DISTRIBUTIONS FROM CARES PLANS
December 3, 2020 - Douglas Myser
Distributions from cares plans. The IRS explained how qualified individuals can take coronavirus related loans and distributions from eligible retirement plans (Notice 2020-50). Qualified individuals receive favorable tax treatment for those distributions under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136. Distributions: A coronavirus related distribution is not subject to the Sec. 72 (t) 10% additional tax (and it is also not subject to the Sec. 72(t)(b) 25% additional tax for certain distributions from SIMPLE IRSs. These distributions are generally includible in income over a three year period and to the extent the distribution is eligible for tax free rollover treatment and is contributed to an eligible retirement plan within a three year period, will not be includible in income. Distributions from cares plans.
Plans loans: The CARES Act also increases the allowable plan loan amount under Sec. 72 (p) form $50,000 to $100,000 and permits a suspension of payments for plan loans outstanding on or after March 27, 2020, that are made to qualified individuals. Qualified Individuals: A qualified individual is defined under the CARES Act as a individual: Who is 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 (CDC) (including a test authorized under the Federal Food, Drug, and Cosmetic Act).
Whose spouse or dependent (defined under Sec. 152) is diagnosed with COVID-19 by a test approved by the CDC (including a test authorized under the Federal Food, Drug, and Cosmetic Act, or Who experiences adverse financial consequences as a result of, The individual's being quarantined, being furloughed or laid off, or having work hours reduced due to COVID-19. The individual being unable to work due to lack of child care due to COVID-19, or Th enclosing or reducing hours of a business owned or operated by the individual due to COVID-19.
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