On March 27 the Coronavirus Aid, Relief and Economic Security Act (CARES Act) was signed into law. This $2 trillion relief /stimulus package does many things to help individuals and businesses affected by the Coronavirus. There are three provisions which directly affect your Individual Retirement Account (IRA):
1. Required Minimum Distributions (RMDs) for 2020 are not required,
2. Distributions prior to age 59 1/2 of up to $100,000 are not subject to the 10% excise tax in 2020, and,
3. Distributions of up to $100,000 this year can be reported as income over three years and/or repaid.
The suspension of the RMD rules apply to all taxpayers who are otherwise required to receive an RMD in 2020. The other two provisions apply only to IRA owners affected by coronavirus. This is defined as a person:
who is diagnosed with coronavirus,
whose spouse or dependent is diagnosed with coronavirus,
who experiences adverse financial consequences as a result of:
being quarantined,
being furloughed or laid off,
having reduced hours,
being unable to work due to lack of childcare,
closing or reduced hours of a business owned or operated by the participant, or
any other factor determined by the Secretary of the Treasury.
The suspension of the RMD requirement applies to anyone who had attained the age of 70 1/2 before January 1, 2020. If you turned 70 1/2 last year and were waiting until March 31 to take your 2019 distribution, you are in luck. You are not required to take your 2019 RMD or your 2020 RMD. If you took your 2019 or 2020 RMD within the last 60 days, you are also in luck. You can roll over your distribution to the same or a different IRA within 60 days of the prior distribution and not pay the income tax on the withdrawal (as long as you have not made an IRA withdrawal within the 365 days preceding your distribution). Although inherited IRAs can take advantage of the RMD suspension for 2020, they are not eligible for the indirect rollovers within sixty days.
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