Southwest Florida

Have an IRA? The CARES Act of 2020 Impacts You

CARES Act of 2020
The CARES Act of 2020 will affect nearly everyone’s retirement and estate planning.

The CARES (Coronavirus Aid, Relief, and Economic Security) Act of 2020 was signed into law by the President on March 27th. Several provisions of the legislation impact IRA and employer-retirement plans.

This is just a high-level overview of just a few of these provisions; be sure to contact your financial advisor to see if changes need to be made to your retirement-plan strategy.

If you were expecting to take Required Minimum Distributions (RMDs) from IRAs or employer retirement plans in 2020, this year’s RMDs are now waived. This is a permanent waiver, not just a deferral. This waiver also applies to beneficiaries of inherited IRAs, Roth IRAs, and employer retirement plans.

Any remaining 2019 RMDs having a required beginning date of April 1, 2020 and not withdrawn by January 1, 2020 are also waived.

Already take a RMD you don’t need? You may be able to reverse it through what is known as an indirect rollover. Distributions taken from an IRA can be returned to the same IRA if 1) the money is returned within 60 days and 2) there must not have been an IRA-to-IRA or Roth IRA-to-Roth IRA transfer within the 12 months preceding the distribution. However, beneficiaries are not able to reverse an RMD from an inherited IRA or employer retirement plan.

If you need to withdraw money from your IRA and you’re under 59 1/2, Coronavirus-related distributions (CRDs) up to $100,000 from IRA or employer plans will be exempt from the 10% early withdrawal penalty that would normally apply. Individuals who meet the requirements for being affected by the coronavirus are eligible.

These CRDs would still be taxable to the account owner, but you can pay the tax over a three-year period.

To avoid taxation, CRDs can be repaid to an eligible retirement plan or IRA and treated as having satisfied the 60-day rollover requirements if repaid during the three-year period beginning the day after the CRD was received.

The Treasury has extended the tax return filing date to July 15, 2020, from April 15, 2020, so the date for making 2019 IRA and Roth IRA contributions is also extended to the same date. Normally, IRA contributions for a prior year must be made by April 15th of the following year.

The extended contribution deadline also applies to 2019 Health Savings Account, Archer Medical Savings Account, and Coverdell Education Savings Account (ESA) contributions.

And finally, beginning with 2020 income tax returns, you’ll be able to take a $300 above-the-line charitable income tax deduction – even if you take the standard deduction.

Again, this is just a high-level view of some of the many provisions of the CARES Act. Be sure to contact your financial advisor and tax professional to find out how they may apply to your situation.

Other articles you may find interesting:

Can I Deduct Long-Term Care Expenses on My Tax Return?

How Does the IRS Know if I Gift My Grandchildren Money?

***Want to learn more about how to protect your family from the government, lawsuits, accidental disinheritance, or nursing homes? Click THIS LINK to book a seat at one of our upcoming fun and educational workshops.***

You wonder whether your granddaughter will think of you fondly when you’re not around anymore.

You want to make sure someone will love and care for your dog, horse, or parrot when you can’t.

Your spouse doesn’t share your love for guns, and you fear your collection could be sold for almost nothing – or even destroyed – instead of being passed on to your children or others who share your passion.

Contact us today. We can help.

Name(Required)