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How the CARES Act Could Affect You…

How the CARES Act Could Affect You…

February 08, 2021

The CAREs Act and IRA RMD holiday was a 2020 event, therefore making a mention of that and the rules governing 2021 will be different. 

As we begin to prepare our 2020 tax returns, it’s reassuring to know our government “cares” about what a challenging year we are leaving behind.

The Coronavirus Aid, Relief, and Economic Security Act, known as the CARES Act, and the RMD, Required Minimum Distribution holiday were enacted to assist individuals, families, and businesses affected by the COVID-19 pandemic.

The CARES Act as an economic stimulus may affect your tax liability for 2020. To follow is a Retirement Benefits Guide to Required Minimum Distributions. Please read carefully and please note that the rules governing RMD’s for 2021 will be different. Contact your One Financial Services advisor with any questions.

What you need to know:

The CARES Act waives all required minimum distributions (RMDs) from retirement accounts for 2020. This includes traditional IRAs, SEP IRAs, and SIMPLE IRAs, as well as 401(k), 403(b), and Governmental 457(b) plans. They do not need to be made up next year.

What does it mean?

This means that, as a retirement account owner or a beneficiary taking stretch distributions, you can leave your retirement accounts alone for another year, allowing your accounts the time to recover.

Additionally, if you are at least age 70 ½, the Qualified Charitable Distributions (QCDs) allow you to send up to $100,000 from an IRA to a qualified charity and have that amount offset any RMDs for the year and not be treated as a taxable distribution. Note: Since the required date for RMDs is 72, if you use a QCD at age 70 ½, you would not be able to offset any RMDs because none are owed yet.

What can you do?

  • If you already took your RMD, it can be rolled over to an IRA or eligible retirement plan (unless you are a beneficiary who inherited the IRA). This is limited to one 60-day rollover per 12-month period.
  • If you took your RMD after Jan. 1 and May 15 you have until August 31 to roll it back.
  • If you won’t need your RMDs, now is an ideal time to suspend your RMDs for 2020.
  • If there’s an agreement or schedule established, you, as the beneficiary should notify the custodian that you don’t to take the RMD this year. (It never hurts to notify the custodian of your intent, regardless of existing arrangements.)

This material was prepared by LPL Financial. This information is not intended to be a substitute for specific individualized legal or tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.