Part of the CARES Act was establishing coronavirus related distributions from retirement plans. The IRS recent came out with IRS Notice 2020-50 which provides a lot more insight for how those distributions are going to work and provided a lot of flexibility for taxpayers. A link to the full notice is here https://www.irs.gov/pub/irs-drop/n-20-50.pdf
Lots of good information and examples in there, but let’s go through a couple of the big picture items.
- A bit more detail of who can claim a coronavirus related distribution
- Reduced pay or self-employment income
- Job offer rescinded
- Job start delayed
- Spouse or household member impacted
- Closing or reduced activity for a business owned by household member
- RMDs taken early in the year can subsequently be treated as coronavirus distributions
- Some ability for beneficiaries to count RMD as coronavirus distributions
- Election to spread coronavirus distribution income over 3 years made with the 2020 tax return
- Rules and examples for how repayment is treated when the income is spread over 3 years
- Payback reduces the income in the current year
- Payback that exceeds the income in the current year can either be carried back and done with an amended return or carried forward to offset future income
- Amended returns can be used to reduce income from coronavirus distributions if paid back in a subsequent year
I think this IRS notice has answered most of the questions regarding how these coronavirus distributions will work administratively so it’s worth a read if you’ve got a coronavirus distribution or reach out and we can go through your situation. Contact me for more information at firstname.lastname@example.org.