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from the previously allowed amount of $50,000.
Participants must repay standard retirement-account loans within five years. The CARES Act allows borrowers to forgo repayment during 2020. The five-year repayment clock begins in 2021. The loan will, however, continue to accrue interest during 2020.
If you have an existing loan out- standing from a qualified individual plan on or after March 27, 2020, and any repayment on the loan is due from March 27, 2020 to Dec. 31, 2020, the due date for any loan repayments are delayed for up to one year.
Employers may amend their plans for the above hardship provisions to apply no later than the last day of the plan year that begins on or after Jan. 1, 2022 (Dec. 31, 2022 for a calendar-year- end plan). An additional two-year win- dow is allowed for governmental plans; however, IRS Notice 2020-51 clarifies that employers can choose whether to implement these coronavirus-related distribution and loan rules, and notes that qualified individuals can claim the tax benefits of coronavirus-related dis- tribution rules even if plan provisions are not yet amended.
Administrators can rely on an indi- vidual’s certification that the individual is a qualified individual (and provides a sample certification), but also notes that an individual must actually be a
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tage of the lower tax bracket and get their incomes as close to the $79,000 as possible. Other clients, who use their retirement-plan distributions to make their charitable contributions (a very wise idea as you will generally save state taxes in addition to possibly saving federal taxes), should probably take a retirement-plan distribution in 2020.
Those who are aged may also want to take a distribution. Under the inher- ited IRA rules, your IRA beneficiaries will be required to take distributions, so consider their tax rates compared with yours.
As always, in the tax code, there are exceptions to exceptions, and this brief summary is only the cocktail hour. Be aware that you are not required to take an RMD for 2020. If you have taken an RMD, you can return it by Aug. 31. Do some tax planning to determine the best amount for your 2020 retirement- plan distribution. u
Bob Suprenant, CPA, MST is a director of Special Tax Services at MP CPAs
in Springfield. His focus is working with closely held businesses and
their owners and identifying and implementing sophisticated corporate and business tax-planning strategies.
qualified individual in order to obtain favorable tax treatment. IRS Notice 2020-50 provides employers a safe-har- bor procedure for implementing the suspension of loan repayments other- wise due through the end of 2020, but notes there may be other reasonable ways to administer these rules.
Please note that the loan provisions apply only to qualified plans such as 401(k), 403(b), and governmental 457 plans; loans may not be taken from IRAs.
Each retirement plan’s rules and requirements supersede the CARES Act. In addition, it is important to remember that not all retirement-plan sponsors allow loans. Before taking
out any loan, it is important to check that your employer’s plan adopts these provisions.
Suspension of RMDs
The CARES Act has suspended required minimum distributions (RMDs) for 2020. Individuals over age 701⁄2 (for those born prior to July 1, 1949) or 72 (for those born after July 1, 1949) were required to take a minimum distribution from their tax-deferred retirement accounts.
Most non-spousal heirs who inher- ited tax-deferred accounts were also required to take an annual RMD. Under the CARES Act, RMDs from
qualified employer retirement plans such as 401(k), 403(b), and 457 plans, will be waived. Even those individu- als not affected by the coronavirus can waive the RMDs.
For individuals who have already taken their 2020 RMD, the CARES Act allows you to put it back into your retirement account. IRS Notice 2020-51 qualifies the distribution as an eligible rollover distribution if repaid in full by Aug. 31, 2020. u
Jim Moran is a tax manager at Melanson, advising clients on individual and corporate tax matters; [email protected]
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