Reporting Relief for 2020 IRA Required Minimum Distributions

27 January 2020

The IRS has provided guidance to financial institutions on reporting required minimum distributions (RMDs) for 2020. The concern is that financial institutions might mistakenly treat IRA owners who turn age 70 1/2 in 2020 as being obligated to make RMDs for 2020. The IRS’s plan is to not treat this kind of mistake as incorrect reporting provided that the institution notifies the IRA owner no later than April 15, 2020, that no RMD is required for 2020.

SECURE Act Moves RBD to Age 72

The SECURE Act was enacted on December 20, 2019, as Division O of the Further Consolidated Appropriations Act, 2020 (P.L. 116-94). Among other changes, the SECURE Act moved the required beginning date for RMDs. The new required beginning date for an IRA owner is April 1 of the calendar year following the calendar year in which the individual attains age 72, rather than April 1 of the calendar year following the calendar year in which the individual attains age 70 1/2.

The change is effective for distributions required to be made after December 31, 2019, with respect to individuals who will attain age 70 1/2 after that date. As a result of this change, IRA owners who will attain age 70 1/2 in 2020 will not have a required beginning date of April 1, 2021. This means that these IRA owners will have no required minimum distribution (RMD) for 2020.

2020 IRA RMD Reporting

If an IRA owner has an RMD due for 2020, the financial institution that is the trustee, custodian, or issuer maintaining the IRA must file a 2019 Form 5498 (IRA Contribution Information) by June 1, 2020, and indicate by a check in Box 11 that an RMD is required for 2020. The financial institution may also choose to provide further information in Box 12a (RMD Date) and Box 12b (RMD Amount). Additionally, if an IRA owner has an RMD due for 2020, the financial institution must furnish an RMD statement to the IRA owner by January 31, 2020, that informs the IRA owner of the date by which the RMD must be distributed, and either provides the amount of the RMD or offers to calculate that amount upon request.

Reporting for IRA Owners Attaining age 70 1/2 in 2020

The RMD statement should not be sent to IRA owners who will attain age 70 1/2 in 2020. If a financial institution does so, the IRS will not consider the statement to have been provided incorrectly. However, this treatment is conditioned on the institution notifying the IRA owner no later than April 15, 2020, that no RMD is required for 2020.

For IRA owners who will attain age 70 1/2 in 2020, the 2019 Form 5498 should not include a check in Box 11 or entries in Box 12a or 12b. The SECURE Act did not change the required beginning date for IRA owners who attained age 70 1/2 prior to January 1, 2020. To reduce confusion, the IRS encourages all financial institutions to remind IRA owners who attained age 70 1/2 in 2019, that they are still required to take those distributions by April 1, 2020.

The IRS is considering what additional guidance should be provided with respect to a distribution to a plan participant or IRA owner who will attain age 70 1/2 in 2020 that was treated as an RMD.