Among the many provisions outlined in the CARES Act, there are several that benefit individuals directly. Most of us are familiar with the stimulus check provisions by now, but there are also ways to minimize financial strains through specific provisions for retirement plans.
IRA Contribution Deadline Extended
The IRA contribution deadline for 2019 has been extended to July 15, 2020, to match the extension for filing income tax returns. If you would like to make a carryback contribution for 2019, it must be postmarked by July 15 and designated as a 2019 contribution.
Required Minimum Distributions (RMDs) from retirement plans have been suspended for 2020. You do not have to take the mandatory distribution if funds are not needed for current living expenses. This provision effectively allows you to retain assets in your retirement account. You will need to contact your plan administrator or IRA custodian to take advantage of this provision.
Account Distribution Rules Revised
If you or a spouse have suffered a financial hardship as a result of the coronavirus pandemic (such as a layoff, furlough, childcare issues, medical expenses, etc.), you can withdraw up to $100,000 from your retirement account (such as an IRA or 401(k)) and not be subject to the 10% early withdrawal penalty if you are under the age of 59 ½. The distribution will still be subject to income taxes; however, the tax liability may be spread over the next three years. Furthermore, if not all the funds are used, you may be able to re-contribute the remaining amount back to the retirement plan to avoid some or all of the taxes.
It is important to check with a tax professional or qualified financial advisor on the advisability of taking a withdrawal from your retirement account. Also, not all plans will allow COVID-19 withdrawals, so be sure to check with your plan administrator or IRA custodian.
Disclaimer: Church Extension Plan does not offer tax or legal advice and does not assume any liability for the materials and information provided by those organizations or the Federal Government which we link you to. We recommend readers consult with professional advisors for their particular situation. Nothing in the message above may be relied upon by a taxpayer to avoid tax penalties.