CARES Act Highlights and Updates

More investors qualify for relief

Good news! The IRS has expanded relief for investors who are subject to required minimum distributions (RMDs) and for those who need to take an early distribution from their retirement funds.

More investors qualify for relief

Good news! The IRS has expanded relief for investors who are subject to required minimum distributions (RMDs) and for those who need to take an early distribution from their retirement funds.

Here’s what changed: Although the CARES act eliminated required minimum withdrawals from retirement accounts for 2020, some savers may already have taken their money earlier in the year. The IRS states those withdrawals may now be rolled back into the accounts from which they came.

If you took a required minimum distribution from your retirement account this year and want to reverse it, you now may be able to do so.

On June 23, 2020, the IRS issued the following notice:

Anyone who has already taken an RMD in 2020 from an IRA has until August 31, 2020 to put the money back. This will help those individuals who had taken their 2020 RMD in January or early February. The CARES Act eliminate those mandated distribution for the year — yet some people already had taken them before the law’s passage.

The IRS’s new relief applies to individuals who face RMDs either due to their age or because they inherited an account that comes with those mandated withdrawals.

CARES Act

New Rollover Rules for 2020 RMDs:

The method approved by the IRS to remedy this is a rollover, which normally has a 60-day and one-per-year limitation. Both of those requirements were waived for 2020 RMDs. The RMD deposit can be treated as a rollover if accomplished before Aug 31, 2020.

Highlights

All required Minimum Distributions (RMDs) are suspended for 2020 including those for inherited IRAs and Traditional IRAs of those over age 70 1/2.

2020 RMDs that have already been taken will be taxed as regular income. A provision in the act will allow the return of a distribution if the funds are returned by August 31, 2020.

The 10% penalty on IRA withdrawals for individuals under 59 1/2 is waived. The waiver applies to distributions taken between January 1, 2020 and December 31, 2020. Up to $100,000 of distributions can avoid the penalty. Income taxes on a coronavirus-related distribution can be paid over a three-year period.

To qualify the IRA distribution exception, the purpose must be coronavirus-related.

  • The individual, the individual’s spouse or a dependent must have been diagnosed with COVID-19, or the individual must experience adverse financial consequences as a result of being quarantined, furloughed, laid off or having work hours reduced due to COVID-19.
  • Individuals who were unable to work due to lack of child care as a result of COVID-19.
  • An individual whose business was closed or had reduced operating hours as a result of COVID-19.

To delay your Red Wing Credit Union IRA RMD for 2020 or to roll over your previous 2020 RMD, please contact our office at 651-267-4223 or 651-267-4219.

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