Department of the Treasury (2020)

Department of the Treasury

Internal Revenue Service

Publication 590-B

Contents

What’s New . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Reminders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Cat. No. 66303U

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Distributions

from Individual

Retirement

Arrangements

(IRAs)

Chapter 1. Traditional IRAs . . . . . . . . . . . . . . . . . . 6

What if You Inherit an IRA? . . . . . . . . . . . . . . . . . 6

When Can You Withdraw or Use Assets? . . . . . . . 7

When Must You Withdraw Assets? (Required

Minimum Distributions) . . . . . . . . . . . . . . . . . . 7

Are Distributions Taxable? . . . . . . . . . . . . . . . . 14

What Acts Result in Penalties or Additional

Taxes? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

For use in preparing

2020 Returns

Chapter 2. Roth IRAs . . . . . . . . . . . . . . . . . . . . . 29

What Is a Roth IRA? . . . . . . . . . . . . . . . . . . . . . 30

Are Distributions Taxable? . . . . . . . . . . . . . . . . 30

Must You Withdraw or Use Assets? . . . . . . . . . . 34

Chapter 3. Coronavirus Relief . . . . . . . . . . . . . . 35

Qualified Coronavirus-Related Distributions . . . . 35

Taxation of Qualified

Coronavirus-Related Distributions . . . . . . 35

Repayment and Inclusion in Income of

Qualified Coronavirus-Related

Distributions . . . . . . . . . . . . . . . . . . . . . . 36

Chapter 4. Disaster-Related Relief . . . . . . . . . . . 36

Qualified Disaster Distributions . . . . . . . . . . . . . 37

Repayment of Qualified Disaster

Distributions . . . . . . . . . . . . . . . . . . . . . . 38

Repayment of Qualified 2018, 2019, and

2020 Distributions for the Purchase or

Construction of a Main Home . . . . . . . . . 39

How To Get Tax Help . . . . . . . . . . . . . . . . . . . . . . 40

Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

What’s New

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May 13, 2021

Coronavirus-related distributions. Recent legislation

contains special rules that provide for tax-favored withdrawals, income inclusion, and repayments for certain individuals who were impacted by the coronavirus in 2020.

See Coronavirus Relief, later.

Special rules for qualified disaster distributions and

repayments expanded. The special rules for qualified

disaster distributions and repayments are expanded to

apply to those disasters described in the Taxpayer Certainty and Disaster Tax Relief Act of 2020. A qualified disaster is now expanded to include a major disaster that

was declared before February 26, 2021, by the President

under section 401 of the Stafford Act and that occurred on

or after December 28, 2019, and on or before December

27, 2020, and continued no later than January 26, 2021.

However, this change does not include a major disaster

that has been declared only by reason of COVID-19.

See Disaster-Related Relief, later, for more information.

RMDs not required in 2020. New legislation temporarily

waives the requirement to make required minimum distributions (RMDs) in 2020 in response to the coronavirus

pandemic. Whether that distribution is one in a series of

RMDs or the initial RMD that would be required by April 1

for a taxpayer reaching age 701/2 in tax year 2019, no

RMD is required. See When Must You Withdraw Assets?

(Required Minimum Distributions), later, for more information.

Qualified birth or adoption distribution. Beginning in

tax years after December 31, 2019, you can take a distribution from your IRA without it being subject to the 10%

additional tax for early distributions if that distribution is for

a qualified birth or adoption. For more information, see

Qualified birth or adoption distribution under Exceptions,

later.

Qualified plan loan offsets. A qualified plan loan offset

is a type of plan loan offset that meets certain requirements. In order to be a qualified plan loan offset, the loan,

at the time of the offset, must be a loan in good standing

and the offset must be solely by reason of (1) the termination of the qualified employer plan, or (2) the failure to

meet the repayment terms is because the employee has a

severance from employment. If you meet the requirements of a qualified plan loan offset, you have until the

due date, including extensions, to file your tax return for

the tax year in which the offset occurs to roll over the

qualified plan loan offset amount.

This revision is effective for tax years beginning January 1, 2018.

Modification of required distribution rules for designated beneficiaries. There are new required minimum

distribution rules for certain beneficiaries who are designated beneficiaries when the IRA owner dies in a tax year

beginning after December 31, 2019. All distributions must

be made by the end of the 10th year after death, except

for distributions made to certain eligible designated beneficiaries. See 10-year rule, later, for more information.

Required minimum distributions (RMDs). For distributions required to be made after December 31, 2019, the

age for beginning mandatory distributions is changed to

age 72 for IRA owners reaching age 701/2 after December

31, 2019. The required beginning date for IRA owners

who haven't reached age 701/2 by the end of 2019 is April

1 of the year following the year of the owner’s 72nd birthday. See When Must You Withdraw Assets? (Required

Minimum Distributions), later, for more information.

Future Developments

For the latest information about developments related to

Pub. 590-B, such as legislation enacted after it was

published, go to IRS.gov/Pub590B.

Page 2

Reminders

Tax relief for qualified disaster distributions and repayments. Special rules provide for tax-favored withdrawals and repayments to certain retirement plans (including IRAs) for taxpayers who suffered economic losses

as a result of certain major disasters that occurred in 2018

and 2019.

Special rules also provide for tax-favored withdrawals

and repayments from certain retirement plans (including

IRAs) for taxpayers who suffered economic losses as a

result of Hurricane Harvey or Tropical Storm Harvey, Hurricane Irma, Hurricane Maria, or the 2017 California wildfires.

Disaster tax relief is also available for taxpayers who

suffered economic losses as a result of disasters declared

by the President under section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act during

calendar year 2016.

See Disaster-Related Relief, later, for information on

these special rules.

Simplified employee pension (SEP). SEP IRAs aren't

covered in this publication. They are covered in Pub. 560,

Retirement Plans for Small Business.

Deemed IRAs. A qualified employer plan (retirement

plan) can maintain a separate account or annuity under

the plan (a deemed IRA) to receive voluntary employee

contributions. If the separate account or annuity otherwise

meets the requirements of an IRA, it will be subject only to

IRA rules. An employee's account can be treated as a traditional IRA or a Roth IRA.

For this purpose, a “qualified employer plan” includes:

• A qualified pension, profit-sharing, or stock bonus

plan (section 401(a) plan);

• A qualified employee annuity plan (section 403(a)

plan);

• A tax-sheltered annuity plan (section 403(b) plan); and

• A deferred compensation plan (section 457 plan)

maintained by a state, a political subdivision of a state,

or an agency or instrumentality of a state or political

subdivision of a state.

Statement of required minimum distribution (RMD).

If an RMD is required from your IRA, the trustee, custodian, or issuer that held the IRA at the end of the preceding year must either report the amount of the RMD to you,

or offer to calculate it for you. The report or offer must include the date by which the amount must be distributed.

The report is due January 31 of the year in which the minimum distribution is required. It can be provided with the

year-end fair market value statement that you normally get

each year. No report is required for section 403(b) contracts (generally tax-sheltered annuities) or for IRAs of

owners who have died.

IRA interest. Although interest earned from your IRA is

generally not taxed in the year earned, it isn't tax-exempt

interest. Tax on your traditional IRA is generally deferred

until you take a distribution. Don't report this interest on

Publication 590-B (2020)

your return as tax-exempt interest. For more information

on tax-exempt interest, see the instructions for your tax return.

Net Investment Income Tax (NIIT). For purposes of the

NIIT, net investment income doesn't include distributions

from a qualified retirement plan (for example, 401(a),

403(a), 403(b), or 457(b) plans, and IRAs). However,

these distributions are taken into account when determining the modified adjusted gross income threshold. Distributions from a nonqualified retirement plan are included in

net investment income. See Form 8960, Net Investment

Income Tax—Individuals, Estates, and Trusts, and its instructions for more information.

Photographs of missing children. The IRS is a proud

partner with the National Center for Missing & Exploited

Children® (NCMEC). Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring

these children home by looking at the photographs and

calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

Comments and suggestions. We welcome your comments about this publication and suggestions for future

editions.

You can send us comments through IRS.gov/

FormComments. Or, you can write to the Internal Revenue Service, Tax Forms and Publications, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224.

Although we can’t respond individually to each comment received, we do appreciate your feedback and will

consider your comments and suggestions as we revise

our tax forms, instructions, and publications. Do not send

tax questions, tax returns, or payments to the above address.

Introduction

Ordering tax forms, instructions, and publications.

Go to IRS.gov/OrderForms to order current forms, instructions, and publications; call 800-829-3676 to order

prior-year forms and instructions. The IRS will process

your order for forms and publications as soon as possible.

Do not resubmit requests you’ve already sent us. You can

get forms and publications faster online.

This publication discusses distributions from individual retirement arrangements (IRAs). An IRA is a personal savings plan that gives you tax advantages for setting aside

money for retirement. For information about contributions

to an IRA, see Pub. 590-A.

What are some tax advantages of an IRA? Two tax

advantages of an IRA are that:

• Contributions you make to an IRA may be fully or partially deductible, depending on which type of IRA you

have and on your circumstances; and

• Generally, amounts in your IRA (including earnings

and gains) aren't taxed until distributed. In some cases, amounts aren't taxed at all if distributed according

to the rules.

Getting answers to your tax questions. If you have

a tax question not answered by this publication or the How

To Get Tax Help section at the end of this publication, go

to the IRS Interactive Tax Assistant page at IRS.gov/

Help/ITA where you can find topics by using the search

feature or viewing the categories listed.

Getting tax forms, instructions, and publications.

Visit IRS.gov/Forms to download current and prior-year

forms, instructions, and publications.

Useful Items

You may want to see:

Publications

590-A Contributions to Individual Retirement

Accounts (IRAs)

590-A

560 Retirement Plans for Small Business (SEP,

SIMPLE, and Qualified Plans)

560

571 Tax-Sheltered Annuity Plans (403(b) Plans)

571

What's in this publication? This publication discusses

traditional and Roth IRAs. It explains the rules for:

• Handling an inherited IRA, and

• Receiving distributions (making withdrawals) from an

IRA.

It also explains the penalties and additional taxes that

apply when the rules aren't followed. To assist you in complying with the tax rules for IRAs, this publication contains

worksheets, sample forms, and tables, which can be

found throughout the publication and in the appendices at

the back of the publication.

How to use this publication. The rules that you must

follow depend on which type of IRA you have. Use Table

I-1 to help you determine which parts of this publication to

read. Also use Table I-1 if you were referred to this publication from instructions to a form.

575 Pension and Annuity Income

575

939 General Rule for Pensions and Annuities

939

976 Disaster Relief

976

Forms (and Instructions)

W-4P Withholding Certificate for Pension or Annuity

Payments

W-4P

1099-R Distributions From Pensions, Annuities,

Retirement or Profit-Sharing Plans, IRAs,

Insurance Contracts, etc.

1099-R

5304-SIMPLE Savings Incentive Match Plan for

Employees of Small Employers (SIMPLE)—Not

for Use With a Designated Financial Institution

5304-SIMPLE

5305-S SIMPLE Individual Retirement Trust Account

5305-S

5305-SA SIMPLE Individual Retirement Custodial

Account

5305-SA

Publication 590-B (2020)

Page 3

5305-SIMPLE Savings Incentive Match Plan for

Employees of Small Employers (SIMPLE)—for

Use With a Designated Financial Institution

5329 Additional Taxes on Qualified Plans (Including

IRAs) and Other Tax-Favored Accounts

5498 IRA Contribution Information

8606 Nondeductible IRAs

8815 Exclusion of Interest From Series EE and I

U.S. Savings Bonds Issued After 1989

8839 Qualified Adoption Expenses

8880 Credit for Qualified Retirement Savings

Contributions

8915-A Qualified 2016 Disaster Retirement Plan

Distributions and Repayments

5305-SIMPLE

5329

5498

8915-B Qualified 2017 Disaster Retirement Plan

Distributions and Repayments

8915-B

8915-C Qualified 2018 Disaster Retirement Plan

Distributions and Repayments

8915-C

8915-D Qualified 2019 Disaster Retirement Plan

Distributions and Repayments

8915-D

8606

8815

8839

8915-E Qualified 2020 Disaster Retirement Plan

Distributions and Repayments (Use for

Coronavirus-Related and Other Qualified 2020

Disaster Distributions)

8915-E

8880

8915-A

Page 4

See How To Get Tax Help, later, for information about

getting these publications and forms.

Publication 590-B (2020)

Table I-1. Using This Publication

IF you need information on...

THEN see...

Traditional IRAs

chapter 1.

Roth IRAs

chapter 2, and parts of chapter 1.

Coronavirus Relief

chapter 3.

Disaster-Related Relief

chapter 4.

SEP IRAs, SIMPLE IRAs, and 401(k) plans

Pub. 560.

Coverdell education savings accounts (formerly called

education IRAs)

Pub. 970.

Table I-2. How Are a Traditional IRA and a

Roth IRA Different?

Question

This table shows the differences between traditional and

Roth IRAs. Answers in the middle column apply to

traditional IRAs. Answers in the right column apply to Roth

IRAs.

Answer

Traditional IRA?

Roth IRA?

Do I have to start taking distributions

when I reach a certain age from a

Yes. You must begin receiving required

minimum distributions by April 1 of the

year following the year you reach age

72. See When Must You Withdraw

Assets? (Required Minimum

Distributions) in chapter 1.

No. If you are the original owner of a

Roth IRA, you don't have to take

distributions regardless of your age.

See Are Distributions Taxable? in

chapter 2. However, if you are the

beneficiary of a Roth IRA, you may

have to take distributions. See

Distributions After Owner's Death in

chapter 2.

How are distributions taxed from a

Distributions from a traditional IRA are

taxed as ordinary income, but if you

made nondeductible contributions, not

all of the distribution is taxable. See Are

Distributions Taxable? in chapter 1.

Distributions from a Roth IRA aren't

taxed as long as you meet certain

criteria. See Are Distributions Taxable?

in chapter 2.

Do I have to file a form just because I

receive distributions from a

Not unless you have ever made a

nondeductible contribution to a

traditional IRA. If you have, file Form

8606. See Nondeductible Contributions

in Pub. 590-A.

Yes. File Form 8606 if you received

distributions from a Roth IRA (other

than a rollover, qualified charitable

distribution, one-time distribution to

fund an HSA, recharacterization,

certain qualified distributions, or a

return of certain contributions).

Publication 590-B (2020)

Page 5

the distribution isn't a required distribution, even if you

aren't the sole beneficiary of your deceased spouse's IRA.

For more information, see When Must You Withdraw Assets? (Required Minimum Distributions), later.

1.

Traditional IRAs

Introduction

This chapter discusses distributions from an IRA. In this

publication, the original IRA (sometimes called an ordinary

or regular IRA) is referred to as a “traditional IRA.” A traditional IRA is any IRA that isn't a Roth IRA or a SIMPLE

IRA.

What if You Inherit an IRA?

If you inherit a traditional IRA, you are called a beneficiary.

A beneficiary can be any person or entity the owner chooses to receive the benefits of the IRA after he or she dies.

Beneficiaries of a traditional IRA must include in their

gross income any taxable distributions they receive.

Inherited from spouse. If you inherit a traditional IRA

from your spouse, you generally have the following three

choices. You can:

1. Treat it as your own IRA by designating yourself as

the account owner;

2. Treat it as your own by rolling it over into your IRA, or

to the extent it is taxable, into a:

a. Qualified employer plan,

b. Qualified employee annuity plan (section 403(a)

plan),

c. Tax-sheltered annuity plan (section 403(b) plan),

d. Deferred compensation plan of a state or local

government (section 457 plan); or

3. Treat yourself as the beneficiary rather than treating

the IRA as your own.

Treating it as your own. You will be considered to

have chosen to treat the IRA as your own if:

• Contributions (including rollover contributions) are

made to the inherited IRA, or

• You don't take the required minimum distribution for a

year as a beneficiary of the IRA.

You will only be considered to have chosen to treat the

IRA as your own if:

• You are the sole beneficiary of the IRA, and

• You have an unlimited right to withdraw amounts from

it.

However, if you receive a distribution from your deceased spouse's IRA, you can roll that distribution over

into your own IRA within the 60-day time limit, as long as

Page 6

Chapter 1

Traditional IRAs

Inherited from someone other than spouse. If you inherit a traditional IRA from anyone other than your deceased spouse, you can't treat the inherited IRA as your

own. This means that you can't make any contributions to

the IRA. It also means you can't roll over any amounts into

or out of the inherited IRA. However, you can make a

trustee-to-trustee transfer as long as the IRA into which

amounts are being moved is set up and maintained in the

name of the deceased IRA owner for the benefit of you as

beneficiary.

Like the original owner, you generally won't owe tax on

the assets in the IRA until you receive distributions from it.

You must begin receiving distributions from the IRA under

the rules for distributions that apply to beneficiaries.

IRA with basis. If you inherit a traditional IRA from a person who had a basis in the IRA because of nondeductible

contributions, that basis remains with the IRA. Unless you

are the decedent's spouse and choose to treat the IRA as

your own, you can't combine this basis with any basis you

have in your own traditional IRA(s) or any basis in traditional IRA(s) you inherited from other decedents. If you

take distributions from both an inherited IRA and your IRA,

and each has basis, you must complete separate Forms

8606 to determine the taxable and nontaxable portions of

those distributions.

Federal estate tax deduction. A beneficiary may be

able to claim a deduction for estate tax resulting from certain distributions from a traditional IRA. The beneficiary

can deduct the estate tax paid on any part of a distribution

that is income in respect of a decedent. He or she can

take the deduction for the tax year the income is reported.

For information on claiming this deduction, see Estate Tax

Deduction under Other Tax Information in Pub. 559.

Any taxable part of a distribution that isn't income in respect of a decedent is a payment the beneficiary must include in income. However, the beneficiary can't take any

estate tax deduction for this part.

A surviving spouse can roll over the distribution to another traditional IRA and avoid including it in income for

the year received.

More information. For more information about rollovers,

required distributions, and inherited IRAs, see:

• Rollovers under Can You Move Retirement Plan Assets? in chapter 1 of Pub. 590-A;

• When Must You Withdraw Assets? (Required Minimum Distributions), later; and

• The discussion of IRA Beneficiaries, later, under

When Must You Withdraw Assets? (Required Minimum Distributions).

When Can You Withdraw or

Use Assets?

You can withdraw or use your traditional IRA assets at any

time. However, a 10% additional tax generally applies if

you withdraw or use IRA assets before you reach age

591/2. This is explained under Age 591/2 Rule under Early

Distributions, later.

If you were affected by a qualified disaster, see chapter 4.

You can generally make a tax-free withdrawal of contributions if you do it before the due date for filing your tax

return for the year in which you made them. This means

that even if you are under age 591/2, the 10% additional

tax may not apply. These distributions are explained in

Pub. 590-A.

When Must You Withdraw

Assets? (Required Minimum

Distributions)

You can't keep funds in a traditional IRA (including SEP

and SIMPLE IRAs) indefinitely. Eventually, they must be

distributed. If there are no distributions, or if the distributions aren't large enough, you may have to pay a 50% excise tax on the amount not distributed as required. See

Excess Accumulations (Insufficient Distributions), later,

under What Acts Result in Penalties or Additional Taxes.

The requirements for distributing IRA funds differ, depending on whether you are the IRA owner or the beneficiary of a decedent's IRA.

Required minimum distribution (RMD). The amount

that must be distributed each year is referred to as the required minimum distribution.

Note. A qualified charitable distribution will count towards your required minimum distribution. See Qualified

charitable distributions under Are Distributions Taxable,

later.

Distributions not eligible for rollover. Amounts that

must be distributed (required minimum distributions) during a particular year aren't normally eligible for rollover

treatment. But see Special rule for RMDs and rollovers in

2020, later.

IRA Owners

If you are the owner of a traditional IRA, you must generally start receiving distributions from your IRA by April 1 of

the year following the year in which you reach age 72.

April 1 of the year following the year in which you reach

age 72 is referred to as the “required beginning date.”

Distributions by the required beginning date. You

must receive at least a minimum amount for each year

starting with the year you reach age 72. If you don't receive that minimum distribution amount in the year you

become age 72, you must receive that distribution by April

1 of the year following the year you become age 72.

If an IRA owner dies after reaching age 72, but before

April 1 of the next year, no minimum distribution is required for that year because death occurred before the required beginning date.

RMDs not required in 2020. You are not required to

make RMDs in tax year 2020, whether that distribution is

one required after the initial RMD in a series of required

distributions or the distribution that would be required by

April 1 for a taxpayer reaching age 701/2 in tax year 2019.

For tax years 2019 and earlier, you were required

TIP to begin receiving distributions by April 1 of the

year following the year in which you reached age

701/2. If you reach age 701/2 in tax year 2020 or later, you

must generally begin receiving distributions from your IRA

by April 1 of the year following the year in which you reach

age 72.

If you have a RMD for 2020 due by April 1, 2021,

TIP you are not required to take that distribution in

2021. You are only required to take the distribution due by December 31, 2021.

Special rule for RMDs and rollovers in 2020. If you receive a distribution in 2020, whether an RMD for the initial

required distribution or a distribution in a series of RMDs,

you can roll that distribution over and the 60-day rollover

period is extended in that the end of that 60-day period

cannot occur before August 31, 2020.

Permitted repayments of RMDs previously distributed from an IRA in 2020. If you received a distribution

from your IRA that would have normally counted as an

RMD in 2020, and that cannot be rolled over without violating the one-rollover-per-year rule, you can repay the

amount back to that IRA as long as the repayment is

made no later than August 31, 2020.

Even if you begin receiving distributions before

you reach age 72, you must begin calculating and

CAUTION receiving RMDs by your required beginning date.

!

More than minimum received. If, in any year, you receive more than the required minimum distribution for that

year, you won't receive credit for the additional amount

when determining the required minimum distributions for

future years. This doesn't mean that you don't reduce your

IRA account balance. It means that if you receive more

than your required minimum distribution in one year, you

can't treat the excess (the amount that is more than the required minimum distribution) as part of your required minimum distribution for any later year. However, any amount

distributed in the year you become age 72 will be credited

toward the amount that must be distributed by April 1 of

the following year.

Chapter 1

Traditional IRAs

Page 7

Distributions after the required beginning date. The

required minimum distribution for any year after the year

you reach age 72 must be made by December 31 of that

later year.

Distributions from individual retirement accounts. If

you are the owner of a traditional IRA that is an individual

retirement account, you or your trustee must figure the required minimum distribution for each year. See Figuring

the Owner's Required Minimum Distribution below.

Distributions from individual retirement annuities. If

your traditional IRA is an individual retirement annuity,

special rules apply to figuring the required minimum distribution. For more information on rules for annuities, see

Regulations section 1.401(a)(9)-6. These regulations can

be read in many libraries, and IRS offices, and online at

the IRS.gov.

Change in marital status. For purposes of figuring your

required minimum distribution, your marital status is determined as of January 1 of each year. If your spouse is a

beneficiary of your IRA on January 1, he or she remains a

beneficiary for the entire year even if you get divorced or

your spouse dies during the year. For purposes of determining your distribution period, a change in beneficiary is

effective in the year following the year of death or divorce.

Change of beneficiary. If your spouse is the sole

beneficiary of your IRA, and he or she dies before you,

your spouse won't fail to be your sole beneficiary for the

year that he or she died solely because someone other

than your spouse is named a beneficiary for the rest of

that year. However, if you get divorced during the year

and change the beneficiary designation on the IRA during

that same year, your former spouse won't be treated as

the sole beneficiary for that year.

Figuring the Owner's Required Minimum

Distribution

Figure your required minimum distribution for each year

by dividing the IRA account balance (defined next) as of

the close of business on December 31 of the preceding

year by the applicable distribution period or life expectancy. Tables showing distribution periods and life expectancies are found in Appendix B and are discussed later.

IRA account balance. The IRA account balance is the

amount in the IRA at the end of the year preceding the

year for which the required minimum distribution is being

figured.

Contributions. Contributions increase the account

balance in the year they are made. If a contribution for last

year isn't made until after December 31 of last year, it increases the account balance for this year, but not for last

year. Disregard contributions made after December 31 of

last year in determining your required minimum distribution for this year.

Page 8

Chapter 1

Traditional IRAs

Outstanding rollovers. The IRA account balance is

adjusted by outstanding rollovers that aren't in any account at the end of the preceding year.

For a rollover from a qualified plan or another IRA that

wasn't in any account at the end of the preceding year, increase the account balance of the receiving IRA by the

rollover amount valued as of the date of receipt.

No recharacterizations of conversions made in

2018 or later. A conversion of a traditional IRA to a Roth

IRA, and a rollover from any other eligible retirement plan

to a Roth IRA, made in tax years beginning after December 31, 2017, cannot be recharacterized as having been

made to a traditional IRA.

Distributions. Distributions reduce the account balance in the year they are made. A distribution for last year

made after December 31 of last year reduces the account

balance for this year, but not for last year. Disregard distributions made after December 31 of last year in determining your required minimum distribution for this year.

Distribution period. This is the maximum number of

years over which you are allowed to take distributions

from the IRA. The period to use for 2021 is listed next to

your age as of your birthday in 2021 in Table III in Appendix B.

Life expectancy. If you must use Table I, your life expectancy for 2021 is listed in the table next to your age as

of your birthday in 2021. If you use Table II, your life expectancy is listed where the row or column containing

your age as of your birthday in 2021 intersects with the

row or column containing your spouse's age as of his or

her birthday in 2021. Both Table I and Table II are in Appendix B.

Distributions during your lifetime. Required minimum

distributions during your lifetime are based on a distribution period that is generally determined using Table III

(Uniform Lifetime) in Appendix B. However, if the sole

beneficiary of your IRA is your spouse who is more than

10 years younger than you, see Sole beneficiary spouse

who is more than 10 years younger below.

To figure the required minimum distribution for 2021, divide your account balance at the end of 2020 by the distribution period from the table. This is the distribution period

listed next to your age (as of your birthday in 2021) in Table III in Appendix B, unless the sole beneficiary of your

IRA is your spouse who is more than 10 years younger

than you.

Example. You own a traditional IRA. Your account balance at the end of 2020 was $100,000. You are married

and your spouse, who is the sole beneficiary of your IRA,

is 6 years younger than you. You turn 75 years old in

2021. You use Table III. Your distribution period is 22.9.

Your required minimum distribution for 2021 would be

$4,367 ($100,000 ÷ 22.9).

Sole beneficiary spouse who is more than 10

years younger. If the sole beneficiary of your IRA is your

spouse and your spouse is more than 10 years younger

than you, use the life expectancy from Table II (Joint Life

and Last Survivor Expectancy) in Appendix B.

The life expectancy to use is the joint life and last survivor expectancy listed where the row or column containing

your age as of your birthday in 2021 intersects with the

row or column containing your spouse's age as of his or

her birthday in 2021.

You figure your required minimum distribution for 2021

by dividing your account balance at the end of 2020 by the

life expectancy from Table II (Joint Life and Last Survivor

Expectancy) in Appendix B.

Example. You own a traditional IRA. Your account balance at the end of 2020 was $100,000. You are married

and your spouse, who is the sole beneficiary of your IRA,

is 11 years younger than you. You turn 75 in 2021 and

your spouse turns 64. You use Table II. Your joint life and

last survivor expectancy is 23.6. Your required minimum

distribution for 2021 would be $4,237 ($100,000 ÷ 23.6).

Distributions in the year of the owner's death. The required minimum distribution for the year of the owner's

death depends on whether the owner died before the required beginning date, defined earlier.

If the owner died before the required beginning date,

there is no required minimum distribution in the year of the

owner's death. For years after the year of the owner's

death, see Owner Died Before Required Beginning Date,

later, under IRA Beneficiaries.

If the owner died on or after the required beginning

date, the IRA beneficiaries are responsible for figuring and

distributing the owner's required minimum distribution in

the year of death. The owner's required minimum distribution for the year of death is generally based on Table III

(Uniform Lifetime) in Appendix B. However, if the sole

beneficiary of the IRA is the owner's spouse who is more

than 10 years younger than the owner, use the life expectancy from Table II (Joint Life and Last Survivor Expectancy).

Note. You figure the required minimum distribution for

the year in which an IRA owner dies as if the owner lived

for the entire year.

IRA Beneficiaries

The rules for determining required minimum distributions

for beneficiaries depend on the following.

• The beneficiary is the surviving spouse.

• The beneficiary is an individual (other than the surviving spouse).

• The beneficiary isn't an individual (for example, the

beneficiary is the owner's estate). (But see Trust as

beneficiary, later, for a discussion about treating trust

beneficiaries as designated beneficiaries.)

• The IRA owner died before the required beginning

date, or died on or after the required beginning date.

The following paragraphs explain the rules for required

minimum distributions and beneficiaries.

If distributions to the beneficiary from an inherited

traditional IRA are less than the required minimum

CAUTION distribution for the year, discussed in this chapter

under When Must You Withdraw Assets? (Required Minimum Distributions), you may have to pay a 50% excise

tax for that year on the amount not distributed as required.

For details, see Excess Accumulations (Insufficient Distributions) under What Acts Result in Penalties or Additional

Taxes, later in this chapter.

!

Surviving spouse. If you are the surviving spouse who is

the sole beneficiary of your deceased spouse's IRA, you

may elect to be treated as the owner and not as the beneficiary. If you elect to be treated as the owner, you determine the required minimum distribution (if any) as if you

were the owner beginning with the year you elect or are

deemed to be the owner. For details, see Inherited from

spouse under What if You Inherit an IRA, earlier in this

chapter.

Note. If you become the owner in the year your deceased spouse died, don't determine the required minimum distribution for that year using your life; rather, you

must take the deceased owner's required minimum distribution for that year (to the extent it wasn't already distributed to the owner before his or her death).

You can never make a rollover contribution of an

RMD; however, RMDs are waived for 2020 and

CAUTION you can roll over an RMD for 2020. The rollover

must be completed within 60 days after the distribution,

except that for distributions made before July 2, 2020, the

60-day rollover period was extended to August 31, 2020.

Normally, any rollover contribution of an RMD is subject to

the 6% tax on excess contributions. See chapter 1 of Pub.

590-A for more information on the tax on excess contributions.

!

For any year after the owner’s death, where a sur-

TIP viving spouse is the sole designated beneficiary

of the account and he or she fails to take a required minimum distribution (if one is required) by December 31 under the rules discussed below for beneficiaries,

he or she will be deemed the owner of the IRA. For details, see Inherited from spouse under What if You Inherit

an IRA, earlier in this chapter.

Date the designated beneficiary is determined. Generally, the designated beneficiary is determined on September 30 of the calendar year following the calendar year

of the IRA owner's death. In order to be a designated beneficiary, an individual must be a beneficiary as of the date

of death. Any person who was a beneficiary on the date of

the owner's death, but isn't a beneficiary on September 30

of the calendar year following the calendar year of the

owner's death (because, for example, he or she disclaimed entitlement or received his or her entire benefit),

won't be taken into account in determining the designated

beneficiary. An individual may be designated as a beneficiary either by the terms of the plan or, if the plan permits,

by affirmative election by the employee specifying the

beneficiary.

Chapter 1

Traditional IRAs

Page 9

Note. If a person who is a beneficiary as of the owner's

date of death dies before September 30 of the year following the year of the owner's death without disclaiming entitlement to benefits, that individual, rather than his or her

successor beneficiary, continues to be treated as a beneficiary for determining the distribution period.

For the exception to this rule, see Death of surviving

spouse prior to date distributions begin, later.

Death of a beneficiary. In general, the beneficiaries of a

deceased beneficiary must continue to take the required

minimum distributions after the deceased beneficiary's

death. However, the beneficiaries of a deceased beneficiary don't calculate required minimum distributions using

their own life expectancies. Instead, the deceased beneficiary's remaining interest must be distributed within 10

years after the beneficiary's death, or in some cases

within 10 years after the owner's death. See 10-year rule,

later.

Owner Died Before Required Beginning

Date

If the owner died before his or her required beginning date

(defined earlier), and you are an eligible designated beneficiary, you must generally base required minimum distributions for years after the year of the owner's death using

your single life expectancy shown in Table I in Appendix

B, as determined under Beneficiary an individual, later.

However, there are situations where an individual designated beneficiary may be required to take the entire account by the end of the 10th year following the year of the

owner's death. See 10-year rule, later.

If the owner’s beneficiary isn’t an individual (for example, if the beneficiary is the owner’s estate), the 5-year

rule, discussed later, applies.

More than one beneficiary. If an IRA has more than one

beneficiary or a trust is named as beneficiary, see Miscellaneous Rules for Required Minimum Distributions, later.

Special rules for surviving spouse. If the owner died

before his or her required beginning date and the surviving spouse is the sole designated beneficiary, the following rules apply.

Eligible designated beneficiaries. An IRA beneficiary

is an eligible designated beneficiary if the beneficiary is

the owner's surviving spouse, the owner's minor child, a

disabled individual, a chronically ill individual, or any other

individual who is not more than 10 years younger than the

IRA owner.

Year of first required distribution. If the owner died

before the year in which he or she reached age 72 (age

70½ if the owner was born before July 1, 1949), distributions to the spouse don't need to begin until the year in

which the owner would have reached age 72 (or age 70½,

if applicable).

Owner Died On or After Required Beginning

Date

Death of surviving spouse prior to date distributions begin. If the surviving spouse dies before December 31 of the year he or she must begin receiving required

minimum distributions, the surviving spouse will be treated

as if he or she were the owner of the IRA.

This rule doesn't apply to the surviving spouse of a surviving spouse.

If the owner died on or after his or her required beginning

date (defined earlier), and you are an eligible designated

beneficiary, you must base required minimum distributions for years after the year of the owner's death on the

longer of:

• Your single life expectancy shown in Table I in Appendix B, as determined under Beneficiary an individual

later; or

• The owner's life expectancy as determined under

Death on or after required beginning date under Beneficiary not an individual later.

Surviving spouse is sole designated beneficiary. If

the owner died on or after his or her required beginning

date and his or her spouse is the sole designated beneficiary, the life expectancy the spouse must use to figure

his or her required minimum distribution may change in a

future distribution year. This change will apply where the

spouse is older than the deceased owner or the spouse

treats the IRA as his or her own.

Designated beneficiary who is not an eligible designated beneficiary. Distributions to a designated beneficiary who is not an eligible designated beneficiary must be

completed within 10 years of the death of the owner. See

10-year rule, later.

Page 10

Chapter 1

Traditional IRAs

Example 1. Your spouse died in 2017, at age 65. You

are the sole designated beneficiary of your spouse’s traditional IRA. You don't need to take any required minimum

distribution until December 31 of 2024, the year your

spouse would have reached age 72. If you die prior to that

date, you will be treated as the owner of the IRA for purposes of determining the required distributions to your beneficiaries. For example, if you die in 2020, your beneficiaries won't have any required minimum distribution for

2020 (because you, treated as the owner, died prior to

your required beginning date). They must start taking distributions under the general rules for an owner who died

prior to the required beginning date.

Example 2. Same as Example 1, except your sole

beneficiary upon your death in 2020 is your surviving

spouse. Your surviving spouse can't wait until the year

you would have turned 72 to take distributions using his or

her life expectancy. Also, if your surviving spouse dies

prior to the date he or she is required to take a distribution,

he or she isn't treated as the owner of the account. Just

like any other individual beneficiary of an owner who dies

before the required beginning date, your surviving spouse

must start taking distributions in 2021 based on his or her

life expectancy (or elect to fully distribute the account under the 10-year rule by the end of 2030).

The second surviving spouse from Example 2

TIP above can still elect to treat the IRA as his or her

own IRA or roll over any distributions that aren't

required minimum distributions into his or her own IRA.

See Inherited from spouse under What if You Inherit an

IRA, earlier in this chapter.

5-year rule. The 5-year rule requires the IRA beneficiaries who are not taking life expectancy payments to

withdraw the entire balance of the IRA by December 31 of

the year containing the fifth anniversary of the owner’s

death. For example, if the owner died in 2019, the beneficiary would have to fully distribute the plan by December

31, 2024. The beneficiary is allowed, but not required, to

take distributions prior to that date. The 5-year rule never

applies if the owner died on or after his or her required beginning date.

The 5-year rule generally applies to all beneficiaries if the owner died in a year ending before

CAUTION 2020. It also applies to beneficiaries who are not

individuals (such as a trust) if the owner died in a year

ending after 2019. If the owner died in a year ending after

2019 and the beneficiary is an individual, see 10-year rule

next.

!

10-year rule. The 10-year rule requires the IRA beneficiaries who are not taking life expectancy payments to

withdraw the entire balance of the IRA by December 31 of

the year containing the 10th anniversary of the owner’s

death. For example, if the owner died in 2020, the beneficiary would have to fully distribute the plan by December

31, 2030. The beneficiary is allowed, but not required, to

take distributions prior to that date.

The 10-year rule applies if (1) the beneficiary is an eligible designated beneficiary who elects the 10-year rule, if

the owner died before reaching his or her required beginning date; or (2) the beneficiary is a designated beneficiary who is not an eligible designated beneficiary, regardless of whether the owner died before reaching his or her

required beginning date.

For a beneficiary receiving life expectancy payments

who is either an eligible designated beneficiary or a minor

child, the 10-year rule also applies to the remaining

amounts in the IRA upon the death of the eligible designated beneficiary or upon the minor child beneficiary reaching the age of majority, but in either of those cases, the

10-year period ends on the 10th anniversary of the beneficiary's death or the child's attainment of majority.

Individual designated beneficiaries. The terms of

most IRA plans require individual designated beneficiaries, who are eligible designated beneficiaries, to take required minimum distributions using the life expectancy

rules (explained later) unless such beneficiaries elect to

take distributions using the 5-year rule or the 10-year rule,

whichever rule applies. The deadline for making this election is December 31 of the year the beneficiary must take

the first required distribution using his or her life expectancy (or December 31 of the year containing the 5th

anniversary (or 10th anniversary for the 10-year rule) of

the owner’s death, if earlier).

If the individual designated beneficiary is not an eligible

designated beneficiary, the beneficiary is required to fully

distribute the IRA by the 10th anniversary of the owner's

death under the 10-year rule.

Beneficiary not an individual. The 5-year rule applies

in all cases where there is no individual designated beneficiary by September 30 of the year following the year of

the owner’s death or where any beneficiary isn't an individual (for example, the owner named his or her estate as

the beneficiary).

Review the IRA plan documents or consult with

TIP the IRA custodian or trustee for specifics on the 5-

or 10-year rule provisions, where applicable, of

any particular plan.

If the 5-year rule applies, the amount remaining in

the IRA, if any, after December 31 of the year

CAUTION containing the 5th anniversary of the owner's

death is subject to the 50% excise tax detailed in Excess

Accumulations (Insufficient Distributions), later.

!

If the 10-year rule applies, the amount remaining

in the IRA, if any, after December 31 of the year

CAUTION containing the 10th anniversary of the owner's

death is subject to the 50% excise tax detailed in Excess

Accumulations (Insufficient Distributions), later.

!

Figuring the Beneficiary's Required

Minimum Distribution

How you figure the required minimum distribution depends on whether the beneficiary is an individual or some

other entity, such as a trust or estate.

Beneficiary an individual. If the beneficiary is an individual, figure the required minimum distribution for 2021

as follows.

Death on or after required beginning date. Divide

the account balance at the end of 2020 by the appropriate

life expectancy from Table I (Single Life Expectancy) in

Appendix B. Determine the appropriate life expectancy as

follows.

Spouse as sole designated beneficiary. Use the life

expectancy listed in the table next to the spouse's age (as

of the spouse's birthday in 2021). Use this life expectancy

even if the spouse died in 2021. If the spouse died in 2020

or a prior year, use the life expectancy listed in the table

next to the spouse’s age as of his or her birthday in the

year he or she died. Reduce the life expectancy by 1 for

each year since the year following the spouse’s death.

You can't make a rollover contribution of your required minimum distributions in years after the

CAUTION owner's death. Such contribution is subject to the

6% tax on excess contributions. See chapter 1 of Pub.

590-A for more information on the tax on excess contributions.

!

Chapter 1

Traditional IRAs

Page 11

Other designated beneficiary. Use the life expectancy listed in the table next to the beneficiary’s age as of

his or her birthday in the year following the year of the

owner’s death. Reduce the life expectancy by 1 for each

year since the year following the owner’s death.

As discussed in Death of a beneficiary, earlier, if the

designated beneficiary dies before his or her portion of the

account is fully distributed, continue to use the designated

beneficiary’s remaining life expectancy to determine the

amount of distributions. However, any remaining balance

in the account must be distributed within 10 years of the

beneficiary's death.

Example. Your brother died in 2020 at age 74. You

are the designated beneficiary of your brother’s traditional

IRA. You are 65 years old in 2021, which is the year following your brother's death. You use Table I and see that

your life expectancy in 2021 is 21.0. If the IRA was worth

$100,000 at the end of 2020, your required minimum distribution for 2021 would be $4,762 ($100,000 ÷ 21.0).

Death before required beginning date. If the IRA

owner dies before the required beginning date and the

10-year rule applies, no distribution is required for any

year before the 10th year.

Which Table Do You Use

To Determine Your

Required Minimum Distribution?

There are three different life expectancy tables. The tables are found in Appendix B of this publication. You use

only one of them to determine your required minimum distribution for each traditional IRA. Determine which one to

use as follows.

Reminder. In using the tables for lifetime distributions,

marital status is determined as of January 1 each year. Divorce or death after January 1 is generally disregarded

until the next year. However, if you divorce and change

the beneficiary designation in the same year, your former

spouse can't be considered your sole beneficiary for that

year.

Table I (Single Life Expectancy). Use Table I for years

after the year of the owner's death if either of the following

applies.

• You are an individual and a designated beneficiary,

but not the owner's surviving spouse and sole designated beneficiary.

Beneficiary not an individual. If the beneficiary isn't an

individual, determine the required minimum distribution for

2021 as follows.

• The beneficiary isn't an individual and the owner died

Death on or after required beginning date. Divide

the account balance at the end of 2020 by the appropriate

life expectancy from Table I (Single Life Expectancy) in

Appendix B. Use the life expectancy listed next to the

owner's age as of his or her birthday in the year of death.

Reduce the life expectancy by 1 for each year after the

year of death.

Surviving spouse. If you are the owner's surviving

spouse and sole designated beneficiary, you will also use

Table I for your required minimum distributions. However,

if the owner hadn't reached age 72 when he or she died,

and you don't elect to be treated as the owner of the IRA,

you don't have to take distributions until the year in which

the owner would have reached age 72.

Death before required beginning date. If the IRA

owner dies before the required beginning date and the

beneficiary isn't an individual (for example, the owner

named his or her estate as the beneficiary), the 5-year

rule applies. No distribution is required for any year before

the fifth year. See 5-year rule, earlier.

Table II (Joint Life and Last Survivor Expectancy).

Use Table II if you are the IRA owner and your spouse is

both your sole designated beneficiary and more than 10

years younger than you.

Note. The required beginning date was defined earlier

under Distributions by the required beginning date.

Example. The owner died in 2020 at the age of 80,

and the owner's traditional IRA went to his estate. The account balance at the end of 2020 was $100,000. In 2021,

the required minimum distribution would be $10,870

($100,000 ÷ 9.2 (the owner's life expectancy in the year of

death, 10.2, reduced by 1)).

If the owner had died in 2020 at the age of 68 (before

their required beginning date), the entire account would

have to be distributed by the end of 2025. See Death on

or after required beginning date and Death before required beginning date, earlier, for more information.

Page 12

Chapter 1

Traditional IRAs

on or after the required beginning date, defined earlier.

Note. Use this table in the year of the owner's death if

the owner died after the required beginning date and this

is the table that would have been used had he or she not

died.

Table III (Uniform Lifetime). Use Table III if you are the

IRA owner and your spouse isn't both the sole designated

beneficiary of your IRA and more than 10 years younger

than you.

Note. Use this table in the year of the owner's death if

the owner died after the required beginning date and this

is the table that would have been used had he or she not

died.

No table. Don't use any of the tables if either the 5-year

rule or the 10-year rule (discussed earlier) applies.

What Age(s) Do You Use With the

Table(s)?

Miscellaneous Rules for

Required Minimum Distributions

The age or ages to use with each table are explained below.

The following rules may apply to you.

Table I (Single Life Expectancy). If you are a designated beneficiary figuring your first distribution, use your age

as of your birthday in the year distributions must begin.

This is usually the calendar year immediately following the

calendar year of the owner's death. After the first distribution year, reduce your life expectancy by 1 for each subsequent year. If you are the owner's surviving spouse and

the sole designated beneficiary, this is generally the year

in which the owner would have reached age 72. After the

first distribution year, use your age as of your birthday in

each subsequent year.

Example 1. You are an eligible designated beneficiary

figuring your first required minimum distribution. Distributions must begin in 2021. You become age 57 years old in

2021. You use Table I.

Example 2. You are the owner's surviving spouse and

the sole designated beneficiary. The owner would have

turned age 72 in 2021. Distributions begin in 2021. You

become 69 years old in 2021. You use Table I. Your distribution period for 2021 is 17.8.

Owner's life expectancy. You use the owner’s life expectancy to calculate required minimum distributions

when the owner dies on or after the required beginning

date and there is no designated beneficiary as of September 30 of the year following the year of the owner’s death.

In this case, use the owner’s life expectancy for his or her

age as of the owner’s birthday in the year of death and reduce it by 1 for each subsequent year.

Or use the owner’s life expectancy in the year of death

(reduced by 1 for each subsequent year) if the owner is

younger than you.

Table II (Joint Life and Last Survivor Expectancy).

For your first distribution by the required beginning date,

use your age and the age of your designated beneficiary

as of your birthdays in the year you become age 72. Your

combined life expectancy is at the intersection of your

ages.

If you are figuring your required minimum distribution

for 2021, use your ages as of your birthdays in 2021. For

each subsequent year, use your and your spouse's ages

as of your birthdays in the subsequent year.

Table III (Uniform Lifetime). For your first distribution by

your required beginning date, use your age as of your

birthday in the year you become age 72.

If you are figuring your required minimum distribution

for 2021, use your age as of your birthday in 2021. For

each subsequent year, use your age as of your birthday in

the subsequent year.

Installments allowed. The yearly required minimum distribution can be taken in a series of installments (monthly,

quarterly, etc.) as long as the total distributions for the

year are at least as much as the minimum required

amount.

More than one IRA. If you have more than one traditional IRA, you must determine a separate required minimum distribution for each IRA. However, you can total

these minimum amounts and take the total from any one

or more of the IRAs.

More than minimum received. If, in any year, you receive more than the required minimum amount for that

year, you won't receive credit for the additional amount

when determining the minimum required amounts for future years. This doesn't mean that you don't reduce your

IRA account balance. It means that if you receive more

than your required minimum distribution in one year, you

can't treat the excess (the amount that is more than the required minimum distribution) as part of your required minimum distribution for any later year. However, any amount

distributed in your age 72 year will be credited toward the

amount that must be distributed by April 1 of the following

year.

Multiple individual beneficiaries. If, as of September

30 of the year following the year in which the owner dies,

there is more than one beneficiary, the beneficiary with

the shortest life expectancy will be the designated beneficiary if both of the following apply.

• All of the beneficiaries are individuals.

• The account or benefit hasn't been divided into separate accounts or shares for each beneficiary.

Separate accounts. A single IRA can be split into

separate accounts or shares for each beneficiary. These

separate accounts or shares can be established at any

time, either before or after the owner's required beginning

date. Generally, these separate accounts or shares are

combined for purposes of determining the minimum required distribution. However, these separate accounts or

shares won't be combined for required minimum distribution purposes after the death of the IRA owner if the separate accounts or shares are established by the end of the

year following the year of the IRA owner's death.

The separate account rules can't be used by beneficiaries of a trust.

Trust as beneficiary. A trust can't be a designated beneficiary even if it is a named beneficiary. However, the

beneficiaries of a trust will be treated as having been designated beneficiaries for purposes of determining required

minimum distributions after the owner’s death (or after the

death of the owner’s surviving spouse described in Death

Chapter 1

Traditional IRAs

Page 13

of surviving spouse prior to date distributions begin, earlier) if all of the following are true.

• The return of nondeductible contributions, discussed

1. The trust is a valid trust under state law, or would be

but for the fact that there is no corpus.

Although a conversion of a traditional IRA is considered a rollover for Roth IRA purposes, it isn't

CAUTION an exception to the rule that distributions from a

traditional IRA are taxable in the year you receive them.

Conversion distributions are includible in your gross income subject to this rule and the special rules for conversions explained in chapter 1 of Pub. 590-A.

2. The trust is irrevocable or became, by its terms, irrevocable upon the owner's death.

3. The beneficiaries of the trust who are beneficiaries

with respect to the trust's interest in the owner's benefit are identifiable from the trust instrument.

4. The trustee of the trust provides the IRA custodian or

trustee with the documentation required by that custodian or trustee. The trustee of the trust should contact

the IRA custodian or trustee for details on the documentation required for a specific plan.

The deadline for the trustee to provide the beneficiary

documentation to the IRA custodian or trustee is October

31 of the year following the year of the owner's death.

Trust beneficiary is another trust. If the beneficiary

of the trust (which is the beneficiary of the IRA) is another

trust and both trusts meet the above requirements, the

beneficiaries of the other trust will be treated as having

been designated as beneficiaries for purposes of determining the distribution period.

Note. The separate account rules, discussed earlier,

can't be used by beneficiaries of a trust.

You may want to contact a tax advisor to comply

TIP with this complicated area of the tax law.

Annuity distributions from an insurance company.

Special rules apply if you receive distributions from your

traditional IRA as an annuity purchased from an insurance

company. See Regulations sections 1.401(a)(9)-6 and

54.4974-2. These regulations can be found in many libraries, and IRS offices, and online at IRS.gov.

Are Distributions Taxable?

In general, distributions from a traditional IRA are taxable

in the year you receive them.

Failed financial institutions. Distributions from a traditional IRA are taxable in the year you receive them even if

they are made without your consent by a state agency as

receiver of an insolvent savings institution. This means

you must include such distributions in your gross income

unless you roll them over.

Exceptions. Exceptions to distributions from traditional

IRAs being taxable in the year you receive them are:

• Rollovers (see chapter 1 of Pub. 590-A);

• Qualified charitable distributions, discussed later;

• Tax-free withdrawals of contributions (see chapter 1 of

Pub. 590-A); and

Page 14

Chapter 1

Traditional IRAs

later under Distributions Fully or Partly Taxable.

!

Qualified charitable distributions. A qualified charitable distribution (QCD) is generally a nontaxable distribution made directly by the trustee of your IRA (other than a

SEP or SIMPLE IRA) to an organization eligible to receive

tax-deductible contributions. You must be at least age

701/2 when the distribution was made. Also, you must

have the same type of acknowledgment of your contribution that you would need to claim a deduction for a charitable contribution. See Substantiation Requirements in

Pub. 526.

The maximum annual exclusion for QCDs is $100,000.

Any QCD in excess of the $100,000 exclusion limit is included in income as any other distribution. If you file a joint

return, your spouse can also have a QCD and exclude up

to $100,000. The amount of the QCD is limited to the

amount of the distribution that would otherwise be included in income. If your IRA includes nondeductible contributions, the distribution is first considered to be paid out of

otherwise taxable income.

A QCD will count towards your required minimum

TIP distribution, discussed earlier.

!

You can't claim a charitable contribution deduction for any QCD not included in your income.

CAUTION

Example. On December 23, 2020, Jeff, age 75, directed the trustee of his IRA to make a distribution of $25,000

directly to a qualified 501(c)(3) organization (a charitable

organization eligible to receive tax-deductible contributions). The total value of Jeff's IRA is $30,000 and consists of $20,000 of deductible contributions and earnings

and $10,000 of nondeductible contributions (basis). Since

Jeff is at least age 701/2 and the distribution is made directly by the trustee to a qualified organization, the part of

the distribution that would otherwise be includible in Jeff's

income ($20,000) is a QCD.

In this case, Jeff has made a QCD of $20,000 (his deductible contributions and earnings). Because Jeff made a

distribution of nondeductible contributions from his IRA,

he must file Form 8606 with his return. Jeff includes the

total distribution ($25,000) on line 4a of Form 1040-SR.

He completes Form 8606 to determine the amount to enter on line 4b of Form 1040-SR and the remaining basis in

his IRA. Jeff enters -0- on line 4b. This is Jeff's only IRA

and he took no other distributions in 2020. He also enters

“QCD” next to line 4b to indicate a qualified charitable distribution.

After the distribution, his basis in his IRA is $5,000. If

Jeff itemizes deductions and files Schedule A (Form

1040) with Form 1040-SR, the $5,000 portion of the distribution attributable to the nondeductible contributions can

be deducted as a charitable contribution, subject to AGI

limits. He can't take the charitable contribution deduction

for the $20,000 portion of the distribution that wasn't included in his income.

Fully taxable. If only deductible contributions were made

to your traditional IRA (or IRAs, if you have more than

one), you have no basis in your IRA. Because you have

no basis in your IRA, any distributions are fully taxable

when received. See Reporting and Withholding Requirements for Taxable Amounts, later.

One-time qualified Health Savings Account (HSA)

funding distribution. You may be able to make a qualified HSA funding distribution from your traditional IRA or

Roth IRA to your HSA. You can't make this distribution

from an ongoing SEP IRA or SIMPLE IRA. For this purpose, a SEP IRA or SIMPLE IRA is ongoing if an employer

contribution is made for the plan year ending with or within

your tax year in which the distribution would be made. The

distribution must be less than or equal to your maximum

annual HSA contribution.

This distribution must be made directly by the trustee of

the IRA to the trustee of the HSA. The distribution isn't included in your income, isn't deductible, and reduces the

amount that can be contributed to your HSA. You must

make the distribution by the end of the year; the special

rule allowing contributions to your HSA for the previous

year if made by your tax return filing deadline doesn't apply. The qualified HSA funding distribution is reported on

Form 8889 for the year in which the distribution is made.

Partly taxable. If you made nondeductible contributions

or rolled over any after-tax amounts to any of your traditional IRAs, you have a cost basis (investment in the contract) equal to the amount of those contributions. These

nondeductible contributions aren't taxed when they are

distributed to you. They are a return of your investment in

your IRA.

Only the part of the distribution that represents nondeductible contributions and rolled over after-tax amounts

(your cost basis) is tax free. If nondeductible contributions

have been made or after-tax amounts have been rolled

over to your IRA, distributions consist partly of nondeductible contributions (basis) and partly of deductible contributions, earnings, and gains (if there are any). Until all of

your basis has been distributed, each distribution is partly

nontaxable and partly taxable.

One-time transfer. Generally, only one qualified HSA

funding distribution is allowed during your lifetime. If you

own two or more IRAs, and want to use amounts in multiple IRAs to make a qualified HSA funding distribution, you

must first make an IRA-to-IRA transfer of the amounts to

be distributed into a single IRA, and then make the

one-time qualified HSA funding distribution from that IRA.

Testing period rules apply. If at any time during the

testing period you cease to meet all requirements to be an

eligible individual, the amount of the qualified HSA funding

distribution is included in your gross income. The qualified

HSA funding distribution is included in gross income in the

tax year you first fail to be an eligible individual. This

amount is subject to the 10% additional tax (unless the

failure is due to disability or death).

More information. See Pub. 969 for additional information about this distribution.

Ordinary income. Distributions from traditional IRAs that

you include in income are taxed as ordinary income.

No special treatment. In figuring your tax, you can't use

the 10-year tax option or capital gain treatment that applies to lump-sum distributions from qualified retirement

plans.

If you were affected by a qualified disaster, see

TIP chapter 4.

Distributions Fully or Partly Taxable

Distributions from your traditional IRA may be fully or

partly taxable, depending on whether your IRA includes

any nondeductible contributions.

Form 8606. You must complete Form 8606, and attach it

to your return, if you receive a distribution from a traditional IRA and have ever made nondeductible contributions or rolled over after-tax amounts to any of your traditional IRAs. Using the form, you will figure the nontaxable

distributions for 2020, and your total IRA basis for 2020

and earlier years. See the illustrated Forms 8606 in this

chapter.

Note. If you are required to file Form 8606, but you

aren't required to file an income tax return, you must still

file Form 8606. Complete Form 8606, sign it, and send it

to the IRS at the time and place you would otherwise file

an income tax return.

Figuring the Nontaxable and Taxable

Amounts

If your traditional IRA includes nondeductible contributions

and you received a distribution from it in 2020, you must

use Form 8606 to figure how much of your 2020 IRA distribution is tax free.

Note. When figuring the nontaxable and taxable

amounts of distributions made prior to death in the year

the IRA account owner dies, the value of all traditional (including SEP) and SIMPLE IRAs should be figured as of

the date of death instead of December 31.

Contribution and distribution in the same year. If you

received a distribution in 2020 from a traditional IRA and

you also made contributions to a traditional IRA for 2020

that may not be fully deductible because of the income

limits, you can use Worksheet 1-1 to figure how much of

your 2020 IRA distribution is tax free and how much is taxable. Then you can figure the amount of nondeductible

contributions to report on Form 8606. Follow the instructions under Reporting your nontaxable distribution on

Chapter 1

Traditional IRAs

Page 15

Form 8606 next to figure your remaining basis after the

distribution.

Reporting your nontaxable distribution on Form

8606. To report your nontaxable distribution and to figure

the remaining basis in your traditional IRA after distributions, you must complete Worksheet 1-1 before completing Form 8606. Then follow these steps to complete Form

8606.

1. Use Worksheet 1-2 in chapter 1 of Pub. 590-A, or the

IRA Deduction Worksheet in the Form 1040 or

1040-SR, or 1040-NR instructions to figure your deductible contributions to traditional IRAs to report on

Schedule 1 (Form 1040), line 19.

2. After you complete Worksheet 1-2 in chapter 1 of

Pub. 590-A or the IRA Deduction Worksheet in the

form instructions, enter your nondeductible contributions to traditional IRAs on line 1 of Form 8606.

3. Complete lines 2 through 5 of Form 8606.

4. If line 5 of Form 8606 is less than line 8 of Worksheet

1-1, complete lines 6 through 15c of Form 8606 and

stop here.

5. If line 5 of Form 8606 is equal to or greater than line 8

of Worksheet 1-1, follow instructions 6 and 7 next.

Don't complete lines 6 through 12 of Form 8606.

6. Enter the amount from line 8 of Worksheet 1-1 on

lines 13 and 17 of Form 8606.

7. Complete line 14 of Form 8606.

8. Enter the amount from line 9 of Worksheet 1-1 (or, if

you entered an amount on line 11, the amount from

that line) on line 15a of Form 8606.

Page 16

Chapter 1

Traditional IRAs

Example. Rose Green has made the following contributions to her traditional IRAs.

Year

2013

2014

2015

2016

2017

2018

2019

Totals

Deductible

2,000

2,000

2,000

1,000

1,000

1,000

700

$9,700

Nondeductible

-0-0-0-0-0-0300

$300

Rose needs to complete Worksheet 1-1 to determine if

her IRA deduction for 2020 will be reduced or eliminated.

In 2020, she makes a $2,000 contribution that may be

partly nondeductible. She also receives a distribution of

$5,000 for conversion to a Roth IRA. She completed the

conversion before December 31, 2020, and didn’t recharacterize any contributions. At the end of 2020, the fair

market values of her accounts, including earnings, total

$20,000. She didn't receive any tax-free distributions in

earlier years. The amount she includes in income for 2020

is figured on Worksheet 1-1.

The illustrated Form 8606 for Rose shows the information required when you need to use Worksheet 1-1 to

figure your nontaxable distribution. Assume that the $500

entered on Form 8606, line 1, is the amount Rose figured

using instructions 1 and 2 given earlier under Reporting

your nontaxable distribution on Form 8606.

Worksheet 1-1. Figuring the Taxable Part of Your IRA

Distribution

Keep for Your Records

Use only if you made contributions to a traditional IRA for 2020 that may not be fully deductible and have to figure the

taxable part of your 2020 distributions to determine your modified AGI. See Limit if Covered by Employer Plan in

chapter 1 of Pub. 590-A.

Form 8606 and the related instructions will be needed when using this worksheet.

Note. When used in this worksheet, the term “outstanding rollover” refers to an amount distributed from a traditional

IRA as part of a rollover that, as of December 31, 2020, hadn't yet been reinvested in another traditional IRA, but was still

eligible to be rolled over tax free.

1. Enter the basis in your traditional IRAs as of December 31, 2019

...................

1.

2. Enter the total of all contributions made to your traditional IRAs during 2020 and all

contributions made during 2021 that were for 2020, whether or not deductible. Don't

include rollover contributions properly rolled over into IRAs. Also, don't include certain

returned contributions described in the instructions for line 7 of Form 8606 . . . . . . . . . . .

2.

3. Add lines 1 and 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.

4. Enter the value of all your traditional IRAs as of December 31, 2020 (include any

outstanding rollovers from traditional IRAs to other traditional IRAs). Subtract any

repayments of qualified disaster distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.

5. Enter the total distributions from traditional IRAs (including amounts converted to Roth

IRAs that will be shown on line 16 of Form 8606) received in 2020. (Don't include

outstanding rollovers included on line 4 or any rollovers between traditional IRAs

completed by December 31, 2020. Also, don't include certain returned contributions

described in the instructions for line 7 of Form 8606.) Do include repayments of

qualified disaster distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.

6.

Add lines 4 and 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6.

7. Divide line 3 by line 6. Enter the result as a decimal (rounded to at least three places).

If the result is 1.000 or more, enter 1.000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7.

8. Nontaxable portion of the distribution.

Multiply line 5 by line 7. Enter the result here and on lines 13 and 17 of Form

8606 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8.

9. Taxable portion of the distribution (before adjustment for conversions).

Subtract line 8 from line 5. Enter the result here, and if there are no amounts converted

to Roth IRAs, stop here and enter the result on line 15a of Form 8606 . . . . . . . . . . . . . . .

9.

10. Enter the amount included on line 9 that is allocable to amounts converted to Roth

IRAs by December 31, 2020. (See Note at the end of this worksheet.) Enter here and

on line 18 of Form 8606 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.

11. Taxable portion of the distribution (after adjustments for conversions).

Subtract line 10 from line 9. Enter the result here and on line 15a of Form 8606 . . . . . . .

11.

Note. If the amount on line 5 of this worksheet includes an amount converted to a Roth IRA by December 31, 2020, you must

determine the percentage of the distribution allocable to the conversion. To figure the percentage, divide the amount converted

(from line 16 of Form 8606) by the total distributions shown on line 5. To figure the amounts to include on line 10 of this worksheet

and on line 18 of Form 8606, multiply line 9 of the worksheet by the percentage you figured.

Chapter 1

Traditional IRAs

Page 17

Worksheet 1-1. Figuring the Taxable Part of Your IRA Distribution—Illustrated

Use only if you made contributions to a traditional IRA for 2020 that may not be fully deductible and have to figure the

taxable part of your 2020 distributions to determine your modified AGI. See Limit if Covered by Employer Plan in

chapter 1 of Pub. 590-A.

Form 8606 and the related instructions will be needed when using this worksheet.

Note. When used in this worksheet, the term “outstanding rollover ” refers to an amount distributed from a traditional

IRA as part of a rollover that, as of December 31, 2020, hadn't yet been reinvested in another traditional IRA, but was still

eligible to be rolled over tax free.

1. Enter the basis in your traditional IRAs as of December 31, 2019

.......................

1.

300

2. Enter the total of all contributions made to your traditional IRAs during 2020 and all

contributions made during 2021 that were for 2020, whether or not deductible. Don't

include rollover contributions properly rolled over into IRAs. Also, don't include certain

returned contributions described in the instructions for line 7 of Form 8606 . . . . . . . . . . . . . . .

2.

2,000

3. Add lines 1 and 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.

2,300

4. Enter the value of all your traditional IRAs as of December 31, 2020 (include any

outstanding rollovers from traditional IRAs to other traditional IRAs). Subtract any

repayments of qualified disaster distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.

20,000

5. Enter the total distributions from traditional IRAs (including amounts converted to Roth

IRAs that will be shown on line 16 of Form 8606) received in 2020. (Don't include

outstanding rollovers included on line 4 or any rollovers between traditional IRAs

completed by December 31, 2020. Also, don't include certain returned contributions

described in the instructions for line 7 of Form 8606.) Do include repayments of qualified

disaster distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.

5,000

Add lines 4 and 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.

25,000

6.

7. Divide line 3 by line 6. Enter the result as a decimal (rounded to at least three places).

If the result is 1.000 or more, enter 1.000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7.

0.092

8. Nontaxable portion of the distribution.

Multiply line 5 by line 7. Enter the result here and on lines 13 and 17 of Form 8606 . . . . . . . .

8.

460

9. Taxable portion of the distribution (before adjustment for conversions).

Subtract line 8 from line 5. Enter the result here, and if there are no amounts converted to

Roth IRAs, stop here and enter the result on line 15a of Form 8606 . . . . . . . . . . . . . . . . . . . . .

9.

4,540

10. Enter the amount included on line 9 that is allocable to amounts converted to Roth IRAs by

December 31, 2020. (See Note at the end of this worksheet.) Enter here and on line 18 of

Form 8606 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.

4,540

11. Taxable portion of the distribution (after adjustments for conversions).

Subtract line 10 from line 9. Enter the result here and on line 15a of Form 8606 . . . . . . . . . . . 11.

-0-

Note. If the amount on line 5 of this worksheet includes an amount converted to a Roth IRA by December 31, 2020, you must

determine the percentage of the distribution allocable to the conversion. To figure the percentage, divide the amount converted

(from line 16 of Form 8606) by the total distributions shown on line 5. To figure the amounts to include on line 10 of this worksheet

and on line 18 of Form 8606, multiply line 9 of the worksheet by the percentage you figured.

Page 18

Chapter 1

Traditional IRAs

Form

8606

Nondeductible IRAs

OMB No. 1545-0074

2020

▶ Go to www.irs.gov/Form8606 for instructions and the latest information.

▶ For coronavirus-related distributions, see the instructions.

Department of the Treasury

Internal Revenue Service (99)

Attachment

Sequence No. 48

▶ Attach to 2020 Form 1040, 1040-SR, or 1040-NR.

Your social security number

Name. If married, file a separate form for each spouse required to file 2020 Form 8606. See instructions.

Rose Green

Part I

▲

Fill in Your Address

Only if You Are

Filing This Form by

Itself and Not With

Your Tax Return

001-00-0000

Home address (number and street, or P.O. box if mail is not delivered to your home)

Apt. no.

City, town or post office, state, and ZIP code. If you have a foreign address, also complete the spaces below (see instructions).

Foreign country name

Foreign province/state/county

Foreign postal code

Nondeductible Contributions to Traditional IRAs and Distributions From Traditional, SEP, and SIMPLE IRAs

Complete this part only if one or more of the following apply.

• You made nondeductible contributions to a traditional IRA for 2020.

• You took distributions from a traditional, SEP, or SIMPLE IRA in 2020 and you made nondeductible contributions to a

traditional IRA in 2020 or an earlier year. For this purpose, a distribution does not include a rollover (other than a

repayment of a qualified disaster distribution (see 2020 Forms 8915-C, 8915-D, and 8915-E)), qualified charitable

distribution, one-time distribution to fund an HSA, conversion, recharacterization, or return of certain contributions.

• You converted part, but not all, of your traditional, SEP, and SIMPLE IRAs to Roth IRAs in 2020 and you made

nondeductible contributions to a traditional IRA in 2020 or an earlier year.

1

2

3

4

5

Enter your nondeductible contributions to traditional IRAs for 2020, including those made for 2020

from January 1, 2021, through April 15, 2021. See instructions . . . . . . . . . . . . .

Enter your total basis in traditional IRAs. See instructions . . . . . . . . . . . . . . .

Add lines 1 and 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

▶ Enter the amount from line 3 on line 14.

No

In 2020, did you take a distribution

Do not complete the rest of Part I.

from traditional, SEP, or SIMPLE IRAs,

or make a Roth IRA conversion?

▶ Go to line 4.

Yes

Enter those contributions included on line 1 that were made from January 1, 2021, through April 15, 2021

Subtract line 4 from line 3 . . . . . . . . . . . . . . . . . . . . . . . . .

6

Enter the value of all your traditional, SEP, and SIMPLE IRAs as of December

31, 2020, plus any outstanding rollovers. Subtract any repayments of qualified

disaster distributions (see 2020 Forms 8915-C, 8915-D, and 8915-E) . . .

7

Enter your distributions from traditional, SEP, and SIMPLE IRAs in 2020. Do not

include rollovers (other than repayments of qualified disaster distributions (see

2020 Forms 8915-C, 8915-D, and 8915-E)), qualified charitable distributions, a

one-time distribution to fund an HSA, conversions to a Roth IRA, certain

returned contributions, or recharacterizations of traditional IRA contributions

(see instructions) . . . . . . . . . . . . . . . . . . . .

8

9

10

11

12

13

14

15a

500

300

800

4

5

0

800

13

14

15a

460*

340

6

7

Enter the net amount you converted from traditional, SEP, and SIMPLE IRAs to

Roth IRAs in 2020. Also enter this amount on line 16 . . . . . . . . .

8

Add lines 6, 7, and 8 . . . . . . . . . . .

9

Divide line 5 by line 9. Enter the result as a decimal rounded to at least 3

×

.

places. If the result is 1.000 or more, enter “1.000” . . . . . . . . .

10

Multiply line 8 by line 10. This is the nontaxable portion of the amount you

converted to Roth IRAs. Also enter this amount on line 17 . . . . . . .

11

Multiply line 7 by line 10. This is the nontaxable portion of your distributions

that you did not convert to a Roth IRA . . . . . . . . . . . . .

12

Add lines 11 and 12. This is the nontaxable portion of all your distributions . . . . . . . . .

Subtract line 13 from line 3. This is your total basis in traditional IRAs for 2020 and earlier years .

Subtract line 12 from line 7 . . . . . . . . . . . . . . . . . . . . . . . . .

b Enter the amount on line 15a attributable to qualified disaster distributions from 2020 Forms 8915-C,

8915-D, and 8915-E (see instructions). Also, enter this amount on 2020 Form 8915-C, line 23; 2020

Form 8915-D, line 22; or 2020 Form 8915-E, line 13, as applicable . . . . . . . . . . . .

c Taxable amount. Subtract line 15b from line 15a. If more than zero, also include this amount on 2020

Form 1040, 1040-SR, or 1040-NR, line 4b . . . . . . . . . . . . . . . . . . . .

Note: You may be subject to an additional 10% tax on the amount on line 15c if you were under age

59½ at the time of the distribution. See instructions.

For Privacy Act and Paperwork Reduction Act Notice, see separate instructions.

1

2

3

Cat. No. 63966F

15b

15c

0

Form 8606 (2020)

* From Worksheet 1 - 1 in Publication 590-B

Chapter 1

Traditional IRAs

Page 19

Page 2

Form 8606 (2020)

Part II

2020 Conversions From Traditional, SEP, or SIMPLE IRAs to Roth IRAs

Complete this part if you converted part or all of your traditional, SEP, and SIMPLE IRAs to a Roth IRA in 2020.

16

17

18

If you completed Part I, enter the amount from line 8. Otherwise, enter the net amount you converted

from traditional, SEP, and SIMPLE IRAs to Roth IRAs in 2020

. . . . . . . . . . . . .

If you completed Part I, enter the amount from line 11. Otherwise, enter your basis in the amount on

line 16 (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . .

Taxable amount. Subtract line 17 from line 16. If more than zero, also include this amount on 2020

Form 1040, 1040-SR, or 1040-NR, line 4b . . . . . . . . . . . . . . . . . . . .

Part III

16

5,000

17

460

18

4,540*

Distributions From Roth IRAs

Complete this part only if you took a distribution from a Roth IRA in 2020. For this purpose, a distribution does not include

a rollover (other than a repayment of a qualified disaster distribution (see 2020 Forms 8915-C, 8915-D, and 8915-E)),

qualified charitable distribution, one-time distribution to fund an HSA, recharacterization, or return of certain contributions

(see instructions).

19

20

21

22

23

24

25a

Enter your total nonqualified distributions from Roth IRAs in 2020, including any qualified first-time

homebuyer distributions, and any qualified disaster distributions (see instructions). Also see 2020

Forms 8915-C, 8915-D, and 8915-E . . . . . . . . . . . . . . . . . . . . . .

Qualified first-time homebuyer expenses (see instructions). Do not enter more than $10,000 reduced

by the total of all your prior qualified first-time homebuyer distributions . . . . . . . . . .

Subtract line 20 from line 19. If zero or less, enter -0- . . . . . . . . . . . . . . . .

Enter your basis in Roth IRA contributions (see instructions). If line 21 is zero, stop here . . . . .

Subtract line 22 from line 21. If zero or less, enter -0- and skip lines 24 and 25. If more than zero, you

may be subject to an additional tax (see instructions) . . . . . . . . . . . . . . . .

Enter your basis in conversions from traditional, SEP, and SIMPLE IRAs and rollovers from qualified

retirement plans to a Roth IRA. See instructions . . . . . . . . . . . . . . . . . .

Subtract line 24 from line 23. If zero or less, enter -0- and skip lines 25b and 25c . . . . . . .

b Enter the amount on line 25a attributable to qualified disaster distributions from 2020 Forms 8915-C,

8915-D, and 8915-E (see instructions). Also, enter this amount on 2020 Form 8915-C, line 24; 2020

Form 8915-D, line 23; or 2020 Form 8915-E, line 14, as applicable . . . . . . . . . . . .

c Taxable amount. Subtract line 25b from line 25a. If more than zero, also include this amount on 2020

Form 1040, 1040-SR, or 1040-NR, line 4b . . . . . . . . . . . . . . . . . . . .

Your signature

Print/Type preparer’s name

Firm’s name

▶

Firm’s address ▶

*From Worksheet 1 - 1 in Publication 590-B

Page 20

Chapter 1

▲

Paid

Preparer

Use Only

20

21

22

23

24

25a

25b

25c

Under penalties of perjury, I declare that I have examined this form, including accompanying attachments, and to the best of my knowledge and

belief, it is true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge.

▲

Sign Here Only if You

Are Filing This Form

by Itself and Not With

Your Tax Return

19

Traditional IRAs

Preparer’s signature

Date

Date

Check

if PTIN

self-employed

Firm’s EIN ▶

Phone no.

Form 8606 (2020)

Other Special IRA

Distribution Situations

Two other special IRA distribution situations are discussed next.

Distribution of an annuity contract from your IRA account. You can tell the trustee or custodian of your traditional IRA account to use the amount in the account to buy

an annuity contract for you. You aren't taxed when you receive the annuity contract (unless the annuity contract is

being converted to an annuity held by a Roth IRA). You

are taxed when you start receiving payments under that

annuity contract.

Tax treatment. If only deductible contributions were

made to your traditional IRA since it was opened (this includes all your traditional IRAs, if you have more than

one), the annuity payments are fully taxable.

If any of your traditional IRAs include both deductible

and nondeductible contributions, the annuity payments

are taxed as explained earlier under Distributions Fully or

Partly Taxable.

Cashing in retirement bonds. When you cash in retirement bonds, you are taxed on the entire amount you receive. Unless you have already cashed them in, you will

be taxed on the entire value of your bonds in the year in

which you reach age 701/2. The value of the bonds is the

amount you would have received if you had cashed them

in at the end of that year. When you later cash in the

bonds, you won't be taxed again.

Reporting and Withholding

Requirements for Taxable Amounts

If you receive a distribution from your traditional IRA, you

will receive Form 1099-R, or a similar statement. IRA distributions are shown in boxes 1 and 2a of Form 1099-R. A

number or letter code in box 7 tells you what type of distribution you received from your IRA.

Number codes. Some of the number codes are explained below. All of the codes are explained in the instructions for recipients on Form 1099-R.

1—Early distribution, no known exception (in most cases, under age 59½).

2—Early distribution, exception applies (under age

59½).

3—Disability.

4—Death.

5—Prohibited transaction.

7—Normal distribution.

8—Excess contributions plus earnings/

excess deferrals (and/or earnings)

taxable in 2020.

If code 1, 5, or 8 appears on your Form 1099-R,

you are probably subject to a penalty or additional

CAUTION tax. If code 1 appears, see Early Distributions,

later. If code 5 appears, see Prohibited Transactions,

later. If code 8 appears, see Excess Contributions in

chapter 1 of Pub. 590-A.

!

Letter codes. Some of the letter codes are explained

below. All of the codes are explained in the instructions for

recipients on Form 1099-R.

B—Designated Roth account distribution.

G—Direct rollover of a distribution to a qualified plan, a

section 403(b) plan, a governmental section 457(b)

plan, or an IRA.

H—Direct rollover of a designated Roth account distribution to a Roth IRA.

J—Early distribution from a Roth IRA, no known exception (in most cases, under age 59½).

N—Recharacterized IRA contribution made for 2020

and recharacterized in 2020.

P—Excess contributions plus earnings/

excess deferrals (and/or earnings) taxable in 2019.

Q—Qualified distribution from a Roth IRA.

R—Recharacterized IRA contribution made for 2019

and recharacterized in 2020.

S—Early distribution from a SIMPLE IRA in the first

2 years, no known exception (under age 59½).

T—Roth IRA distribution, exception applies.

If the distribution shown on Form 1099-R is from your

IRA, SEP IRA, or SIMPLE IRA, the small box in box 7 (labeled IRA/SEP/SIMPLE) should be marked with an “X.”

If code J, P, or S appears on your Form 1099-R,

you are probably subject to a penalty or additional

CAUTION tax. If code J appears, see Early Distributions,

later. If code P appears, see Excess Contributions in

chapter 1 of Pub. 590-A. If code S appears, see Distributions (Withdrawals) in chapter 3 of Pub. 560.

!

Withholding. Federal income tax is withheld from distributions from traditional IRAs unless you choose not to

have tax withheld.

The amount of tax withheld from an annuity or a similar

periodic payment is based on your marital status and the

number of withholding allowances you claim on your withholding certificate (Form W-4P). If you haven't filed a certificate, tax will be withheld as if you are a married individual claiming three withholding allowances.

Generally, tax will be withheld at a 10% rate on nonperiodic distributions.

IRA distributions delivered outside the United

States. In general, if you are a U.S. citizen or resident

alien and your home address is outside the United States

or its possessions, you can't choose exemption from withholding on distributions from your traditional IRA.

To choose exemption from withholding, you must certify to the payer under penalties of perjury that you aren't a

Chapter 1

Traditional IRAs

Page 21

U.S. citizen, a resident alien of the United States, or a

tax-avoidance expatriate.

Even if this election is made, the payer must withhold

tax at the rates prescribed for nonresident aliens.

More information. For more information on withholding on pensions and annuities, see Pensions and Annuities in chapter 1 of Pub. 505. For more information on

withholding on nonresident aliens and foreign entities, see

Pensions, Annuities, and Alimony under Withholding on

Specific Income in Pub. 515.

Reporting taxable distributions on your return. Report fully taxable distributions, including early distributions,

on Form 1040, 1040-SR, or 1040-NR, line 4b (no entry is

required on line 4a). If only part of the distribution is taxable, enter the total amount on Form 1040, 1040-SR, or

1040-NR, line 4a, and enter the taxable part on Form

1040, 1040-SR, or 1040-NR, line 4b.

Estate tax. Generally, the value of an annuity or other

payment receivable by any beneficiary of a decedent's

traditional IRA that represents the part of the purchase

price contributed by the decedent (or by his or her former

employer(s)) must be included in the decedent's gross estate. For more information, see the instructions for Form

706, Schedule I.

What Acts Result in Penalties

or Additional Taxes?

The tax advantages of using traditional IRAs for retirement

savings can be offset by additional taxes and penalties if

you don't follow the rules. There are additions to the regular tax for using your IRA funds in prohibited transactions.

There are also additional taxes for the following activities.

• Investing in collectibles.

• Having unrelated business income.

• Taking early distributions.

• Allowing excess amounts to accumulate (failing to

take required distributions).

• Making excess contributions.

There are penalties for overstating the amount of nondeductible contributions and for failure to file Form 8606, if

required.

This chapter discusses those acts (relating to distributions) that you should avoid and the additional taxes and

other costs, including loss of IRA status, that apply if you

don't avoid those acts.

Prohibited Transactions

Generally, a prohibited transaction is any improper use of

your traditional IRA account or annuity by you, your beneficiary, or any disqualified person.

Page 22

Chapter 1

Traditional IRAs

Disqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendant,

and any spouse of a lineal descendant).

The following are some examples of prohibited transactions with a traditional IRA.

• Borrowing money from it.

• Selling property to it.

• Using it as security for a loan.

• Buying property for personal use (present or future)

with IRA funds.

If your IRA invested in nonpublicly traded assets

or assets that you directly control, the risk of enCAUTION gaging in a prohibited transaction in connection

with your IRA may be increased.

!

Fiduciary. For these purposes, a fiduciary includes anyone who does any of the following.

• Exercises any discretionary authority or discretionary

control in managing your IRA or exercises any authority or control in managing or disposing of its assets.

• Provides investment advice to your IRA for a fee, or

has any authority or responsibility to do so.

• Has any discretionary authority or discretionary responsibility in administering your IRA.

Effect on an IRA account. Generally, if you or your beneficiary engages in a prohibited transaction in connection

with your traditional IRA account at any time during the

year, the account stops being an IRA as of the first day of

that year.

Effect on you or your beneficiary. If your account

stops being an IRA because you or your beneficiary engaged in a prohibited transaction, the account is treated

as distributing all its assets to you at their fair market values on the first day of the year. If the total of those values

is more than your basis in the IRA, you will have a taxable

gain that is includible in your income. For information on

figuring your gain and reporting it in income, see Are Distributions Taxable, earlier. The distribution may be subject

to additional taxes or penalties.

Borrowing on an annuity contract. If you borrow

money against your traditional IRA annuity contract, you

must include in your gross income the fair market value of

the annuity contract as of the first day of your tax year.

You may have to pay the 10% additional tax on early distributions, discussed later.

Pledging an account as security. If you use a part of

your traditional IRA account as security for a loan, that

part is treated as a distribution and is included in your

gross income. You may have to pay the 10% additional

tax on early distributions, discussed later.

Trust account set up by an employer or an employee

association. Your account or annuity doesn't lose its IRA

treatment if your employer or the employee association

with whom you have your traditional IRA engages in a prohibited transaction.

3. During the year, the total fair market value of the payments you receive isn't more than:

Owner participation. If you participate in the prohibited transaction with your employer or the association,

your account is no longer treated as an IRA.

a. $10 for IRA deposits of less than $5,000, or

Taxes on prohibited transactions. If someone other

than the owner or beneficiary of a traditional IRA engages

in a prohibited transaction, that person may be liable for

certain taxes. In general, there is a 15% tax on the amount

of the prohibited transaction and a 100% additional tax if

the transaction isn't corrected.

Loss of IRA status. If the traditional IRA ceases to be

an IRA because of a prohibited transaction by you or your

beneficiary, you or your beneficiary isn’t liable for these

excise taxes. However, you or your beneficiary may have

to pay other taxes as discussed under Effect on you or

your beneficiary, earlier.

Exempt Transactions

The Department of Labor has authority to grant administrative exemptions from the prohibited transaction provisions of ERISA and the Code for a class of transactions or

for individual transactions. In order to grant an administrative exemption, the Department must make the following

three determinations.

1. The exemption must be administratively feasible.

2. In the interest of the plan and its participants and beneficiaries.

3. Protective of the rights of plan participants and beneficiaries.

For additional information on prohibited transaction exemptions, see the Department of Labor publication,

Exemption Procedures under Federal Pension Law.

Transactions Not Prohibited

The following two types of transactions aren't prohibited

transactions if they meet the requirements that follow.

• Payments of cash, property, or other consideration by

the sponsor of your traditional IRA to you (or members

of your family).

• Your receipt of services at reduced or no cost from the

bank where your traditional IRA is established or

maintained.

Payments of cash, property, or other consideration.

Even if a sponsor makes payments to you or your family,

there is no prohibited transaction if all three of the following requirements are met.

1. The payments are for establishing a traditional IRA or

for making additional contributions to it.

2. The IRA is established solely to benefit you, your

spouse, and your or your spouse's beneficiaries.

b. $20 for IRA deposits of $5,000 or more.

If the consideration is group-term life insurance, requirements (1) and (3) don't apply if no more than $5,000 of the

face value of the insurance is based on a dollar-for-dollar

basis on the assets in your IRA.

Services received at reduced or no cost. Even if a

sponsor provides services at reduced or no cost, there is

no prohibited transaction if all of the following requirements are met.

• The traditional IRA qualifying you to receive the services is established and maintained for the benefit of

you, your spouse, and your or your spouse's beneficiaries.

• The bank itself can legally offer the services.

• The services are provided in the ordinary course of

business by the bank (or a bank affiliate) to customers

who qualify but don't maintain an IRA (or a Keogh

plan).

• The determination, for a traditional IRA, of who quali-

fies for these services is based on an IRA (or a Keogh

plan) deposit balance equal to the lowest qualifying

balance for any other type of account.

• The rate of return on a traditional IRA investment that

qualifies isn't less than the return on an identical investment that could have been made at the same time

at the same branch of the bank by a customer who

isn't eligible for (or doesn't receive) these services.

Investment in Collectibles

If your traditional IRA invests in collectibles, the amount invested is considered distributed to you in the year invested. You may have to pay the 10% additional tax on early

distributions, discussed later.

Any amounts that were considered to be distributed

when the investment in the collectible was made, and

which were included in your income at that time, aren't included in your income when the collectible is actually distributed from your IRA.

Collectibles. These include:

• Artworks,

• Rugs,

• Antiques,

• Metals,

• Gems,

• Stamps,

• Coins,

• Alcoholic beverages, and

Chapter 1

Traditional IRAs

Page 23

• Certain other tangible personal property.

Exception. Your IRA can invest in one, one-half,

one-quarter, or one-tenth ounce U.S. gold coins, or

one-ounce silver coins minted by the Treasury Department. It can also invest in certain platinum coins and certain gold, silver, palladium, and platinum bullion.

Unrelated Business Income

An IRA is subject to tax on unrelated business income if it

carries on an unrelated trade or business. An unrelated

trade or business means any trade or business regularly

carried on by the IRA or by a partnership of which it is a

member, and not substantially related to the IRA’s exempt

purpose or function. If the IRA has $1,000 or more of unrelated trade or business gross income, the IRA must file a

Form 990-T, Exempt Organization Business Income Tax

Return. An IRA trustee is permitted to file Form 990-T on

behalf of the IRA. In the case of an IRA that operates on a

calendar year, the Form 990-T must be filed by the 15th

day of April following the close of the calendar year. In the

case of an IRA that operates on a fiscal year, the Form

990-T must be filed by the 15th day of the 4th month following the close of the fiscal year. See Pub. 598 for more

information.

Early Distributions

You must include early distributions of taxable amounts

from your traditional IRA in your gross income. Early distributions are also subject to an additional 10% tax, as discussed later.

Early distributions defined. Early distributions are generally amounts distributed from your traditional IRA account or annuity before you are age 591/2, or amounts you

receive when you cash in retirement bonds before you are

age 591/2.

If you were affected by a qualified disaster, see

TIP chapter 4.

Age 591/2 Rule

Generally, if you are under age 591/2, you must pay a 10%

additional tax on the distribution of any assets (money or

other property) from your traditional IRA. Distributions before you are age 591/2 are called early distributions.

The 10% additional tax applies to the part of the distribution that you have to include in gross income. It is in addition to any regular income tax on that amount.

A number of exceptions to this rule are discussed later

under Exceptions. Also see Contributions Returned Before Due Date of Return in chapter 1 of Pub. 590-A.

After age 591/2 and before age 72. After you reach age

591/2, you can receive distributions without having to pay

the 10% additional tax. Even though you can receive distributions after you reach age 591/2, distributions aren't rePage 24

Chapter 1

Traditional IRAs

quired until you reach age 72. See When Must You Withdraw Assets? (Required Minimum Distributions), earlier.

Exceptions

There are several exceptions to the age 591/2 rule. Even if

you receive a distribution before you are age 591/2, you

may not have to pay the 10% additional tax if you are in

one of the following situations.

• You have unreimbursed medical expenses that are

more than 7.5% of your adjusted gross income.

• The distributions aren't more than the cost of your

medical insurance due to a period of unemployment.

• You are totally and permanently disabled.

• You are the beneficiary of a deceased IRA owner.

• You are receiving distributions in the form of an annuity.

• The distributions aren't more than your qualified

higher education expenses.

• You use the distributions to buy, build, or rebuild a first

home.

• The distribution is due to an IRS levy of the qualified

plan.

• The distribution is a qualified reservist distribution.

• The distribution is a qualified birth or adoption distribution.

Most of these exceptions are explained below.

Note. Distributions that are timely and properly rolled

over, as discussed in chapter 1 of Pub. 590-A, aren't subject to either regular income tax or the 10% additional tax.

Certain withdrawals of excess contributions after the due

date of your return are also tax free and therefore not subject to the 10% additional tax. (See Excess Contributions

Withdrawn After Due Date of Return in chapter 1 of Pub.

590-A.) This also applies to transfers incident to divorce,

as discussed under Can You Move Retirement Plan Assets? in chapter 1 of Pub. 590-A.

Receivership distributions. Early distributions (with

or without your consent) from savings institutions placed

in receivership are subject to this tax unless one of the

above exceptions applies. This is true even if the distribution is from a receiver that is a state agency.

Unreimbursed medical expenses. Even if you are under age 591/2, you don't have to pay the 10% additional

tax on distributions that aren't more than:

• The amount you paid for unreimbursed medical expenses during the year of the distribution, minus

• 7.5% of your adjusted gross income (defined next) for

the year of the distribution.

You can only take into account unreimbursed medical expenses that you would be able to include in figuring a deduction for medical expenses on Schedule A (Form

1040). You don't have to itemize your deductions to take

advantage of this exception to the 10% additional tax.

Adjusted gross income. This is the amount on Form

1040, 1040-SR, or 1040-NR, line 11.

Medical insurance. Even if you are under age 591/2, you

may not have to pay the 10% additional tax on distributions during the year that aren't more than the amount you

paid during the year for medical insurance for yourself,

your spouse, and your dependents. You won't have to pay

the tax on these amounts if all of the following conditions

apply.

• You lost your job.

• You received unemployment compensation paid un-

der any federal or state law for 12 consecutive weeks

because you lost your job.

• You receive the distributions during either the year

you received the unemployment compensation or the

following year.

• You receive the distributions no later than 60 days after you have been reemployed.

Disabled. If you become disabled before you reach age

591/2, any distributions from your traditional IRA because

of your disability aren't subject to the 10% additional tax.

You are considered disabled if you can furnish proof

that you can't do any substantial gainful activity because

of your physical or mental condition. A physician must determine that your condition can be expected to result in

death or to be of long, continued, and indefinite duration.

Beneficiary. If you die before reaching age 591/2, the assets in your traditional IRA can be distributed to your beneficiary or to your estate without either having to pay the

10% additional tax.

However, if you inherit a traditional IRA from your deceased spouse and elect to treat it as your own (as discussed under What if You Inherit an IRA, earlier), any distribution you later receive before you reach age 591/2 may

be subject to the 10% additional tax.

Annuity. You can receive distributions from your traditional IRA that are part of a series of substantially equal

payments over your life (or your life expectancy), or over

the lives (or the joint life expectancies) of you and your

beneficiary, without having to pay the 10% additional tax,

even if you receive such distributions before you are age

591/2. You must use an IRS-approved distribution method

and you must take at least one distribution annually for

this exception to apply. The “required minimum distribution method,” when used for this purpose, results in the

exact amount required to be distributed, not the minimum

amount.

There are two other IRS-approved distribution methods

that you can use. They are generally referred to as the

“fixed amortization method” and the “fixed annuitization

method.” These two methods aren't discussed in this publication because they are more complex and generally require professional assistance. For information on these

methods, see Revenue Ruling 2002-62, which is on

page 710 of Internal Revenue Bulletin 2002-42 at

IRS.gov/pub/irs-irbs/irb02-42.pdf.

Recapture tax for changes in distribution method

under equal payment exception. You may have to pay

an early distribution recapture tax if, before you reach age

591/2, the distribution method under the equal periodic

payment exception changes (for reasons other than your

death or disability). The tax applies if the method changes

from the method requiring equal payments to a method

that wouldn't have qualified for the exception to the tax.

The recapture tax applies to the first tax year to which the

change applies. The amount of tax is the amount that

would have been imposed had the exception not applied,

plus interest for the deferral period.

You may have to pay the recapture tax if you don't receive the payments for at least 5 years under a method

that qualifies for the exception. You may have to pay it

even if you modify your method of distribution after you

reach age 591/2. In that case, the tax applies only to payments distributed before you reach age 591/2.

Report the recapture tax and interest on line 4 of Form

5329. Attach an explanation to the form. Don't write the

explanation next to the line or enter any amount for the recapture on line 1 or 3 of the form.

One-time switch. If you are receiving a series of substantially equal periodic payments, you can make a

one-time switch to the required minimum distribution

method at any time without incurring the additional tax.

Once a change is made, you must follow the required minimum distribution method in all subsequent years.

Higher education expenses. Even if you are under age

591/2, if you paid expenses for higher education during the

year, part (or all) of any distribution may not be subject to

the 10% additional tax. The part not subject to the tax is

generally the amount that isn't more than the qualified

higher education expenses (defined next) for the year for

education furnished at an eligible educational institution

(defined below). The education must be for you, your

spouse, or the children or grandchildren of you or your

spouse.

When determining the amount of the distribution that

isn't subject to the 10% additional tax, include qualified

higher education expenses paid with any of the following

funds.

• Payment for services, such as wages.

• A loan.

• A gift.

• An inheritance given to either the student or the individual making the withdrawal.

• A withdrawal from personal savings (including savings

from a qualified tuition program).

Don't include expenses paid with any of the following

funds.

• Tax-free distributions from a Coverdell education savings account.

• Tax-free part of scholarships and fellowships.

• Pell grants.

• Employer-provided educational assistance.

Chapter 1

Traditional IRAs

Page 25

• Veterans' educational assistance.

• Any other tax-free payment (other than a gift or inheritance) received as educational assistance.

Qualified higher education expenses. Qualified

higher education expenses are tuition, fees, books, supplies, and equipment required for the enrollment or attendance of a student at an eligible educational institution.

They also include expenses for special needs services incurred by or for special needs students in connection with

their enrollment or attendance. In addition, if the individual

is at least a half-time student, room and board are qualified higher education expenses.

Eligible educational institution. This is any college,

university, vocational school, or other postsecondary educational institution eligible to participate in the student aid

programs administered by the U.S. Department of Education. It includes virtually all accredited, public, nonprofit,

and proprietary (privately owned profit-making) postsecondary institutions. The educational institution should be

able to tell you if it is an eligible educational institution.

For more information, see chapter 9 of Pub. 970.

First home. Even if you are under age 591/2, you don't

have to pay the 10% additional tax on up to $10,000 of

distributions you receive to buy, build, or rebuild a first

home. To qualify for treatment as a first-time homebuyer

distribution, the distribution must meet all the following requirements.

during the 2-year period ending on the date of acquisition

of the home which the distribution is being used to buy,

build, or rebuild. If you are married, your spouse must also

meet this no-ownership requirement.

Date of acquisition. The date of acquisition is the

date that:

• You enter into a binding contract to buy the main

home for which the distribution is being used, or

• The building or rebuilding of the main home for which

the distribution is being used begins.

If you received a distribution to buy, build, or re-

TIP build a first home and the purchase or construc-

tion was canceled or delayed, you could generally

contribute the amount of the distribution to an IRA within

120 days of the distribution and not pay income tax or the

10% additional tax on early distributions. This contribution

is treated as a rollover contribution to the IRA.

Qualified reservist distributions. A qualified reservist

distribution isn't subject to the additional tax on early distributions.

Definition. A distribution you receive is a qualified reservist distribution if the following requirements are met.

• You were ordered or called to active duty after September 11, 2001.

• You were ordered or called to active duty for a period

of more than 179 days or for an indefinite period because you are a member of a reserve component.

1. It must be used to pay qualified acquisition costs (defined next) before the close of the 120th day after the

day you received it.

• The distribution is from an IRA or from amounts attrib-

2. It must be used to pay qualified acquisition costs for

the main home of a first-time homebuyer (defined below) who is any of the following.

• The distribution was made no earlier than the date of

a. Yourself.

b. Your spouse.

c. Your or your spouse's child.

d. Your or your spouse's grandchild.

e. Your or your spouse's parent or other ancestor.

3. When added to all your prior qualified first-time homebuyer distributions, if any, total qualifying distributions

can't be more than $10,000.

If both you and your spouse are first-time home-

TIP buyers (defined later), each of you can receive

distributions up to $10,000 for a first home without

having to pay the 10% additional tax.

Qualified acquisition costs. Qualified acquisition

costs include the following items.

• Costs of buying, building, or rebuilding a home.

• Any usual or reasonable settlement, financing, or

other closing costs.

First-time homebuyer. Generally, you are a first-time

homebuyer if you had no present interest in a main home

Page 26

Chapter 1

Traditional IRAs

utable to elective deferrals under a section 401(k) or

403(b) plan or a similar arrangement.

the order or call to active duty and no later than the

close of the active duty period.

Reserve component. The term “reserve component”

means the:

• Army National Guard of the United States,

• Army Reserve,

• Naval Reserve,

• Marine Corps Reserve,

• Air National Guard of the United States,

• Air Force Reserve,

• Coast Guard Reserve, or

• Reserve Corps of the Public Health Service.

Qualified birth or adoption distribution. A qualified

birth or adoption distribution is any distribution from an applicable eligible retirement plan if made during the 1-year

period beginning on the date on which your child was born

or the date on which the legal adoption of your child was

finalized.

A qualified birth or adoption distribution must not exceed $5,000 per adoption or birth. In addition, an eligible

adoptee is any individual (other than the child of the taxpayer’s spouse) who has not reached age 18 or is physically or mentally incapable of self-support.

Amount may be repaid. If you receive a qualified

birth or adoption distribution, you can make one or more

contributions to an eligible retirement plan if you are a

beneficiary of that plan, the plan accepts rollover contributions, and the total of those contributions does not exceed

the amount of the qualified birth or adoption distribution.

Additional 10% Tax

The additional tax on early distributions is 10% of the

amount of the early distribution that you must include in

your gross income. This tax is in addition to any regular income tax resulting from including the distribution in income.

Use Form 5329 to figure the tax. See the discussion of

Form 5329, later, under Reporting Additional Taxes for information on filing the form.

Example. Tom Jones, who is 35 years old, receives a

$3,000 distribution from his traditional IRA account. Tom

doesn't meet any of the exceptions to the 10% additional

tax, so the $3,000 is an early distribution. Tom never

made any nondeductible contributions to his IRA. He must

include the $3,000 in his gross income for the year of the

distribution and pay income tax on it. Tom must also pay

an additional tax of $300 (10% (0.10) × $3,000). He files

Form 5329. See the filled-in Form 5329, later.

Early distributions of funds from a SIMPLE retirement account made within 2 years of beginning

CAUTION participation in the SIMPLE are subject to a 25%,

rather than a 10%, early distributions tax.

!

Nondeductible contributions. The tax on early distributions doesn't apply to the part of a distribution that represents a return of your nondeductible contributions (basis).

Excess Accumulations

(Insufficient Distributions)

You can't keep amounts in your traditional IRA (including

SEP and SIMPLE IRAs) indefinitely. Generally, you must

begin receiving distributions by April 1 of the year following the year in which you reach age 72. The required minimum distribution for any year after the year in which you

reach age 72 must be made by December 31 of that later

year.

Tax on excess. If distributions are less than the required minimum distribution for the year, discussed earlier

under When Must You Withdraw Assets? (Required Minimum Distributions), you may have to pay a 50% excise

tax for that year on the amount not distributed as required.

Reporting the tax. Use Form 5329 to report the tax on

excess accumulations. See the discussion of Form 5329,

later, under Reporting Additional Taxes for more information on filing the form.

Request to waive the tax. If the excess accumulation is

due to reasonable error, and you have taken, or are taking, steps to remedy the insufficient distribution, you can

request that the tax be waived. If you believe you qualify

for this relief, attach a statement of explanation and complete Form 5329 as instructed under Waiver of tax for reasonable cause in the Instructions for Form 5329.

Exemption from tax. If you are unable to take required

distributions because you have a traditional IRA invested

in a contract issued by an insurance company that is in

state insurer delinquency proceedings, the 50% excise

tax doesn't apply if the conditions and requirements of

Revenue Procedure 92-10 are satisfied. Those conditions

and requirements are summarized below. Revenue Procedure 92-10 is in Cumulative Bulletin 1992-1. You can

read the revenue procedure at most IRS offices, at many

public libraries, and online at IRS.gov.

Conditions. To qualify for exemption from the tax, the

assets in your traditional IRA must include an affected investment. Also, the amount of your required distribution

must be determined as discussed earlier under When

Must You Withdraw Assets? (Required Minimum Distributions).

Affected investment defined. Affected investment

means an annuity contract or a guaranteed investment

contract (with an insurance company) for which payments

under the terms of the contract have been reduced or suspended because of state insurer delinquency proceedings

against the contracting insurance company.

Requirements. If your traditional IRA (or IRAs) includes assets other than your affected investment, all traditional IRA assets, including the available portion of your

affected investment, must be used to satisfy as much as

possible of your IRA distribution requirement. If the affected investment is the only asset in your IRA, as much of

the required distribution as possible must come from the

available portion, if any, of your affected investment.

Chapter 1

Traditional IRAs

Page 27

5329

Form

(Rev. February 2021)

Department of the Treasury

Internal Revenue Service

Additional Taxes on Qualified Plans

(Including IRAs) and Other Tax-Favored Accounts

OMB No. 1545-0074

2020

Attach to Form 1040, 1040-SR, or 1040-NR.

Go to www.irs.gov/Form5329 for instructions and the latest information.

Attachment

Sequence No. 29

Your social security number

Name of individual subject to additional tax. If married filing jointly, see instructions.

Tom Jones

004-00-0000

Home address (number and street), or P.O. box if mail is not delivered to your home

Fill in Your Address Only

if You Are Filing This

Form by Itself and Not

With Your Tax Return

City, town or post office, state, and ZIP code. If you have a foreign address, also complete the

spaces below. See instructions.

Foreign country name

Foreign province/state/county

Apt. no.

If this is an amended

return, check here

Foreign postal code

If you only owe the additional 10% tax on the full amount of the early distributions, you may be able to report this tax directly on

Schedule 2 (Form 1040), line 6, without filing Form 5329. See instructions.

Part I

Additional Tax on Early Distributions. Complete this part if you took a taxable distribution before you reached age

59½ from a qualified retirement plan (including an IRA) or modified endowment contract (unless you are reporting this tax

directly on Schedule 2 (Form 1040)—see above). You may also have to complete this part to indicate that you qualify for

an exception to the additional tax on early distributions or for certain Roth IRA distributions. See instructions.

1

2

3

4

Early distributions includible in income (see instructions). For Roth IRA distributions, see instructions .

Early distributions included on line 1 that are not subject to the additional tax (see instructions).

. . . . . . . . . .

Enter the appropriate exception number from the instructions:

Amount subject to additional tax. Subtract line 2 from line 1 . . . . . . . . . . . . . .

Additional tax. Enter 10% (0.10) of line 3. Include this amount on Schedule 2 (Form 1040), line 6 . .

Caution: If any part of the amount on line 3 was a distribution from a SIMPLE IRA, you may have to

include 25% of that amount on line 4 instead of 10%. See instructions.

Part II

1

3000

2

3

4

-03000

300

Additional Tax on Certain Distributions From Education Accounts and ABLE Accounts. Complete this part

if you included an amount in income, on Schedule 1 (Form 1040), line 8, from a Coverdell education savings account

(ESA), a qualified tuition program (QTP), or an ABLE account.

5

Distributions included in income from a Coverdell ESA, a QTP, or an ABLE account . . . . . .

Distributions included on line 5 that are not subject to the additional tax (see instructions) . . . .

6

Amount subject to additional tax. Subtract line 6 from line 5 . . . . . . . . . . . . . .

7

Additional tax. Enter 10% (0.10) of line 7. Include this amount on Schedule 2 (Form 1040), line 6 . .

8

Part III

Additional Tax on Excess Contributions to Traditional IRAs. Complete this part if you contributed more to your

traditional IRAs for 2020 than is allowable or you had an amount on line 17 of your 2019 Form 5329.

Enter your excess contributions from line 16 of your 2019 Form 5329. See instructions. If zero, go to line 15

9

9

10

If your traditional IRA contributions for 2020 are less than your maximum

allowable contribution, see instructions. Otherwise, enter -0- . . . . . .

10

11

2020 traditional IRA distributions included in income (see instructions) . . .

11

12

2020 distributions of prior year excess contributions (see instructions) . . .

12

13

Add lines 10, 11, and 12 . . . . . . . . . . . . . . . . . . . . . . . . . .

13

14

Prior year excess contributions. Subtract line 13 from line 9. If zero or less, enter -0- . . . . . .

14

15

Excess contributions for 2020 (see instructions) . . . . . . . . . . . . . . . . . .

15

16

Total excess contributions. Add lines 14 and 15 . . . . . . . . . . . . . . . . . .

16

17

Additional tax. Enter 6% (0.06) of the smaller of line 16 or the value of your traditional IRAs on December

31, 2020 (including 2020 contributions made in 2021). Include this amount on Schedule 2 (Form 1040), line 6

17

Part IV

Additional Tax on Excess Contributions to Roth IRAs. Complete this part if you contributed more to your Roth

IRAs for 2020 than is allowable or you had an amount on line 25 of your 2019 Form 5329.

Enter your excess contributions from line 24 of your 2019 Form 5329. See instructions. If zero, go to line 23 18

18

19

If your Roth IRA contributions for 2020 are less than your maximum allowable

19

contribution, see instructions. Otherwise, enter -0- . . . . . . . . .

20

2020 distributions from your Roth IRAs (see instructions) . . . . . . .

20

21

Add lines 19 and 20 . . . . . . . . . . . . . . . . . . . . . . . . . . .

21

22

Prior year excess contributions. Subtract line 21 from line 18. If zero or less, enter -0- . . . . . .

22

23

Excess contributions for 2020 (see instructions) . . . . . . . . . . . . . . . . . .

23

24

Total excess contributions. Add lines 22 and 23 . . . . . . . . . . . . . . . . . .

24

25

Additional tax. Enter 6% (0.06) of the smaller of line 24 or the value of your Roth IRAs on December 31,

2020 (including 2020 contributions made in 2021). Include this amount on Schedule 2 (Form 1040), line 6

25

5

6

7

8

For Privacy Act and Paperwork Reduction Act Notice, see your tax return instructions.

Page 28

Chapter 1

Traditional IRAs

Cat. No. 13329Q

Form 5329 (2020)

Available portion. The available portion of your affected investment is the amount of payments remaining after

they have been reduced or suspended because of state

insurer delinquency proceedings.

Make up of shortfall in distribution. If the payments

to you under the contract increase because all or part of

the reduction or suspension is canceled, you must make

up the amount of any shortfall in a prior distribution because of the proceedings. You make up (reduce or eliminate) the shortfall with the increased payments you receive.

You must make up the shortfall by December 31 of the

calendar year following the year that you receive increased payments.

Reporting Additional Taxes

Generally, you must use Form 5329 to report the tax on

excess contributions, early distributions, and excess accumulations.

Filing a tax return. If you must file an individual income

tax return, complete Form 5329 and attach it to your Form

1040, 1040-SR, or 1040-NR. Enter the total additional

taxes due on Schedule 2 (Form 1040), line 6.

Not filing a tax return. If you don't have to file a return,

but do have to pay one of the additional taxes mentioned

earlier, file the completed Form 5329 with the IRS at the

time and place you would have filed Form 1040, 1040-SR,

or 1040-NR. Be sure to include your address on page 1

and your signature and date on page 2. Enclose, but don't

attach, a check or money order payable to “United States

Treasury” for the tax you owe, as shown on Form 5329.

Write your social security number and “2020 Form 5329”

on your check or money order.

Form 5329 not required. You don't have to use Form

5329 if any of the following situations exists.

• Distribution code 1 (early distribution) is correctly

shown in box 7 of Form 1099-R. If you don't owe any

other additional tax on a distribution, multiply the taxable part of the early distribution by 10% and enter the

result on Schedule 2 (Form 1040), line 6. Enter “No” to

the left of the line to indicate that you don't have to file

Form 5329. However, if you owe this tax and also owe

any other additional tax on a distribution, don't enter

this 10% additional tax directly on your Form 1040,

1040-SR, or 1040-NR. You must file Form 5329 to report your additional taxes.

2.

Roth IRAs

Reminders

Disaster relief. If you were affected by a qualified disaster, see chapter 4.

Deemed IRAs. For plan years beginning after 2002, a

qualified employer plan (retirement plan) can maintain a

separate account or annuity under the plan (a deemed

IRA) to receive voluntary employee contributions. If the

separate account or annuity otherwise meets the requirements of an IRA, it will be subject only to IRA rules. An

employee's account can be treated as a traditional IRA or

a Roth IRA.

For this purpose, a “qualified employer plan” includes:

• A qualified pension, profit-sharing, or stock bonus

plan (section 401(a) plan);

• A qualified employee annuity plan (section 403(a)

plan);

• A tax-sheltered annuity plan (section 403(b) plan); and

• A deferred compensation plan (section 457 plan)

maintained by a state, a political subdivision of a state,

or an agency or instrumentality of a state or political

subdivision of a state.

Designated Roth accounts. Designated Roth accounts

are separate accounts under 401(k), 403(b), or 457(b)

plans that accept elective deferrals that are referred to as

Roth contributions. These elective deferrals are included

in your income, but qualified distributions from these accounts aren't included in your income. Designated Roth

accounts aren't IRAs and shouldn’t be confused with Roth

IRAs. Contributions, up to their respective limits, can be

made to Roth IRAs and designated Roth accounts according to your eligibility to participate. A contribution to

one doesn't impact your eligibility to contribute to the

other. See Pub. 575 for more information on designated

Roth accounts.

Introduction

• If you rolled over part or all of a distribution from a

Regardless of your age, you may be able to establish and

make nondeductible contributions to an individual retirement plan called a Roth IRA.

• You have a qualified disaster distribution.

Contributions not reported. You don't report Roth IRA

contributions on your return.

qualified retirement plan, the part rolled over isn't subject to the tax on early distributions.

Chapter 2

Roth IRAs

Page 29

What Is a Roth IRA?

A Roth IRA is an individual retirement plan that, except as

explained in this chapter, is subject to the rules that apply

to a traditional IRA (defined next). It can be either an account or an annuity. Individual retirement accounts and

annuities are described in How Can a Traditional IRA Be

Opened? in chapter 1 of Pub. 590-A.

To be a Roth IRA, the account or annuity must be designated as a Roth IRA when it is opened. A deemed IRA

can be a Roth IRA, but neither a SEP IRA nor a SIMPLE

IRA can be designated as a Roth IRA.

Unlike a traditional IRA, you can't deduct contributions

to a Roth IRA. But, if you satisfy the requirements, qualified distributions (discussed later) are tax free and you

can leave amounts in your Roth IRA as long as you live.

Traditional IRA. A traditional IRA is any IRA that isn't a

Roth IRA or SIMPLE IRA. Traditional IRAs are discussed

in chapter 1.

Are Distributions Taxable?

You don't include in your gross income qualified distributions or distributions that are a return of your regular contributions from your Roth IRA(s). You also don't include

distributions from your Roth IRA that you roll over tax free

into another Roth IRA. You may have to include part of

other distributions in your income. See Ordering Rules for

Distributions, later.

Basis of distributed property. The basis of property

distributed from a Roth IRA is its fair market value (FMV)

on the date of distribution, whether or not the distribution

is a qualified distribution.

Withdrawals of contributions by due date. If you withdraw contributions (including any net earnings on the contributions) by the due date of your return for the year in

which you made the contribution, the contributions are

treated as if you never made them. If you have an extension of time to file your return, you can withdraw the contributions and earnings by the extended due date. The withdrawal of contributions is tax free, but you must include

the earnings on the contributions in income for the year in

which you made the contributions.

What Are Qualified Distributions?

A qualified distribution is any payment or distribution from

your Roth IRA that meets the following requirements.

1. It is made after the 5-year period beginning with the

first tax year for which a contribution was made to a

Roth IRA set up for your benefit.

2. The payment or distribution is:

a. Made on or after the date you reach age 591/2,

Page 30

Chapter 2

Roth IRAs

b. Made because you are disabled (defined earlier),

c. Made to a beneficiary or to your estate after your

death, or

d. One that meets the requirements listed under First

home under Exceptions in chapter 1 (up to a

$10,000 lifetime limit).

If you were affected by a qualified disaster, see

TIP chapter 4.

Additional Tax on Early Distributions

If you receive a distribution that isn't a qualified distribution, you may have to pay the 10% additional tax on early

distributions as explained in the following paragraphs.

Distributions of conversion and certain rollover contributions within 5-year period. If, within the 5-year period starting with the first day of your tax year in which you

convert an amount from a traditional IRA or roll over an

amount from a qualified retirement plan to a Roth IRA, you

take a distribution from a Roth IRA, you may have to pay

the 10% additional tax on early distributions. You must

generally pay the 10% additional tax on any amount attributable to the part of the amount converted or rolled over

(the conversion or rollover contribution) that you had to include in income (recapture amount). A separate 5-year

period applies to each conversion and rollover. See Ordering Rules for Distributions, later, to determine the recapture amount, if any.

The 5-year period used for determining whether the

10% early distribution tax applies to a distribution from a

conversion or rollover contribution is separately determined for each conversion and rollover, and isn't necessarily the same as the 5-year period used for determining

whether a distribution is a qualified distribution. See What

Are Qualified Distributions, earlier.

For example, if a calendar-year taxpayer makes a conversion contribution on February 25, 2020, and makes a

regular contribution for 2019 on the same date, the 5-year

period for the conversion begins January 1, 2020, while

the 5-year period for the regular contribution begins on

January 1, 2019.

Unless one of the exceptions listed later applies, you

must pay the additional tax on the portion of the distribution attributable to the part of the conversion or rollover

contribution that you had to include in income because of

the conversion or rollover.

You must pay the 10% additional tax in the year of the

distribution, even if you had included the conversion or

rollover contribution in an earlier year. You must also pay

the additional tax on any portion of the distribution attributable to earnings on contributions.

Other early distributions. Unless one of the exceptions

listed below applies, you must pay the 10% additional tax

on the taxable part of any distributions that aren't qualified

distributions.

Exceptions. You may not have to pay the 10% additional

tax in the following situations.

• You have reached age 591/2.

• You are totally and permanently disabled.

• You are the beneficiary of a deceased IRA owner.

• You use the distribution to buy, build, or rebuild a first

home.

• The distributions are part of a series of substantially

equal payments.

• You have unreimbursed medical expenses that are

more than 7.5% of your adjusted gross income (defined earlier) for the year.

• You are paying medical insurance premiums during a

period of unemployment.

• The distributions aren't more than your qualified

higher education expenses.

• The distribution is due to an IRS levy of the qualified

plan.

• The distribution is a qualified reservist distribution.

Most of these exceptions are discussed earlier in chapter 1 under Early Distributions.

If you were affected by a qualified disaster, see

TIP chapter 4.

Ordering Rules for Distributions

If you receive a distribution from your Roth IRA that isn't a

qualified distribution, part of it may be taxable. There is a

set order in which contributions (including conversion contributions and rollover contributions from qualified retirement plans) and earnings are considered to be distributed

from your Roth IRA. For these purposes, disregard the

withdrawal of excess contributions and the earnings on

them (discussed under What if You Contribute Too Much?

in chapter 2 of Pub. 590-A). Order the distributions as follows.

1. Regular contributions.

2. Conversion and rollover contributions, on a first-in,

first-out basis (generally, total conversions and rollovers from the earliest year first). See Aggregation

(grouping and adding) rules, later. Take these conversion and rollover contributions into account as follows.

a. Taxable portion (the amount required to be included in gross income because of the conversion or

rollover) first.

b. Nontaxable portion.

3. Earnings on contributions.

Disregard rollover contributions from other Roth IRAs for

this purpose.

Aggregation (grouping and adding) rules. Determine the taxable amounts distributed (withdrawn), distributions, and contributions by grouping and adding them

together as follows.

• Add all distributions from all your Roth IRAs during the

year together.

• Add all regular contributions made for the year (including contributions made after the close of the year, but

before the due date of your return) together. Add this

total to the total undistributed regular contributions

made in prior years.

• Add all conversion and rollover contributions made

during the year together. For purposes of the ordering

rules, in the case of any conversion or rollover in

which the conversion or rollover distribution is made in

2020 and the conversion or rollover contribution is

made in 2021, treat the conversion or rollover contribution as contributed before any other conversion or

rollover contributions made in 2021.

Add any recharacterized contributions that end up in a

Roth IRA to the appropriate contribution group for the year

that the original contribution would have been taken into

account if it had been made directly to the Roth IRA.

Disregard any recharacterized contribution that ends

up in an IRA other than a Roth IRA for the purpose of

grouping (aggregating) both contributions and distributions. Also, disregard any amount withdrawn to correct an

excess contribution (including the earnings withdrawn) for

this purpose.

Example. On October 15, 2016, Justin converted all

$80,000 in his traditional IRA to his Roth IRA. His Forms

8606 from prior years show that $20,000 of the amount

converted is his basis.

Justin included $60,000 ($80,000 − $20,000) in his

gross income.

On February 23, 2020, Justin made a regular contribution of $5,000 to a Roth IRA. On November 8, 2020, at

age 60, Justin took a $7,000 distribution from his Roth

IRA.

The first $5,000 of the distribution is a return of Justin's

regular contribution and isn't includible in his income.

The next $2,000 of the distribution isn't includible in income because it was included previously.

Figuring your recapture amount. If you had an early

distribution from your Roth IRAs in 2020, you must allocate the early distribution by using the Recapture

Amount—Allocation Chart located in Appendix C.

Chapter 2

Roth IRAs

Page 31

Figure 2-1.

Is the Distribution From Your Roth IRA a Qualified Distribution?

Start Here

Has it been at least 5 years from the beginning of the

year for which you first set up and contributed to a

Roth IRA?

No

Yes

Yes

Were you at least 591⁄2 years old at the time of the

distribution?

No

Yes

Is the distribution being used to buy or rebuild a first

home as explained in First home under Early

Distr ibutions in chapter 1?

No

Yes

Is the distribution due to your being disabled (defined

under Early Distributions in chapter 1)?

No

Was the distribution made to the owner’s beneficiary

or the owner’s estate?

No

Yes

The distribution from the Roth IRA is a qualified

distribution. It isn’t subject to tax or penalty.

Page 32

Chapter 2

Roth IRAs

The distribution from the Roth IRA

isn’t a qualified distribution. The

portion of the distribution allocable

to earnings may be subject to tax

and it may be subject to the 10%

additional tax.

Illustrated Recapture Amount—Allocation Chart

Enter the amount from your 2020 Form 8606,

$85,500

line 19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Before you begin: You will need your prior year Form(s) 8606 and income tax return(s) if you entered an amount on any line(s) as indicated below.

You will now allocate the amount you entered above (2020 Form 8606, line 19) in the order shown, to the amounts on the lines listed below (to the

extent a prior year distribution wasn't allocable to the amount). The maximum amount you can enter on each line below is the amount entered on the

referenced lines of the form for that year. Note. Once you have allocated the full amount from your 2020 Form 8606, line 19, STOP. See the

Example below.

Tax Year

Your Form

2020

Form 8606, line 20 . . . . . . . . . . . . . . . . .

$10,000

Form 8606, line 22 . . . . . . . . . . . . . . . . . $55,500

2005

Form 8606, line 18 . . . . . . . . . . . . . . . . .

$10,000

Form 8606, line 17 . . . . . . . . . . . . . . . . . $-0-

2016

Form 8606, line 18;

and

Form 1040, line 16b; Form 1040A,

line 12b; or Form 1040NR,

line 17b* . . . . . . . . . . . . . . . . . . . . . . . .

$20,000

Form 8606, line 17;

and

Form 1040, line 16a; Form 1040A,

line 12a; or Form 1040NR,

line 17a** . . . . . . . . . . . . . . . . . . . . . . . $20,000

2020

Form 8606, line 25c . . . . . . . . . . . . . . . .

* Only include those amounts rolled over to a Roth IRA.

** Only include any contributions (usually box 5 of Form 1099-R) that were taxable to you when made and rolled over to a Roth IRA.

Amount to include on Form 5329, line 1. Include on

line 1 of your 2020 Form 5329 the following four amounts

from the Recapture Amount—Allocation Chart that you filled out.

• The amount you allocated to line 20 of your 2020

Form 8606.

• The amount(s) allocated to your 2015 through 2020

Forms 8606, line 18.

• The amount(s) allocated to your 2020 Form 1040,

1040-SR or 1040-NR, line 5b; 2019 Form 1040 or

1040-SR, line 4d; your 2018 Form 1040, line 4b; your

2016 and 2017 Forms 1040, line 16b; Forms 1040A,

line 12b; or 2015 through 2019 Form 1040-NR,

line 17b.

• The amount from your 2020 Form 8606, line 25c.

Also, include any amount you allocated to line 20 of

your 2020 Form 8606 on your 2020 Form 5329, line 2,

and enter exception number 09.

Example. Ishmael, age 32, opened a Roth IRA in

2000. He made the following transactions into his Roth

IRA.

• In 2005, he converted $10,000 from his traditional IRA

into his Roth IRA. He filled out a 2005 Form 8606 and

attached it with his 2005 Form 1040. He entered $0 on

line 17 of Form 8606 because he took a deduction for

all the contributions to the traditional IRA; therefore,

he has no basis. He entered $10,000 on line 18 of

Form 8606. He also entered zero on Form 1040,

line 15a, and $10,000 on line 15b.

• In 2016, he rolled over the balance of his qualified re-

tirement plan, $20,000, into a Roth IRA when he

changed jobs. He used a 2016 Form 1040 to file his

taxes. He entered $20,000 on line 16a of Form 1040

because that was the amount reported in box 1 of his

2016 Form 1099-R. Box 5 of his 2016 Form 1099-R

reported $0 since he didn't make any after-tax contributions to the qualified retirement plan. He entered

$20,000 on line 16b of Form 1040 since that is the taxable amount that was rolled over in 2016.

The total balance in his Roth IRA as of January 1,

2020, was $105,000 ($50,000 in contributions from 2000

through 2019 + $10,000 from the 2005 conversion +

$20,000 from the 2016 rollover + $25,000 from earnings).

He hasn't taken any early distribution from his Roth IRA

before 2020. In 2020, he made a contribution of $5,500 to

his Roth IRA.

In August of 2020, he took a $85,500 early distribution

from his Roth IRA to use as a down payment on the purchase of his first home. See his filled out Illustrated Recapture Amount—Allocation Chart to see how he allocated the amounts from the above transactions. Based on

his allocation, he would enter $20,000 on his 2020 Form

5329, line 1 (see Amount to include on Form 5329, line 1,

earlier). He should also report $10,000 on his 2020 Form

5329, line 2, and enter exception 09 because that amount

isn't subject to the 10% additional tax on early distributions.

Chapter 2

Roth IRAs

Page 33

How Do You Figure the Taxable Part?

To figure the taxable part of a distribution that isn't a qualified distribution, complete Form 8606, Part III.

Must You Withdraw or Use

Assets?

You aren't required to take distributions from your Roth

IRA at any age. The minimum distribution rules that apply

to traditional IRAs don't apply to Roth IRAs while the

owner is alive. However, after the death of a Roth IRA

owner, certain of the minimum distribution rules that apply

to traditional IRAs also apply to Roth IRAs as explained

later under Distributions After Owner's Death.

Minimum distributions. You can't use your Roth IRA

to satisfy minimum distribution requirements for your traditional IRA. Nor can you use distributions from traditional

IRAs for required distributions from Roth IRAs. See Distributions to beneficiaries, later.

Distributions After Owner's Death

If a Roth IRA owner dies, the minimum distribution rules

that apply to traditional IRAs apply to Roth IRAs as though

the Roth IRA owner died before his or her required beginning date. See When Can You Withdraw or Use Assets?

in chapter 1.

Distributions to beneficiaries. Generally, the entire interest in the Roth IRA must be distributed by the end of

the 5th or 10th calendar year, as applicable, after the year

of the owner's death unless the interest is payable to an

eligible designated beneficiary over the life or life expectancy of the eligible designated beneficiary. See When

Must You Withdraw Assets? (Required Minimum Distributions) in chapter 1.

If paid as an annuity, the entire interest must be payable over a period not greater than the designated beneficiary's life expectancy and distributions must begin before

the end of the calendar year following the year of death.

Distributions from another Roth IRA can't be substituted

for these distributions unless the other Roth IRA was inherited from the same decedent.

If the sole beneficiary is the spouse, he or she can either delay distributions until the decedent would have

reached age 72 or treat the Roth IRA as his or her own.

Combining with other Roth IRAs. A beneficiary can

combine an inherited Roth IRA with another Roth IRA

maintained by the beneficiary only if the beneficiary either:

• Inherited the other Roth IRA from the same decedent,

or

• Was the spouse of the decedent and the sole benefi-

ciary of the Roth IRA and elects to treat it as his or her

own IRA.

Distributions that aren't qualified distributions. If a

distribution to a beneficiary isn't a qualified distribution, it

Page 34

Chapter 2

Roth IRAs

is generally includible in the beneficiary's gross income in

the same manner as it would have been included in the

owner's income had it been distributed to the IRA owner

when he or she was alive.

If the owner of a Roth IRA dies before the end of:

• The 5-year period beginning with the first tax year for

which a contribution was made to a Roth IRA set up

for the owner's benefit, or

• The 5-year period starting with the year of a conversion contribution from a traditional IRA or a rollover

from a qualified retirement plan to a Roth IRA,

each type of contribution is divided among multiple beneficiaries according to the pro-rata share of each. See Ordering Rules for Distributions, earlier in this chapter under

Are Distributions Taxable.

Example. When Ms. Hibbard died in 2020, her Roth

IRA contained regular contributions of $4,000, a conversion contribution of $10,000 that was made in 2016, and

earnings of $2,000. No distributions had been made from

her IRA. She had no basis in the conversion contribution

in 2016.

When she established this Roth IRA (her first) in 2016,

she named each of her four children as equal beneficiaries. Each child will receive one-fourth of each type of contribution and one-fourth of the earnings. An immediate distribution of $4,000 to each child will be treated as $1,000

from regular contributions, $2,500 from conversion contributions, and $500 from earnings.

In this case, because the distributions are made before

the end of the applicable 5-year period for a qualified distribution, each beneficiary includes $500 in income for

2020. The 10% additional tax on early distributions

doesn't apply because the distribution was made to the

beneficiaries as a result of the death of the IRA owner.

If distributions from an inherited Roth IRA are less

than the required minimum distribution for the

CAUTION year, discussed in chapter 1 under When Must

You Withdraw Assets? (Required Minimum Distributions),

you may have to pay a 50% excise tax for that year on the

amount not distributed as required. For the tax on excess

accumulations (insufficient distributions), see Excess Accumulations (Insufficient Distributions) under What Acts

Result in Penalties or Additional Taxes? in chapter 1. If

this applies to you, substitute “Roth IRA” for “traditional

IRA” in that discussion.

!

3.

Coronavirus Relief

Introduction

New rules provide for special distributions, during tax year

2020, from IRAs and other retirement plans. These rules

provide tax-favored withdrawals, income inclusion, and

repayments for certain individuals who are impacted by

the coronavirus. See Qualified Coronavirus-Related Distributions next.

Qualified Coronavirus-Related

Distributions

Coronavirus-related distributions. A coronavirus-related distribution is a retirement plan distribution that was

made:

1. In 2020 before December 31, 2020; and

2. To a qualified individual. See Qualified individuals

next for details.

If (1) and (2) apply, you can generally designate any

distribution (including periodic payments and required

minimum distributions) from an eligible retirement plan as

a coronavirus-related distribution, regardless of why the

distribution was made. Coronavirus-related distributions

are permitted without regard to your need. See Eligible retirement plan, later, for the list of plans from which coronavirus-related distributions can be made.

A reduction or offset of your account balance in an eligible retirement plan (other than an IRA) in order to repay

a loan can also be designated as a qualified 2020 disaster

distribution. For more information, see Distribution of plan

loan offsets under Types of Qualified 2020 Disaster Distributions in the Instructions for Form 8915-E.

Qualified individuals. You are a qualified individual if

you are an individual meeting any of the following criteria.

1. You were diagnosed with the virus SARS-CoV-2 or

with coronavirus disease 2019 (referred to collectively

in these instructions as coronavirus) by a test approved by the Centers for Disease Control and Prevention (including a test authorized under the Federal

Food, Drug, and Cosmetic Act).

2. Your spouse or dependent (as defined in section 152)

was diagnosed with coronavirus by a test approved

by the Centers for Disease Control and Prevention

(including a test authorized under the Federal Food,

Drug, and Cosmetic Act).

3. You experienced adverse financial consequences as

a result of you, your spouse, or a Member of your

household (as defined later):

• Being quarantined, being furloughed or laid off, or

having work hours reduced due to coronavirus;

• Being unable to work due to lack of childcare due

to coronavirus;

• Having to close or reduce the hours of a business

you, your spouse, or a member of your household

owned or operated due to coronavirus; or

• Having a reduction in pay (or self-employment in-

come) due to coronavirus or having a job offer rescinded or start date for a job delayed due to coronavirus.

Member of your household. For purposes of determining whether you are a qualified individual, anyone who

shares your principal residence is a member of your

household.

Eligible retirement plan. An eligible retirement plan can

be any of the following.

• A qualified pension, profit-sharing, or stock bonus

plan (including a 401(k) plan).

• The federal Thrift Savings Plan.

• A qualified annuity plan.

• A tax-sheltered annuity contract.

• A governmental section 457 deferred compensation

plan.

• A traditional, SEP, SIMPLE, or Roth IRA.

Taxation of Qualified

Coronavirus-Related Distributions

Qualified coronavirus-related distributions are included in

income in equal amounts over 3 years. However, if you

elect, you can include the entire distribution in your income in the year it was received.

Qualified coronavirus-related distributions aren’t subject to the 10% additional tax (or the additional 25% tax for

certain distributions from SIMPLE IRAs) on early distributions from qualified retirement plans (including IRAs).

Also, if you are receiving substantially equal periodic payments from a qualified retirement plan, the receipt of a

qualified coronavirus-related distribution from that plan

won’t be treated as a change in those substantially equal

payments merely because of the qualified coronavirus-related distribution. However, any distributions you received

in excess of the $100,000 qualified coronavirus-related

distribution limit may be subject to the additional tax on

early distributions.

Note. If a qualified taxpayer dies before the full taxable

amount of the coronavirus-related distribution has been

included in gross income (or repaid), the remainder must

be included in income for the tax year of the taxpayer's

death.

Chapter 3

Coronavirus Relief

Page 35

Repayment and Inclusion in Income

of Qualified Coronavirus-Related

Distributions

If you choose, you can generally repay any portion of a

qualified coronavirus-related distribution that is eligible for

tax-free rollover treatment to an eligible retirement plan.

Also, you can repay a qualified coronavirus-related distribution made on account of a hardship from a retirement

plan.

You have 3 years from the day after the date you received the qualified coronavirus-related distribution to

make a repayment. The amount of your repayment can’t

be more than the amount of the original distribution.

Amounts that are repaid are treated as trustee-to-trustee

transfers and are not included in income. Also, for purposes of the one-rollover-per-year limitation for IRAs, a repayment to an IRA is not considered a rollover.

For more information on how to report distributions and

repayments, see the Instructions for Form 8915-E.

Repayment of qualified coronavirus-related distributions if reporting in income under the 1-year election.

If you elect to include all of your qualified coronavirus-related distributions received in a year in income for that year

and then repay any portion of the distribution during the

allowable 3-year period, the amount repaid will reduce the

amount included in income for the year of distribution.

If the repayment is made after the due date (including

extensions) for your return for the year of distribution, you

will need to file, with an amended return, a revised Form

8915-E. See Amending Your Return, later.

Example. Maria received a $45,000 qualified coronavirus-related distribution on November 1, 2020. Maria repays $45,000 of the qualified distribution on March 31,

2021. She reports the distribution and the repayment on

Form 8915-E, which she files with her timely filed 2020 tax

return. As a result, no po

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