Are you or a loved one adversely impacted by Covid-19? The CARES Act 2020 provides some tax relief related to Covid-19 withdrawals and loans from IRA accounts and certain retirement accounts that you might consider.
Generally, IRA and retirement accounts allow you to take distributions which are to be included in your gross income in the year of withdrawal (with some exceptions) and subject to additional 10% tax if withdrawn before you attain the age of 59 1/2 years.
The special treatment for Coronavirus related distributions, lets you withdraw up to $100,000 from your IRA, 401(k) or 403(b) plan before 12/31/2020 without being subject to the additional 10% penalty, irrespective of your age at the time of the withdrawal, and without being subject to mandatory tax withholding. In addition, these Covid-19 withdrawals are allowed to be included in your taxable income over a 3 years period, one third being included each year.
You may also consider taking a loan of up to $100,000 before 09/22/2020 from your workplace retirement plan, if your plan allows it. The plan administrators can suspend, for up to one year, loan repayments due on or after March 27, 2020, and before January 1, 2021.
How To Qualify
This special tax treatment for Covid-19 withdrawals or loans is available if you satisfy the below conditions:
- You, your spouse or dependent are diagnosed with Covid-19 by a test approved by CDC or
- You experience adverse financial consequences because of you, your spouse or any other member of your household being quarantined, furloughed, laid off, having reduced pay/hours or being unable to work due to lack of childcare, having a job offer rescinded or start date for a job delayed or
- Closing or reducing hours of a business owned or operated by you, your spouse or a member of the household, due to Covid-19 and
- You certify to the Retirement Plan administrator that you are a qualified eligible individual for this special tax treatment.
To find out more information about this Covid-19 tax relief click here.
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