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CARES ACT Impact on Required Minimum Distributions from IRAs

by | Jul 14, 2020 | IRS

As part of the Coronavirus Aid, Relief, and Economic Security Act (“the CARES Act”) the IRS has announced important guidance on the rules for Required Minimum Distributions (RMDs) from IRAs and other retirement plans for tax year 2020.

  • RMD Waiver: You can elect to NOT take your 2020 RMDs from defined-contribution retirement plans, including 401(k) plans, 403(b) plans, and IRAs. This waiver does not apply to defined-benefit plans.
  • IRA RMD Repayment: If you have taken your 2020 RMD from your IRA and you would like to put it back to avoid paying tax on it, you can return it to the account it came out of by August 31, 2020.   This repayment option is available for ALL IRAs, including inherited IRAs.  This repayment is not considered a rollover, so rollover limits do not apply.
  • IRA 60-Day Rollover Period Extended to August 31, 2020: If you withdrew money from an IRA or other retirement plan and missed the 60-day window to roll it into an IRA, you have until August 31, 2020 (or within 60 days after distribution, whichever is later) to roll it over if it is otherwise eligible for a rollover distribution.
  • Coronavirus-Related Distribution:The IRS increased the categories of “qualified individuals” who can receive coronavirus-related distributions (CRDs) from retirement plans, taking into account additional factors such as reductions in pay, rescissions of job offers, and delayed job start dates, as well as adverse financial consequences arising from the impact of COVID-19.  Qualified individuals affected by COVID-19 may be able to withdraw up to $100,000 from their eligible retirement plans, including IRAs, in 2020. The CRD is not subject to the 10% additional tax that otherwise generally applies to distributions made before an individual reaches age 59 ½. In addition, the CRD can be treated as income in equal installments over a three-year period, and the CRD can be repaid within three years and undo the tax consequences of the distribution. Note that this repayment option is not available for distributions from non-spouse inherited IRAs, but it the once-per-12-months limit on IRA-to-IRA rollovers limit DOES NOT apply.

If you think that these law changes may apply to your situation, you should either call your personal financial advisor or call the Willi Law Office, LLC at (614) 890-0500 for more information.  The Willi Law Office, LLC has been providing personalized legal services to individuals and businesses in Westerville and Central Ohio for over 20 years,