The COVID-19 crisis has shifted many things around the world these past 9 months. With stimulus money paid to individuals and PPP loans made available to businesses this past summer, it is important to also be aware of another financial assistance option:
the CARES Act, in response to COVID-19, provides relief for retirement plans and IRA’s.
This provision allows for up to $100,000 to be taken out of an IRA and 401K retirement account if the following circumstances apply.
You are a qualified individual if:
- You are diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention
- Your spouse or dependent is diagnosed with SARS-CoV-2 or with COVID-19 by a test approved by the Centers for Disease Control and Prevention
- You experience adverse financial consequences as a result of being quarantined, being furloughed or laid off, or having work hours reduced due to SARS-CoV-2 or COVID-19
- You experience adverse financial consequences as a result of being unable to work due to lack of child care due to SARS-CoV-2 or COVID-19
- You experience adverse financial consequences as a result of closing or reducing hours of a business that you own or operate due to SARS-CoV-2 or COVID-19.
There is not a 10% early withdraw penalty assessed and you can choose to either repay all or a portion of the funds within 3 years of taking the distribution. If you prefer to claim the funds as income, you can do so and allocate any portion of the income into tax years 2020, 2021, and 2022.
These monies can be used for personal, business, or investment purpose expenses provided you are a qualified individual taking the distribution. It is important to read the IRS requirements closely to confirm eligibility for this program prior to taking any action.
The deadline for this withdrawal is December 30th, 2020.
Given the complexity of options combined with the potential size of the distribution, obtaining tax advice is recommended.
Our firm, SJC Company has helped numerous clients navigate what distribution amounts to take. We have also helped analyze repayment plans versus claiming the distribution as income. This is a time sensitive opportunity that can help those financially impacted by this pandemic. Feel free to share this information with anyone you think may find it useful.
If you’d like to learn more, please join our webinar on November 23rd that covers further details,
If you’d like to schedule a free initial consultation, please call 719-473-9557 or email joshmanier@gmail.com
Content Provided by Josh Manier, Independent Tax and Financial Advisor,
SJC Company, dba Whole Family Financial Services
This content supports SJC COMPANY/Whole Family Financial Services marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. If you are interested in the topics presented herein, we encourage you to contact us or an independent tax professional to discuss their potential application to your particular situation. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this content may be considered to contain written tax advice, any written advice contained in, forwarded with or attached to this content is not intended by SJC COMPANY/Whole Family Financial Service to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.
The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice provided by SJC COMPANY /WFFS to the reader. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact SJC COMPANY/Whole Family Financial Service or other tax professionals prior to taking any action based upon this information. Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; SJC COMPANY/Whole Family Financial Service assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to Internal Revenue Code 1986 as amended.