Taking a Retirement Plan Distribution in 2020

Here are some interesting facts for those under 591/2 considering retirement plan distributions in 2020.

Coronavirus related withdrawals of up to $100,000 (in the aggregate) from qualified retirement plans (that choose to permit them) and IRAs during 2020 may receive special tax treatment.

Clients under age 59? can withdraw up to $100,000 in the aggregate from specified qualified retirement plans and IRAs during 2020 without a 10% early withdrawal additional federal income tax, if the individual meets coronavirus-related eligibility requirements (see below).

The 20% mandatory federal income tax withholding is waived for CRDs from qualified retirement plans.

Unless you elect to include taxes in the year of distribution, CRDs will be included in your income for federal income tax purposes ratably over 3 years. Note that state and local income taxes may not be subject to this delayed tax treatment. Consult your tax advisor for more information on your personal circumstances.

CRDs may be repaid to a qualified retirement plan in which you participate or an IRA (in one or more payments) at any time during the 3-year period beginning on the day after the date on which the distribution was received, and those repayments will be treated as a tax-free rollover, without regard to any annual contribution cap. We anticipate guidance regarding the tax treatment of taxes that were previously paid on CRDs in the event all or a portion of a CRD is repaid during such 3-year period. Non-spouse beneficiaries may be eligible for a CRD and the 3 year tax spread, but they are not permitted to rollover/repay a CRD.

Of course this article is somewhat generalized so you should check in with your Tax Advisor about your particular situation.