INTRODUCTION

This is an update to an article published on June 26th, 2020 on our website, titled “CARES Act – Retirement Account Provisions”.

EARLY WITHDRAWALS

The CARES Act provided relief for penalties assessed on early withdrawals from retirement accounts.  Eligible plan participants were able take an early distribution of up to $100,000 without incurring the 10% penalty normally imposed on early distributions. In addition, the 20% federal income tax withholding requirement was also waived.

On June 19, 2020 the IRS published Notice 2020-50 to expand the eligibility criteria. Adverse financial consequences suffered by a taxpayer’s spouse, and vice-versa, are now considered. In addition, the rescission of job offers, or the delay of a job start date, are now considered adverse financial consequences.

From the IRS website “As expanded under Notice 2020-50, a qualified individual is anyone who –

REQUIRED MINIMUM DISTRIBUTIONS

The CARES Act allowed taxpayers to forgo Required Minimum Distributions (RMD) from their retirement accounts for the 2020 tax year. For taxpayers who had already taken their RMD before the Act passed, the CARES Act allowed them to roll money back into their accounts to negate the distribution. Unfortunately, this relief was only available to original account holders and spousal-beneficiaries who had taken an RMD after January 31, 2020. Additionally, the roll back had to take place within 60 days from the date of the distribution.

On June 23, 2020, the IRS published Notice 2020-51, which expanded the relief on RMDs provided by the CARES Act in three ways.

  • Non-spousal beneficiaries are now eligible to roll back their RMD.
  • Taxpayers who took their RMD in January are now eligible to roll back their RMD.
  • The 60-day window taxpayers have to perform the roll back has been changed to a single deadline of August 31, 2020.

CONCLUSION/DISCLAIMER  

Please note that this article does not constitute financial advice. Consult with your financial advisor and/or CPA before taking any of the actions described above. If you would like to discuss how these provisions apply to you, please contact one of your ADKF service team members. If you are not yet a client of our firm, we would be delighted to conduct an initial consultation at no charge.