In this week’s episode, your host Jeff Montgomery is joined by co-host Joani Gursky as well as special guest, Nick Craven- Associate Advisor at Montgomery Financial. The crew discusses a recent article written by renowned CPA, Ed Slott.

The article addresses the numerous questions we have received surrounding the CARES ACT, congress’ 2.7 trillion dollar stimulus program. Most of the questions revolve around the RMD waiver and the CRD withdraw provision. Let’s dive in!

Disclaimer: Please do not take advice from me on this show. As a licensed Fiduciary I am only allowed to give advice to clients. So, unless you’re a client I can’t give you advice because I don’t know you. So think of this as helpful hints and education only. And please before implementing any information or ideas you hear on this show always consult your legal adviser, your tax adviser , and your financial adviser………….right? that’s just common sense.

So we have received quite a few questions regarding the CARES ACT which if you don’t know is the “Coronavirus Aid, Relief, and Economic Security Act” or the “CARES Act”.

What type of accounts are impacted by the RMD waiver?
The waiver applies to traditional IRAs and workplace plans like SEP, SIMPLE, 401(k), 403(b) and 457(b) plans. Defined benefit plans are not part of the waiver.

(4:40) Does a client have the option to take a 2020 RMD?
Yes. Any withdrawal taken in 2020 will be treated as a voluntary distribution. Be aware that taxes will still apply, but the withdrawal can also be converted to a Roth IRA since it is no longer an RMD.

(7:00) OK, but if a client already received all or a portion of her 2020 RMD, can she return it to the IRA and eliminate the tax bill?
It depends. While the CARES Act does not grant a free rollover to everyone for every RMD dollar, subsequent IRS guidance in Notice 2020-23 further relaxed rollover restrictions. As of this writing, anyone who takes an RMD between Feb. 1 and May 15, 2020, has until July 15 to roll over the RMD payment. Future guidance could further expand rollover relief. For all RMDs received in January 2020 and after May 15, the 60-day deadline still applies.

Under the act, the once-per-year rollover rule also still applies. If another IRA-to-IRA (or Roth IRA-to-Roth IRA) 60-day rollover was done in the previous 365 days, then the RMD cannot be put back. This means that if a person received monthly RMD payments in 2020, only one can be rolled over. Note that rollovers from employer plans to IRAs, and vice versa, do not count toward the once-per-year rule. This rule is unaffected by the rollover relief in Notice 2020-23. While the CARES Act waived 2020 RMDs from both inherited IRAs and Roth IRAs, they cannot be rolled over.

(12:00) My client passed away in January without taking his 2020 RMD. I am working with his children to establish inherited IRAs. Do they need to take his year-of-death RMD?
No. Since the decedent passed away in 2020 when RMDs were waived, there is no year-of-death RMD to take. Beneficiary stretch rules under the SECURE Act will apply. Eligible designated beneficiaries inheriting in 2020 looking to stretch payments are unaffected by the CARES Act and will have their first RMD due in 2021. Non-eligible designated beneficiaries unable to stretch inherited payments under the SECURE Act are still bound by the standard 10-year payout rule. The 10-year rule does not become an 11-year rule.

(14:20) Must my client be negatively affected by the coronavirus for the RMD waiver to apply to him?
There are no prerequisites for the RMD waiver. It automatically applies to everyone who has an

Do not confuse rules in the CARES Act for coronavirus-related distributions, or CRDs, with the RMD waiver — these are separate and distinct provisions. Frequently asked questions about CRDs follow.

What special tax relief is available for coronavirus-related distributions?
The CARES Act allows qualified individuals to take distributions of up to $100,000 penalty-free from their IRA or company plan during 2020. Further, it allows the distributions to be repaid to IRAs or plans and permits federal income tax on those withdrawals to be spread out over three years. The three-year repayment period begins the day after the date the funds were received.

(17:10) Who qualifies for relief?
Unlike IRS relief for disasters like hurricanes and wildfires, this relief is available only to qualified individuals who have been:

• diagnosed with the SARS-CoV-2 or COVID-19 virus by a test approved by the CDC;
• whose spouse or dependent is diagnosed;
• who experiences “adverse financial consequences” from being quarantined; being furloughed or laid off or having work hours reduced; or being unable to work due to lack of child care; or have closed or reduced hours of a business they owned or operated.

Can someone with both an IRA and company plan withdraw $100,000 limit from each?
No. The $100,000 is an overall limit. IRA and company plan withdrawals are aggregated for this purpose.

Are there any restrictions on how the CRDs are used?
Surprisingly, no.

(20:40) When must the CRDs be taken?
CRDs can be taken at any time during 2020. This means that distributions taken between January 1, 2020, and March 26, 2020 — before the CARES Act date of enactment — also qualify.

Are CRDs taxable?
Generally yes, but CRDs can be repaid tax free. If they are not repaid, income can be spread over three years.

(27:15) Can those age 59 ½ or over qualify for CRDs?
Yes. Although those individuals would not be subject to the 10% penalty anyway. They still get to repay the CRD or spread the income.

Final Disclaimer:

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