As the coronavirus pandemic has spread, many Americans have been hit hard. Their retirement accounts have also taken a serious blow as markets have plummeted. In these tough times, there is a bit of good news as the government has come through with some relief for retirement savers.
IRA Deadline Extended until July 15
The IRS has extended the tax-filing deadline for 2019 federal income tax returns from April 15 to July 15. The extension of the tax-filing deadline also postpones the deadline for making 2019 prior-year contributions to traditional and Roth IRAs from April 15 to July 15. This is good news for retirement savers, giving them a little more time to get their prior-year contributions done. To avoid confusion, anyone taking advantage of this postponed deadline should be sure to clearly indicate to the IRA custodian that the amounts contributed are 2019 prior-year contributions.
2020 RMD Waiver
On March 27, the massive “Coronavirus Aid, Relief, and Economic Security Act,” or the “CARES Act,” was signed into law. The CARES Act includes a waiver of required minimum distributions (RMDs) for 2020. This waiver applies to company savings plans and IRAs, including both traditional and Roth inherited IRAs. In addition, the CARES Act impacts 2019 RMDs for those who reached age 70 ½ in 2019 and have a required beginning date of April 1, 2020. Any 2019 RMD amount remaining and not already withdrawn by January 1, 2020 is waived. The RMD waiver can help you if you would have had to take an RMD this year based on much higher end-of-2019 account values. Now you can avoid the tax bill altogether.
The CARES Act also waives the 10% early distribution on distribution of up $100,000 from IRAs and plans for individuals who meet the requirements of being affected by the coronavirus. The tax would still be due on pre-tax distributions, but could be spread evenly over three years, and the funds could be repaid anytime during the three years.
Rules for plan loans are relaxed for those who meet the definition of being affected by the coronavirus with loan limits increased and repayments postponed.
America’s Tax Solutions®, the #1 Provider of Retirement Distribution Strategies, is the only community-based, one-stop resource specializing in retirement distribution planning and related tax mitigation. Few investors realize that the federal government is actually the primary beneficiary of their retirement accounts and, unless the take specific steps to “disinherit” Uncle Sam, they could lose anywhere from 35% to 80% of their retirement to taxes.
The rules surrounding distributions from retirement accounts are especially complex. Therefore, we will be sending you our exclusive Tax Tips periodically to help you understand the tax code, so you can maximize your clients’ retirement. To ensure compliance requirements imposed by the IRS, we inform you that, unless specifically indicated otherwise, any tax advice contained in this communication was not intended or written to be used, and cannot be used, for purpose of (i) avoiding tax-related penalties under Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any tax-related matter addressed herein.
This is not intended as a solicitation or advertisement for legal services. The information contained herein is not intended as legal advice.