Two Important Tax Opportunities Are About to Expire

The Coronavirus Aid, Relief and Economic Security (“CARES”) Act provided numerous opportunities for tax relief, two of which are about to lapse:

Required Minimum Distributions

Required Minimum Distributions (RMDs) from retirement plans are waived for the 2020 tax year. RMDs usually impact persons who were at least 70 ½ years of age at the end of 2019, or who will be at least 72 years of age at the end of 2020.  It can also impact younger persons who have inherited a retirement plan, such as an IRA, from a decedent.

Many people received RMDs for 2020 before the CARES Act was passed, retroactively suspending the requirement.  To rectify this situation, anyone who wishes to do so can replace (“roll over”) a 2020 RMD without penalty within sixty days of having received the RMD or through August 31, 2020, whichever is later.  If you already received an RMD for 2020 and are in a financial position to do so, you may wish to consider a rollover prior to the upcoming deadline.

Loans from Qualified Plans

Many qualified retirement plans, such as 401(k) plans, permit participants to borrow up to 50% of their plan balance, up to a maximum of $50,000.  The CARES act temporarily expanded these limits, permitting plans to allow loans of up to 100% of the participant’s balance, up to a maximum of $100,000. This opportunity ends on September 22, 2020.

If you participate in such a plan and intend to request a substantial loan, please be mindful of this deadline. If you manage this type of plan, you may wish to remind all participants of the opportunity.

Rules governing retirement plans and RMDs are complex.  Please contact your Anchin Relationship Partner if you would like to review your own situation prior to making a decision.