CARES Act CRD apply to Roth IRAs?
Initial search did not find this addressed – can a client take the CRD from a Roth IRA and be able to return it over 3 years? Are there any provisions of CARES Act that would allow that?
Initial search did not find this addressed – can a client take the CRD from a Roth IRA and be able to return it over 3 years? Are there any provisions of CARES Act that would allow that?
Permalink Submitted by Alan - IRA critic on Mon, 2020-07-06 18:35
A Roth IRA is an eligible retirement plan just a pre tax retirement accounts are, therefore a Roth IRA CRD could be distributed, and if there is any taxable income component it could be reported over 3 years, and repayments could also be made up to 3 years from the date of distribution. It is also possible to repay a pre tax IRA or QRP distribution into a Roth IRA as a conversion even though this use of funds is not what CRDs are intended to do. But it’s allowed nonetheless.
Permalink Submitted by [email protected] on Mon, 2020-07-06 19:12
Thank you Alan. Just to clarify, when you say “and repayments could also be made up to 3 years from the date of distribution” – you are saying the client could take up to $100k from Roth IRA, and could then put back the $100k over the next 3 years? -m
Permalink Submitted by Alan - IRA critic on Mon, 2020-07-06 20:17
Yes, once the client qualifies for a CRD, they can take distributions from any eligible retirement plan (Some employer plans will not support CRDs), decide by the tax due date whether to report the income in 2020 or 1/3 each year 2020-2022, and then whether or how much of the CRD they wish to repay to any eligible retirement plan. Client could take the CRD now, and if they repay by 4/15/2020 (or by 10/15 with an extension) the entire amount they will not have any taxable income to report for 2020. If client only repays a portion of the CRD, any taxable portion of the distribution is treated as if repaid before the non taxable portion. So there are quite a few options available. CRD max is 100k for all CRDs combined and the CRD must be distributed by 12/30/2020.