CARES Act withdrawal
Client would like to take money out of his wife’s solo 410k to cover some near term financial burdens. The client had his work hours drastically cut back.
The client already did a 60 day IRA rollover on his own IRA earlier this year.
Can the client and his wife each take money out of their retirement accounts via the Cares act?
Permalink Submitted by Alan - IRA critic on Fri, 2020-10-09 16:09
Yes, as long as one of them qualifies for a CRD, the spouse also qualifies for a CRD. Therefore, each could take a withdrawal up to 100k from their retirement plans, and report 1/3 of the distribution as income in 2020 through 2022. There is no 10% penalty on a CRD, and they can be fully or partially repaid up to 3 years from the date of distribution. A CRD distribution must be done no later than 12/30/2020. Repayment of CRD amounts does not count against the one rollover limitation per 12 month period.
Permalink Submitted by Roselyn Siino on Fri, 2020-10-09 17:37
Thank you! Any information on how the custodian would report the CRD if it were paid back? I’m reading it would be treated as a trustee-to-trustee transfer if paid back but I’m not sure if the custodian would code as such or if this reporting falls on the tax preparer/CPA to show a CRD taken and paid back. My assumption is there would be no 1099 since in normal transfers there is no tax document reporting it.
Permalink Submitted by Brian Dobbis on Fri, 2020-10-09 19:00
Does taking a retirement coronavirus related distribution (CRD) impact unemployment Benefits? Receiving conflicting information on one hand I’m being told unemployment benefits are not means tested on the other hand DOL FAQ from earlier this says it might
Permalink Submitted by Alan - IRA critic on Sat, 2020-10-10 00:22
The taxpayer must complete Form 8915 E to report both the CRD and any repayment made before the due date for the 2020 return (including extensions). Repayments made in future year through 2022 will be reported on an 8915 for that particular year. An IRA custodian receiving a repayment must be told of the repayment when made and will then report the repayment on Form 5498 in Box 14a with the CRD code provided in 14b. A qualified plan does not report repaid CRDs or other rollovers under current rules, ie there is no equivalent to Form 5498. A 1099R is only issued to report distributions, so a CRD 1099R could only be for 2020.
Permalink Submitted by Alan - IRA critic on Sat, 2020-10-10 00:28
Unemployment benefit rules vary by state, but generally speaking there is no means testing for UC benefits, however such benefits may affect other means tested program benefits.