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Did you take money out of an IRA or 401k in 2020? If you did you may be eligible to get a tax refund by repaying those monies to your IRA, 401k, or other employer sponsored retirement plan. The CARES Act created an exemption to the tax due on withdraws up to $100,00 from an IRA or 401k type account taken in 2020 due to COVID. This became known as the 2020 COVID Related Distribution or Coronavirus Related Distribution (CRD for short). If you repay the money to your IRA or 401k type account within 3 years of the withdrawal you may claim a refund for the full amount of the tax on the withdrawal.

To make this work, you will need to amend your 2020 tax return and file an IRS Form 8915-E to claim the refund after you have repaid the money to your IRA or 401k type account. With the 2020 COVID Related Distribution, when you repay the money you do not have to put it in the same account you withdrew the money from originally. Also, the once per year rollover limitation doesn’t apply.

NOTE: If you were subject to Required Minimum Distributions or RMDs in 2020, you may not use this strategy to put money back into your retirement account and get a tax refund for your RMD. However, if you withdrew more money than you 2020 required minimum distribution you can use the 2020 COVID Related Distribution strategy to get a refund.

For more information about the 2020 COVID Related Distribution see the IRS Q&A page on Coronavirus Related Distributions. If you are not a current Almega Wealth Management client please contact us for more information about becoming a client. Almega Wealth Management will work with your CPA or accountant to help you take advantage of this strategy.