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The Internal Revenue Service has issued guidance for retirement plans participants, affected by the COVID-19 virus, who take distributions or loans from those funds. Under the CARES Act, distributions this year are not subject to an additional 10 percent tax for early withdrawals.

Notice 2020-50 (PDF)  notes individuals may  make $100,000 in distributions as virus-related between January 1 and December 30. Such distributions are not subject to the additional levy for those who take them before reaching the age of 59.5

These withdrawals can also be treated as income in equal parts over a three-year period and individuals also can repay distributions to a pan or IRA over three years and avoid any tax consequences.

Plans may also suspend loan repayments due from March 27 through December 27 and the limit on loans for the same period is raised from $50,000 to $100,000.

To qualify for the relief, individuals, their spouses or dependents must have been diagnosed as infected by the virus under an approved test. They must also have experience financial harm owing to having been furloughed or laid off, or having work hours reduced due to COVID-19; unable to work because of lack of child care; have experienced closing of a business they own or reduced hours;  had compensation reduced, including self-employment income; or had a job offer rescinded or its start date delayed.

Bob Scott
Bob Scott has provided information to the tax and accounting community since 1991, first as technology editor of Accounting Today, and from 1997 through 2009 as editor of its sister publication, Accounting Technology. He is known throughout the industry for his depth of knowledge and for his high journalistic standards.  Scott has made frequent appearances as a speaker, moderator and panelist and events serving tax and accounting professionals. He  has a strong background in computer journalism as an editor with two former trade publications, Computer+Software News and MIS Week and spent several years with weekly and daily newspapers in Morris County New Jersey prior to that.  A graduate of Indiana University with a degree in journalism, Bob is a native of Madison, Ind
Last modified on Wednesday, 24 June 2020
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