We are a Veteran Owned Business, providing 20% discounts for Veterans and First Responders. We remain open during the shutdown period, so please contact us to set up a phone or Zoom meeting. Taking care of you and your family, It's What We Do!

Skip to Content
Klenk Law

Can I Make Penalty-Free Coronavirus Related IRA Withdrawals?

Posted on Tue Mar 31, 2020, on IRA Trust

From Our “Ask a Question” Mailbag: “Can I Withdraw Funds from My Retirement Account for Costs Related to Coronavirus?  Are there any penalties for Coronavirus Related IRA Withdrawals?”

Coronavirus Related IRA Withdrawals

Estate Planning Attorneys

Can I Make Penalty-Free Coronavirus Related IRA Withdrawals?

On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic
Security (CARES) Act into law. The CARES Act is an unprecedented economic stimulus plan
providing over $2 trillion in relief. That relief comes in multiple forms, including cash payments
made directly to taxpayers.

The Act and Retirement Accounts.

A lesser-known aspect of the CARES Act is the ability to withdraw money from your qualified
retirement plans before you turn 59 ½ without incurring a penalty. Generally, if you prematurely
withdraw funds from a qualified plan like an IRA or 401(k), you must pay taxes on the
distribution and suffer a 10% penalty. There are some exceptions to this rule, and the CARES
Act adds a new one: a taxpayer can take a “coronavirus related distribution” from a qualified
retirement plan of up to $100,000 in 2020 without incurring a penalty. You are still required to
pay tax on the distribution, however.

What are Coronavirus Related IRA Withdrawals?

A “coronavirus-related IRA distribution” is any distribution from a qualified retirement plan made to
an individual 1) diagnosed with SARS-CoV-2 or COVID-19 by a test approved by the Centers
for Disease Control and Prevention (CDC); 2) whose spouse or dependent is diagnosed by a
CDC-approved test; or 3) who experiences adverse financial consequences as a result of any of
the following events caused by the outbreak: quarantine, furlough, job loss, reduced working
hours, inability to work due to lack of child care, business closure, or reduction of business
hours.

Do I Have To Pay the Income Tax in 2020?

Although you still have to pay income tax on the distribution, the law allows you to spread the
income over a three-year period, starting in 2020. You can also avoid the tax completely if you
repay the distribution back into the retirement plan within three years.

How Much Can I Withdraw?

The law temporarily increases the maximum an individual can borrow from a qualified
retirement plan from $50,000 to $100,000 for the 180-day period after enactment. If you have
already reached retirement age and are required to withdraw a required minimum distribution
(RMD) from your qualified plan in 2020, the new law postpones the RMD to 2021.

Can I Make Penalty-Free Coronavirus Related IRA Withdrawals?

In sum, if you, a spouse, or a dependent have suffered adverse financial effects due to the
outbreak, the CARES Act allows you to tap into your retirement funds without incurring an early
withdrawal penalty. There are still income tax consequences, but they can be spread out over
time to lessen the blow. Of course, it’s best to keep retirement funds in their accounts until you
reach retirement age, but the CARES Act gives you the option to access additional funds to help
cope with this frightening and unpredictable time.

There is more! 

Please follow this link to read a more detailed article IRAs and IRA Trusts

In Conclusion: Coronavirus Related IRA Withdrawals.

I hope you found helpful this short article about Coronavirus Related IRA Withdrawals. Also, I have included some links for more detailed information.  Contact us. Let our Estate Planning Lawyers walk you through this confusing process. Furthermore, feel free to contact our office for a free consultation. 

Wills, Trusts, Probate, and Estate Litigation, It’s All We Do!

This Article was written by Attorney Andrew Barron.

Tags:

Income Tax, IRA Trust

What Our clients are saying

Klenk Law Logo
Stars

Peter provided outstanding advice and preparation of a will and trusts.

Klenk Law Logo
Stars

Peter was excellent. He explained everything very clearly and is super friendly. My wife and I originally tried using a lawyer through group legal coverage, but unfortunately the old adage - "you get what you pay for" - applied to the other lawyer, and we decided to go with a real professional.

Klenk Law Logo
Stars

When it came down to picking the right attorney to handle my affairs, I knew right away it was this firm. From speaking to their secretary to speaking to Peter I knew I was making the right decision. After only a few mins Peter knew right away what I was looking for and handled all my questions professionally and even gave me great feedback that put my mind at ease. All that without even giving a single penny! So of course I hired him! So far so good...

Klenk Law Logo
Stars

AWESOME LAWYER! Peter Klenk is an exceptional attorney and a very nice person! Today I spoke with Peter about estate planning and was impressed with by his professionalism, cordiality, and attention to detail. I highly recommend Klenk Law for probates, wills, trusts, and other issues germane to estate planning!

Klenk Law Logo
Stars

Great friendly staff

Klenk Law Logo
Stars

Tremendous firm with bright, kind and tenacious people. Great representation for our family.

Klenk Law Logo
Stars

I'm totally satisfied with Klenk Law. Peter has a great legal mind with the personality of the guy next door.

Klenk Law Logo
Stars

Everything about my experience was a 10+! Peter and his staff made what I thought would be a difficult process easy and understandable. Every detail was handled correctly. No other firm could possibly do better than Klenk Law!

Klenk Law Logo
Stars

Peter and his staff are very responsive and always willing to help my clients and in a cost efficient manner.

Klenk Law Logo
Stars

Like another reviewer, I contacted Peter through his website using the free consultation link, for a question regarding PA inheritance taxes. The question was quite technical and difficult to explain, and the answer was nowhere to be found on the web. Peter grasped precisely what I was asking, and provided a clear, helpful response (with a touch of humor) the very next day.

Klenk Law Logo
Stars

Answered my question quickly and referred me to a colleague that could handle my problem

Klenk Law Logo
Stars

Mr. Klenk, quickly understood the circumstances presented and provided clear and concise advice. This advice provided me with the information I required to progress the case to my advantage.

Klenk Law Logo
Stars

Peter is excellent. I had a very complicated situation with my parents' estate planning and potential Medicaid needs. Peter was very knowledgeable in estate planning matters, able to define the best solution for the situation. Additionally, he was congenial and able to communicate effectively to my senior citizen parents the benefits of estate planning. He earned my trust, and more importantly, my parents' trust in a 45 mins consultation period. Highly recommend Peter. He is very easy to work with.

Klenk Law Logo
Stars

Peter recently gave a presentation about Wills & Trusts at my employer, and it was fantastic! He was extremely knowledgeable and provided valuable information to the group. People were very engaged and asked several questions, all of which Peter thoroughly answered. Personally, my husband and I have selected Peter to help us with our estate planning, and he has been very helpful in providing us with all of the information we need to provide a secure future for our family. Thank you, Peter!

Klenk Law Logo
Stars

Peter provided outstanding advice and preparation of a will and trusts.

Klenk Law Logo
Stars

Peter explained things in a way that was easy to understand. Everything was done in the time frame he said it. Could not have been better!

Klenk Law Logo
Stars

You & your staff are the best thank you for everything.

Klenk Law Logo
Stars

Peter and his staff handled all of our needs in a very professional and timely matter.

Klenk Law Logo
Stars

Peter Klenk made a complex subject understandable and allowed us to move forward with our estate planning. He was patient with our questions and creative in the solutions he proposed.

Klenk Law Logo
Stars

Peter explained a complex subject very clearly, helped us to decide the best approach to managing our estate and then made it very easy for us to execute the required documents. He will be a valuable resource for years to come and clearly has a great understanding of estate law that will lead to innovative solutions for us. I would unhesitatingly recommend him for estate planning.

Klenk Law Logo
Stars

Fantastic customer service. Very personable and most importantly they provide great explanations of what is required based on your individual needs. Highly recommend Klenk Law for anyone that needs to create a will and estate documents.

Klenk Law Logo
Stars

Always professional and very responsive. Everyone on the staff that I have worked with. I look forward to continuing our relationship.

Klenk Law Logo
Stars

Surprisingly easy

Klenk Law Logo
Stars

Affable...yet surprisingly cerebral estate planning atty. High marks all the way around.

Klenk Law Logo
Stars

Peter and his associates made things easy for us.

Let us put our expertise to work for you.

Free consultation within 24 hours.