Retirement Provisions of CARES Act

The CARES Act is 335 pages and has created a lot of opportunity for proactive tax planning, along with a lot of acronyms – CARES (Coronavirus Aid, Relief, and Economic Security Act), PPP, PUA, FPUC, EIDL, PPPHCEA & PEUC (Pandemic Emergency Unemployment Compensation) or Payments extend until Christmas.

A few of the CARES Act law changes for tax year 2020 on retirement accounts –

  • No RMD (Required Minimum Distribution) required for 2020 -YES not required to take funds from your IRA for 2020
    • Waiver applies to Traditional IRAs, retirement plans – SEP, SIMPLE, 401(k),403(b) & 457(b)
  • No required distribution from Inherited IRAs or Inherited ROTH IRAs for 2020
  • You can still take a distribution from your IRA if you need or want to (Taxes still apply to the distribution)
  • If someone passed away in 2020 and did not take an RMD the estate is not required to take the RMD.
  • Qualified Charitable Distributions are still allowed even though RMDs are not required
    • QDC – Charitable contributions paid directly from your IRA to the charity (Must be 501(c)3 & you need to be 70 ½)
  • Special Tax Relief for those who qualify – Coronavirus Related Distribution – CRD
    • Allows $100,000 penalty free distribution from IRA or company retirement plan
    • Don’t have to be over 59 ½
    • Allows distribution to be repaid TAX FREE – repayment period begins day after funds are received
    • OR allows Federal tax to be paid over 3 years / State income tax may vary
      • Qualifications only those individuals
        • diagnosed with the SARS-CoV-2 or COVID-19 virus by a test approved by the CDC
        • spouse or dependent is diagnosed
        • who experiences “adverse financial consequences” from being quarantined; being furloughed or laid off or having work hours reduced; or being unable to work due to lack of child care; or have closed or reduced hours of a business they owned or operated
    • Distribution taken prior to CARES Act also qualify

A lot of tax planning to think about and review for your 2020 tax projection. As with all tax law changes, we will work directly with you and apply these changes to your unique tax situation.