IRS: New Law Helps Taxpayers Who Need Money From IRAs Or Retirement Accounts

The Internal Revenue Service gave a reminder that the Economic Security (CARES) Act and the Coronavirus Aid Relief can help needy taxpayers. By offering friendly tax actions for withdrawals from IRAs and retirement plans, allowing expanded loan options for specific retirement plans.

Can I Get Money from My Retirement Account Now?

If you are eligible for the coronavirus-related relief, the CARES Act allows you to withdraw up to $100,000 from workplace retirement plans or IRAs before 12/31/2020. Besides IRAs, the relief applies to 403(b), 401(k), and profit-sharing plans.

These Coronavirus-related withdrawals:

• Aren’t subject to compulsory tax withholding

• Can be prepaid to a workplace retirement plan or IRA within three years

• Aren’t subject to the ten percent additional tax on early distributions that would apply to withdrawals before you are fifty-nine and six months old.

• It can be included in your taxable income over three years or in a year taken based on your option.

Can I Take Out a Loan?

Loans aren’t available from an IRA. Fortunately, you can borrow as much as $100,000 from your workplace retirement plan if you are eligible for the coronavirus-related withdrawals before 9/22/2020, in case your plan allows. 

If you are certified, plan administrators can suspend your plan loan repayments due on or after 5/27/2020 and before 1/1/2021 for up to one year. Suspended loans are subject to interest during the suspension duration. The term of your loan could be extended to account for the duration of the delay.

You should check with your plan administrators to determine if your plan offers flexible loan options and get more details about the available options. 

Am I Eligible?

To be eligible for Covid-19 relief, you should meet the qualifications highlighted below;

Your dependent or spouse gets diagnosed with Covid-19 by a test accepted by the Center for Disease Control and Prevention and a test authorized under the Federal Food, Drug, and Cosmetics Act).

You are diagnosed with SARS-CoV-2 or Covid-19 by an approved test.

You are experiencing severe financial implications as a result of:

• Your spouse or member of your household is quarantined, laid off, furloughed, gets working hours and pay reduced, inability to work due to lack of childcare, having the job commencement date pushed forward, or your job offer getting rescinded due to Covid-19. 
• Being quarantined, laid off, or furloughed, reduced working hours, reduced pay, inability to work due to lack of childcare, delay of the start date for your job, or having a job offer rescinded, as a result of Covid-19.
•  Reducing or closing hours of a business owned and operated by you, your spouse, or another member of your household as a result of Covid-19.

Where to Get More Information

As a recipient of the retirement plan, you can get more information about the available provisions in IRS Notice 2020-50

The Internal Revenue Service (IRS) has posted Frequently Asked Questions that offer additional information regarding the Corvid-19 relief. 

To access additional information about retirement plans, the CARES Act, updates, and Frequently Asked Questions, you should visit IRS.gov/coronavirus.