IRAs and Plans Relief

IRS provides relief on required minimum distributions (RMD) taken for 2020: 

Since the stimulus law enacted on March 27 waived RMDs from IRAs and company retirement plans for 2020, There has been a lot of controversies involving IRA and qualified and unqualified plan distributions already taken out in 2020. The most common query includes IRA and plan distributions already taken out in 2020.

Plan participants have until August 31 to return Jan. through June payouts to their IRAs or other qualified plans, such as a 401(k) and treat the re-contributed funds as a tax-free rollover per IRS. Additionally, they also waived the one-rollover-every-12-months for IRA owners who took RMD monthly installments in 2020. Rollovers of RMDs from inherited IRAs are permitted as well. See IRS Notice 2020-51 for details.

Other retirement-account-related plan changes due to COVID-19:

The 10% penalty on pre-age-59½ payouts from retirement accounts is waived on up to $100,000 of coronavirus-related distributions in 2020 from IRA’s, 401(k)s, and 403(b)s. Federal income tax on these distributions can be paid over three years unless the individual elects to pay the tax all at once. Additionally, amounts re-contributed to the account within the three-year time period are not taxable. However, they will be treated as rollovers, and any income tax paid on the distribution can be refunded by filing an amended Tax return for 202 using Form 1040-X.

IRS expands the definition of a corona virus-related distribution:

This rule pertains to payouts to account owners if they or their spouses were laid off or furloughed, work hours cut or reduction in pay, a job offer rescinded, or work start date delayed, and or had childcare issues, due to COVID-19. This also qualified for distributions to individuals who own or operate a business that closed or had to reduce hours in the pandemic.