Dubious Multi-Layered CRD Tax Strategy
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Dubious Multi-Layered CRD Tax Strategy

By Andy Ives, CFP®, AIF®
IRA Analyst

By Andy Ives, CFP®, AIF®

Recently we became aware of a multi-layered tax strategy that we think is a bridge too far when it comes to CRDs. In fact, it may even be outright tax fraud.

As most readers are aware, the CARES Act created CRDs which waive the 10% early distribution penalty on eligible 2020 distributions from IRAs and company plans. The tax would still be due, but could be spread evenly over three years. All or a portion of the CRD can be repaid at any time over this three-year period. Subsequently, the original tax bill on the CRD could be reversed by filing an amended tax return.

Not everyone is eligible for a CRD. You must be an “affected individual” as defined by the CARES Act. This includes those people diagnosed with the virus, those whose spouse or dependents are diagnosed, those who experience adverse financial consequences, etc.




Q: I am 79 and still employed. My employer has an SEP for me and I have a Rollover IRA from a previous employer. Can I transfer my Rollover IRA to the SEP account?


Q: I understand that I need not take any RMD this year in 2020. However, I took monthly distributions from January to May. Can I credit them to 2021?


Q: Can you still recharacterize a Roth contribution (due to income limits) to a Traditional IRA and then subsequently convert the IRA back to a Roth in the same year? Will this conflict with the new law that prohibits undoing a Roth conversion?


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