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.
