Financial Help May Not Be That Far Away
IRS: New law provides relief for eligible taxpayers who need funds from IRAs and other retirement plans for financial help during the COVID-19 pandemic
Under the CARES Act, individuals eligible for financial help related to coronavirus 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
- Maybe repaid to an IRA or workplace retirement plan within three years.
Individuals eligible to take coronavirus-related withdrawals for financial help 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.
Can I Take Out a Loan?
To be eligible for COVID-19 coronavirus-related withdrawals or loans for financial help 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unable to work due to lack of childcare, having a reduction in pay (or self-employment income), or having a job offer rescinded or start date for a job delayed, due to COVID-19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unable to work due to lack of childcare, having a reduction in pay (or self-employment income), or having a job offer rescinded or start date for a job delayed, due to COVID-19; or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.
Additional information on the CARES Act and retirement plans for financial help, as well as updates, other FAQs, and other information, can be found at IRS.gov/coronavirus or contact us for more information.
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