New law provides relief for eligible taxpayers who need funds from IRA’s and other retirement plans

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 IRA’s.

Under the CARES Act, individuals eligible for coronavirus-related relief may be able to withdraw up to $100,000 from IRA’s or workplace retirement plans before December 31, 2020, if their plans allow. In addition to IRA’s 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% penalty on early distributions that would otherwise apply
• Are not subject to mandatory tax withholdings
• May be repaid to an IRA or workplace retirement plan within 3 years

Who is eligible?

• The individual is diagnosed with the virus SARS-CoV2 or with coronavirus disease 2019 (collectively COVID-19) by a test approved by the Center for Disease Control
• The individual’s spouse or dependent is diagnosed with COVID-19 by such a test
• The individual experiences adverse financial consequences as a result of
  1. The individual being quarantined, furloughed or laid off
  2. The individual’s spouse or a member of the household being quarantined, furloughed or laid off
  3. 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