualified funds. Depending on the answer to my first question, can I take the balance of the RMD funds for the year and rollover to my ROTH account without paying federal income tax?

To help answer our reader’s question, we turned to Denise Appleby, CEO of Appleby Retirement Consulting.

In essence, Appleby says the reader can’t put his distributions into a Roth IRA without having to pay a federal income tax. Doing so would be a Roth IRA conversion. You can't have your cake and eat it too.

Got questions about money? Get answers. Email Robert.Powell@maven.io. 

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