RMD Question

[peggysioux]

Taxpayer has several IRA accounts and turned 70 1/2 in 2019. Financial institutions provided the information of RMD amounts needed for for each IRA account. Taxpayer cashed in an annuity that was over the required minimum distribution of all IRA accounts and received a 1099-R for the distribution from the annuity. The 1099-R for the annuity distribution is not marked as an IRA. My question - does the distribution from the annuity satisfy the RMD requirement for the IRA's? Or being the annuity was not part of an IRA, the RMD's are still required from the IRA accounts?

Peggy Sioux

[Lion]

No. (Unless you're asking about 2020 when no RMDs are required)

[terryats]

If the annuity was purchased with qualified funds I believe it would count towards RMD. the only qualified funds that have to be kept separate for the RMD are 401s, 403s, and IRAs

[RWG1950]

It is my understanding that someone turning 70 1/2 in 2019 would have an RMD obligation for that tax year. (Their first RMD year)
The post does not seem to say if any IRA funds were withdrawn by 12-31-19 or 3-31-20 to satisfy the initial RMD.
Although an annuity can be used to fund an IRA, the 1099-R is not coded as an IRA distribution.
This likely resulted from it being a non-qualified annuity. Such a distribution would not count toward the IRA RMD for 2019.
The RMD for 2019 appears to have not been distributed as required.
Taxpayer might want to check with the insurance company to verify that it was not an IRA.

[Lion]

I see teachers with annuities that are labeled 403(b)s. How did your client purchase his annuity?

[RWG1950]

Taxpayers holding 403-b accounts would also not have the IRA box checked on the 1099-R, but if the annuity distribution was from
a 403-b, it still could not have satisfied the IRA RMD.
As I understand this, IRA's, 401-K's & 403-b's & 457's each have their own separate RMD calculation & distribution requirements.

[Lion]

RWG made the point I was aiming for. An annuity not labeled as an IRA is probably not an IRA and can't count as part/all of the IRA RMD.

[peggysioux]

Lion, taxpayer is a retired teacher and she contributed to the annuity through her work.

[Lion]

Then it's a 403(b) probably, or maybe a 457; it has it's own RMD requirement. That is definitely NOT an IRA and that distribution will NOT satisfy her 2019 RMD requirement for her IRA. She needs to take her late IRA RMD from one or move of her IRA accounts ASAP. (You're not talking 2020, right? 2020 she'd be off the hook with no RMDs required.) RWG gave you details above.

[peggysioux]

Well the good news that I just found was the Cares Act included special rules for individuals who turned 70 1/2 in 2019 and postponed their 2019 RMD until 2020. The waiver applies to the 2019 RMD. So she is not required to take the 2019 RMD.

Peggy Sioux

[TAXNJ]

Is this what you are referring:

https://www.irs.gov/newsroom/irs-announces-rollover-relief-for-required-minimum-distributions-from-retirement-accounts-that-were-waived-under-the-cares-act

[RWG1950]

Hadn't seen the IRS 6-23-20 item pertaining to certain 2019 RMD distributions. Thanks for passing along this info.

[Gene V]

This information was in TheTaxBook News update. https://www.thetaxbook.com/view_update.asp?1=4141