IRS:
New law provides relief for eligible taxpayers who need funds from IRAs and
other retirement plans
WASHINGTON − The Internal Revenue Service provided a reminder today that the
Coronavirus Aid, Relief, and Economic Security (CARES) Act can help eligible
taxpayers in need by providing favorable tax treatment for withdrawals from
retirement plans and IRAs and allowing certain retirement plans to offer
expanded loan options.
Can I get money from my
retirement account now?
Under the CARES Act, individuals eligible for coronavirus-related relief may be
able to withdraw up to $100,000 from IRAs or workplace retirement plans before Dec. 31, 2020, if their plans
allow. In addition to IRAs, this relief applies to 401(k) plans, 403(b) plans,
profit-sharing plans and others.
These coronavirus-related withdrawals:
- May
be included in taxable income either over a three-year period (one-third
each year) or in the year taken, at the individual’s option.
- Are
not subject to the 10% additional tax on early distributions that would
otherwise apply to most withdrawals before age 59½,
- Are
not subject to mandatory tax withholding, and
- May
be repaid to an IRA or workplace retirement plan within three years.
Can I take out a loan?
Individuals eligible to take coronavirus-related withdrawals may also, until
Sept. 22, 2020, be able to borrow as much as $100,000 (up from $50,000) from a
workplace retirement plan, if their plan allows. Loans are not available from
an IRA.
For eligible individuals, plan administrators can suspend, for up to one year,
plan loan repayments due on or after March 27, 2020, and before Jan. 1, 2021. A
suspended loan is subject to interest during the suspension period, and the
term of the loan may be extended to account for the suspension period.
Taxpayers should check with their plan administrator to see if their plan
offers these expanded loan options and for more details about these options.
Who is eligible?
To be eligible for COVID-19 relief, coronavirus-related withdrawals or loans
can only be made to an individual if:
- The
individual is diagnosed with the virus SARS-CoV-2 or with coronavirus
disease 2019 (collectively, COVID-19) by a test approved by the Centers
for Disease Control and Prevention (including a test authorized under the
Federal Food, Drug, and Cosmetics Act);
- The
individual’s spouse or dependent is diagnosed with COVID-19 by such a
test; or
- The
individual experiences adverse financial consequences as a result of:
- The individual being quarantined, being furloughed or
laid off, having work hours reduced, being unable to work due to lack of
childcare, having a reduction in pay (or self-employment income), or
having a job offer rescinded or start date for a job delayed, due to
COVID-19;
- The individual’s spouse or a member of the
individual’s household (that is, someone who shares the individual’s
principal residence) being quarantined, being furloughed or laid off,
having work hours reduced, being unable to work due to lack of childcare,
having a reduction in pay (or self-employment income), or having a job
offer rescinded or start date for a job delayed, due to COVID-19; or
- Closing or reducing hours of a business owned or
operated by the individual, the individual’s spouse, or a member of the
individual’s household, due to COVID-19.
Retirement plan recipients can learn more about these provisions in IRS Notice 2020-50.
The IRS has also posted FAQs that provide additional information regarding this relief.
Additional information on the CARES Act and retirement plans, as well as updates, other FAQs, and
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