CARES Act Effect on Individual Retirement Account
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed and enacted in an effort to help Americans affected by COVID-19. This bill is designed to alleviate financial strains from the coronavirus for those who have been affected by the outbreak.
If you have an Individual Retirement Account (IRA) at Langley, you may have federal relief opportunities that will help you during these uncertain times.
Tax relief opportunities are:
- IRA contribution deadline extended. The deadline for making 2019 IRA contributions has been extended until July 15, 2020.
- Required minimum distributions (RMDs). All 2020 RMDs from IRAs and retirement plans are waived, including RMDs from inherited IRAs (both Traditional and Roth). Individuals required to take minimum distributions from retirement accounts are no longer required to make a distribution for 2020. The RMD waiver includes 2019 RMDs that were not taken before January 1, 2020.
- Tax-favored early distributions from retirement plans. The CARES Act waives the 10% IRS penalty applicable to early distributions for coronavirus related distributions up to $100,000 from IRAs and qualified defined contribution retirement plans such as 401(k), 403(b), and governmental 457(b) plans. A coronavirus related distribution is a distribution made during calendar year 2020 to an individual (or spouse) diagnosed with COVID-19 by a CDC-approved test, or to one who experiences adverse financial consequences as a result of quarantine, business closure, layoff, or reduced hours due to the coronavirus. In addition, any income attributable to an early withdrawal is subject to income tax over a 3-year period unless the individual elects to have it all included in their 2020 income. Finally, individuals may re-contribute the withdrawn amounts back into an IRA or plan within 3 years without violating the 60-day rollover rule or annual contribution limits.