INDIVIDUALS - Retirement Plan Changes in the New "CARES ACT"

April 9, 2020

The Coronavirus Aid, Relief, and Economic Security Act, "CARES Act", also included various changes and relief provisions that you should consider implementing immediately.


A few of these provisions are outlined below.

 

Extended deadline for 2019 IRA Contribution

 

Now that the Treasury has extended the tax return filing date to July 15, 2020, from April 15, 2020, the date for making your 2019 year IRA; Roth IRA, Health Savings Account (HSA); and Retirement Plan Contributions for your business (SEP-IRA, 401(k), Pension Plans, Etc) are also extended to the same date.

 

 

Required Minimum Distributions (RMDs) Waived for 2020

 

RMDs Waived for 2020

  • 2019 RMDs due by April 1, 2020 (if delayed to January 1, 2020 or later)

  • 2019 RMDs from company plans and IRAs 

  • 2020 RMDs for plan, IRA and ROTH IRA beneficiaries

 

RMDs taken this year can be undone if are eligible to be rolled over.

To be Eligible:

  • Must be within 60 days

  • There must not have been an IRA-to-IRA or ROTH IRA to ROTH IRA Rollover in the 12 months preceding the receipt of the 2020 RMD.

  • Non-spouse beneficiaries cannot undo RMD's already taken

 

10% Early Distribution Penalty Waiver for "COVID-19 Related Distributions"

 

This penalty is waived on up to $100,000 of 2020 distributions from IRAs and company plans (aggregated) for corona virus related distributions.


While the distribution is exempt from the 10% penalty tax, it is still subject to ordinary tax. This tax could be spread evenly over three years, and the funds could be repaid within the three year period


"Affected Individuals" who over are age 59 1/2 (not subject to the 10% penalty) can still take advantage of the three-year income tax deferral and payback.

 

Plan Loan Relief

  • The maximum amount of plan loans from qualified plans is increased from $50,000 to the lesser of $100,000 (reduced by other outstanding loans) or 100% of the account balance.

  • This relief applies to loans taken within 180 days from March 27, 2020, the bill's date of enactment.

  • Any loan repayments normally due between March 27, 2020 and December 31, 2020 could be suspended for one year.

  • Note that IRAs do not allow loans.

 

We will continue to update you with significant tax filing changes during these difficult times. Refer to the SS+G website for all current and past updates. Please do not hesitate to contact your SS+G team member if you have questions.

 

Very truly yours,

 

 

tel: 312-648-4844 | cpas@ssgltd.com | www.ssgltd.com | 626 W. Jackson Blvd, Suite 650, Chicago, IL 60661-5670

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