For Our Clients

Educational Resources

By Theresa Fry, Senior Vice President and Manager, IRA’s, Retirement  & Education Planning

Print This Post Print This Post

A key feature of the CARES Act was improving access to retirement account assets for those who suffered adverse financial consequences because of the coronavirus COVID-19 – access that otherwise would not have been available. As a result, in 2020 coronavirus-related distributions were introduced.

Coronavirus-related distributions are available to you if:

  • You, your spouse, or dependent are 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, or
  • You experience adverse financial consequences from SARS-CoV-2 or COVID-19 as a result of you, your spouse, or a member of your household:
    • being quarantined
    • being furloughed or laid off
    • having work hours reduced
    • being unable to work due to lack of childcare
    • closing or reducing hours of a business you own or operate (or that your spouse or member of your household owns or operates)
    • having a reduction in pay or self-employment income
    • having a job offer rescinded or start date of a job delayed

Up to $100,000 in coronavirus-related distributions may be withdrawn from IRAs and participating workplace retirement plans, but keep in mind the following:

  • Distributions are taxable, but they can be included in income over three years beginning with tax year 2020.
  • No 10% early withdrawal penalty will apply.
  • Distributions paid to an account owner or surviving spouse as beneficiary can also be repaid – in one or more rollover contributions – at any time during the three-year period beginning with the date of the distribution to remove the income tax liability (note: Coronavirus-related distributions paid to a non-spouse beneficiary from an inherited IRA or retirement plan cannot be recontributed).

Any distribution taken between January 1 and December 30 can be treated as a coronavirus-related distribution if you meet the qualifying conditions above. In June, the IRS provided additional guidance confirming that individuals will self-report that they meet the qualifying conditions and their decision to spread the income tax liability over three years. In addition, if coronavirus-related distributions are repaid, in certain situations amended income tax returns will be required to receive credit for income taxes paid in prior years so make sure you discuss your tax situation with your CPA or tax advisor before you act.

 

December 18, 2020 |