IRS Expands Eligibility for Coronavirus-Related Distributions
By Sarah Brenner, JD
Follow Us on Twitter: @theslottreport
On June 19, the IRS released additional guidance on coronavirus-related distributions (CRDs) from retirement accounts. The new guidance will make many more individuals eligible for these tax-advantaged distributions allowed under the CARES Act.
What Is a CRD?
If you qualify as an “affected individual”, you can take up to $100,000 of distributions from your IRAs and employer plans in 2020. There is no 10% early distribution penalty if you are under age 59 ½, and you have an option to spread the federal tax on CRDs evenly over a three-year period beginning with the year 2020. You also have a three-year period to repay CRDs to an IRA or employer plan. Taxes can be refunded on the amounts repaid. Repayment does not have to be made to the same IRA or company plan from which the CRD was originally paid. While the 10% penalty is a non-issue you if you are over age 59 ½, you can still take advantage of the other two items of relief if you are eligible.
Increased CRD Eligibility
The new IRS guidance increases eligibility for CRDs by expanding the definition of an “affected individual” to include those who suffer financial hardship as result of having a reduction in pay or having job offer rescinded or delayed due to COVID-19.
Additionally, the new definition includes those who experience financial hardship due to the following new factors: a spouse or a member of the individual’s household being quarantined, furloughed or laid off or having work hours reduced due to COVID-19; being unable to work due to lack of childcare due to COVID-19; having a reduction in pay due to COVID-19; or having a job offer rescinded or start date for a job delayed due to COVID-19; or closing or reducing hours of a business owned or operated by the individual’s spouse or a member of the individual’s household due to COVID-19.
The complete guidance released by the IRS can be found here: https://www.irs.gov/pub/irs-drop/n-20-50.pdf
Good Advice is Essential
Do you have questions as to whether you fit the new expanded definition of “affected individual”? Or, are you unsure whether a CRD is the right move for you? In these turbulent times, good advice is more essential than ever. Be sure to discuss your situation with a qualified tax or financial advisor.
Content Citation Guidelines
Below is the required verbiage that must be added to any re-branded piece from Ed Slott and Company, LLC or IRA Help, LLC. The verbiage must be used any time you take text from a piece and put it onto your own letterhead, within your newsletter, on your website, etc. Verbiage varies based on where you’re taking the content from.
Please be advised that prior to distributing re-branded content, you must send a proof to email@example.com for approval.
For white papers/other outflow pieces:
Copyright © [year of publication], [Ed Slott and Company, LLC or IRA Help, LLC - depending on what it says on the original piece] Reprinted with permission [Ed Slott and Company, LLC or IRA Help, LLC - depending on what it says on the original piece] takes no responsibility for the current accuracy of this information.
Copyright © [year of publication], Ed Slott and Company, LLC Reprinted with permission Ed Slott and Company, LLC takes no responsibility for the current accuracy of this information.
For Slott Report articles:
Copyright © [year of article], Ed Slott and Company, LLC Reprinted from The Slott Report, [insert date of article], with permission. [Insert article URL] Ed Slott and Company, LLC takes no responsibility for the current accuracy of this article.
Please contact Matt Smith at firstname.lastname@example.org or (516) 536-8282 with any questions.