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IRS: More COVID-impacted taxpayers now eligible to receive loans from retirement plans

1 year 11 months 1 week ago Wednesday, October 14 2020 Oct 14, 2020 October 14, 2020 7:46 AM October 14, 2020 in News
Source: WBRZ

WASHINGTON — The Internal Revenue Service announced Wednesday that an increased number of taxpayers impacted by novel coronavirus are now qualified to receive distributions or loans from retirement plans.

The agency expanded the categories of individuals it considers eligible for these types of distributions and loans (referred to as "qualified individuals").

The CARES Act allows for qualified individuals to treat up to $100,000 in distributions made from their eligible retirement plans (including IRAs) between January 1 and December 30, 2020 as coronavirus-related distributions.

Such coronavirus-related distributions are not subject to the 10% additional tax that otherwise generally applies to distributions made before an individual reaches age 59 ½.

Additionally, a coronavirus-related distribution can be included in income in equal installments over a three-year period, and an individual has three years to repay a coronavirus-related distribution to a plan or IRA and undo the tax consequences of the distribution.

In addition, the CARES Act provides that plans may implement certain relaxed rules for qualified individuals relating to plan loan amounts and repayment terms. In particular, plans may suspend loan repayments that are due from March 27 through December 31, 2020, and the dollar limit on loans made between March 27 and September 22, 2020, is raised from $50,000 to $100,000.

As authorized under the CARES Act, Notice 2020-50 expands the definition of who is a qualified individual to take into account additional factors such as reductions in pay, rescissions of job offers, and delayed start dates with respect to an individual, as well as adverse financial consequences to an individual arising from the impact of the COVID-19 coronavirus on the individual's spouse or household member. As expanded under Notice 2020-50, a qualified individual is anyone who –

-is diagnosed, or whose spouse or dependent is diagnosed, with the virus SARS-CoV-2 or the coronavirus disease 2019 (collectively, "COVID-19") by a test approved by the Centers for Disease Control and Prevention (including a test authorized under the Federal Food, Drug, and Cosmetic Act); or

- experiences adverse financial consequences as a result of the individual, the individual's spouse, or a member of the individual's household (that is, someone who shares the individual's principal residence):

-being quarantined, being furloughed or laid off, or having work hours reduced due to COVID-19;

-being unable to work due to lack of childcare due to COVID-19;

-closing or reducing hours of a business that they own or operate due to COVID-19;

-having pay or self-employment income reduced due to COVID-19; or

-having a job offer rescinded or start date for a job delayed due to COVID-19.

For additional details related to the effects of COVID-19 on federal income tax, visit the IRS Coronavirus Tax Relief pages of IRS.gov.

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