The $2 trillion coronavirus economic recovery bill, dubbed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) is a daunting 880 pages long, but it contains lots of good news for individuals and businesses, including meaningful tax relief.
The bill provides a temporary waiver of required minimum distribution rules for certain defined contribution plans and IRAs for calendar year 2020.
All RMDs may be suspended at your direction, including those for inherited IRAs as well as traditional IRAs of those over age 70½.
If you already took the 2020 RMD, you might still have some options. Please contact your advisor to discuss further.
Coronavirus-related distributions from IRAs are tax-favored
The new act waives the 10% early distribution penalty on up to $100,000 of 2020 distributions from IRAs and company plans for “affected individuals”. The tax would be due, but could be spread over three years, and the funds could be repaid over the three-year period.
How do you qualify?
For now, here’s what the CARES Act says.
A coronavirus-related distribution is a distribution of up to $100,000 from an eligible retirement plan, including an IRA, that is made on or after 1/1/2020 and before 12/31/2020 to an individual:
* Who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, or having work hours reduced due to COVID-19.
* Who is unable to work because of lack of childcare due to COVID-19 and experiences adverse financial consequences as a result.
* Who is diagnosed with COVID-19 by a test approved by the Centers for Disease Control and Prevention.
* Whose spouse or dependent (generally a qualifying child or relative who receives more than half of his or her support from you) is diagnosed with COVID-19 by such a test.
* Who owns or operates a business that has closed or had operating hours reduced due to COVID-19 and has experienced adverse financial consequences as a result.
* Who has experienced adverse financial consequences due to other COVID-19-related factors to be specified in future IRS guidance.
Should you have specific questions regarding your financial or retirement situation please let your Financial Directions advisor know.