How does this affect you?

The CARES Act suspended the required minimum distribution (RMD) rules for 2020. This means any RMD a taxpayer would have been required to make before Dec. 31, 2020, as well as any RMD required to be made by April 1, 2020, based on meeting the required beginning date in 2019, is not required.

However, if the RMD due on April 1, 2020, was made before Jan. 1, 2020, it may not be rolled over or redeposited.

If you received distributions from your IRA in 2020, you might be able to spread the tax over the course of three years if you were diagnosed with coronavirus, if your spouse or dependent was diagnosed with coronavirus or if you experienced adverse financial consequences while being quarantined, furloughed, laid off or had work hours reduced; were unable to work due to lack of child care because of the disease; or a business you operated closed or had reduced hours due to the pandemic.

The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) also made changes to the RMD rules, including raising the RMD to age 72 for individuals who had not yet attained age 70 1/2 by Dec. 31, 2019, and limiting the type of beneficiaries who can continue to receive RMDs over the beneficiary’s life expectancy. “Stretch IRAs” are eliminated for non-spouse beneficiaries who may no longer “stretch” inherited IRA distributions over their lifetime. Distributions must be made within 10 years of the IRA owner’s death.

The additional 10% tax on early distributions from IRAs and defined contribution plans such as a 401(k) is waived for distributions made between Jan. 1 and Dec. 31, 2020, if you or a family member was infected with COVID-19 or were economically harmed by COVID-19. Penalty-free distributions are limited to $100,000 and, subject to plan guidelines, may be re-contributed to the plan or IRA. Income arising from the distributions is spread out over three years unless you elect to not have the three-year spread apply.

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