The CARES Act Retirement passed recently, and as a result, there are some changes to your retirement account to be aware of:
RMD – Required Minimum Distribution Waived
Are you 70+? The Required Minimum Distribution is waived for 2020. If you already took an RMD distribution, you can return it to the account so long as it is within 60-days of the withdrawal.
If you are the spouse and/or beneficiary and have an Inherited IRA, you are also exempt from having to take a 2020 RMD distribution.
You file a 990t when your IRA owes tax. If your 990(t) would be due on April 15, 2020 the filing date is now postponed until July 15, 2020. If the 990(t) would be due on May 15, 2020 then there is no postponement for time to file.
CRD – Coronavirus Related Distribution
Remember your annual contributions are limited and difficult to replace. The CARES Act allows you to take distributions:
Up to $100,000
- Applies across all plans and IRAs of an individual
- CARES Act Retirement plans are also available to qualified plans such as 401(b) and governmental 457(b)
Taking a Coronavirus Related Distribution? To be eligible you must be:
- Diagnosed with the virus SARS-CoV-2 or with Coronavirus Disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and prevention
- Have a spouse, or dependent who is diagnosed with such virus or disease by such a test or
- Experience adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of childcare due to such virus or disease, closing or reducing hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the IRS.
- State taxation rules will vary by state with the CARES Act Retirement Plan
Like other Exceptions to Withdrawal Penalties you can take a CRD and the penalty is 100% waived. You can keep the funds and report the amount of the withdrawal over the next 3 years. Or, you can pay the funds back by depositing them into an IRA. Can you repay the IRA by sending the funds from a Traditional IRA to a Roth? We have no guidance from the IRS on this matter, however, taking a distribution from a pre-tax account and paying it back to a Roth is not likely feasible.
Here is the latest IRS guidance:
You have until December 31, 2020 to take a CRD withdrawal.
As always, check with a competent tax advisor before tapping into your retirement account.