Everyone has been focused on the SBA loan provisions in the CARES Act, and are overlooking several other tax savings opportunities in the law. In this article we'll dive into the tax-free distributions from qualified retirement accounts.
Distributions Treated As Rollovers
If you have been negatively affected by the COVID-19 pandemic (and who hasn't), you can distributions up to $100k from your IRA anytime during 2020. As long as you repay the amount within 3 years of the withdrawal, the IRS will treat the distribution as a Rollover, with no tax or penalty. This can be done from multiple accounts, and the repayment can be made ANYTIME during the 3 years.
The qualifications are pretty broad. Obviously if you, your spouse, or your dependents have been diagnosed with COVID-19 you qualify. But here are the ones that will pretty much qualify everyone in America:
- You've experienced adverse financial consequences from being quarantined, furloughed, laid off, or forced to reduce work hours.
- You're unable to work because of a lack of child care due to COVID-19.
- You've experienced adverse financial consequences due to other COVID-19 related factors to be determined in future IRS guidance.
- You own or operate a business that has closed or had operating hours reduced due to COVID-19, and experienced adverse financial consequences because of it.
Other Retirement Accounts
Other Retirement accounts such as 401k's, SEP-IRA's, and SIMPLE-IRA's are also eligible for the distributions. Some businesses may have to update the rules of their plans to allow such distributions for employees. Check with your plan advisor to make sure. Roth IRA's are not affected by this Act.
Last thing, Required Minimum Distributions (RMD's) for those that have reached 70 1/2 are suspended for 2020.