Stimulus Plan Brings Massive Changes to RMDs and Retirement Contributions
“Here are the highlights of the most recent tax changes found in the $2 trillion coronavirus relief bill, which the Senate has approved, and the House passed recently.”
Several of the provisions that were signed into law in the relief bill can taken advantage of immediately, reports Financial Planning in the article “Major changes in RMDs and retirement contributions in $2T stimulus plan.” Here are some highlights.
Extended Deadline for 2019 IRA Contributions Gives Taxpayers More Time to Decide
Extended deadline for 2019 IRA contributions. With the tax return filing date extended to July 15, 2020 from April 16, the date for making 2019 contributions to IRA and Roth IRA contributions has also been extended to the same date. Those contributions normally must be made by April 15 of the following year, but this is no normal year. There have never been extensions to the April 15 deadline, even when taxpayers filed for extensions.
When this tax return deadline was extended, most financial professionals doubted the extension would only apply to IRA contributions, but the IRS responded in a timely manner, issuing guidance titled “Filing and Payment Deadlines Questions and Answers.” These changes give taxpayers more time to decide if they still want to contribute, and how much. Job losses and market downturns that accompanied the COVID-19 outbreak have changed the retirement savings priorities for many Americans. Just be sure when you do make a contribution to your account, note that it is for 2019 because financial custodians may just automatically consider it for 2020. A phone call to confirm will likely be in order.
RMDs Waived for 2020, Lowering Tax Bills for Those Who Don't Need to Take Money from Accounts
Beneficiaries Inheriting Retirement Accounts Get Extra Time to Withdraw Funds
Early Distribution Penalty Waived for 'Affected Individuals' Under New Act
Additional relief for retirement accounts. The new act also waives the early 10% early distribution penalty on up to $100,000 of 2020 distributions from IRAs and company plans for ‘affected individuals.’ The tax will still be due, but it can be spread over three years and the funds may be repaid over the three-year period.
Many changes have been implemented from the new legislation. Speak with your estate planning attorney to be sure that you are taking full advantage of the changes and not running afoul of any new or old laws regarding retirement accounts.
Reference: Financial Planning (March 27, 2020) “Major changes in RMDs and retirement contributions in $2T stimulus plan”
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