Secure Act and Birth/Adoption Withdrawals & Foster Care Exempt Income.

Submitted by Brian Devers on Tue, 2020-01-21 21:13

Thanks for clarifying so many issues with the SECURE Act..
2 Questions:
1. IRA withdrawals for birth & adoption expenses are taxed, but without penalty. When paid back – deducted then ?

2. Exempt income for FOSTER CARE PARENTS can be used to base IRA Contributions on. Are these contributions deductible with the income being exempt.? I wouldn’t think so.



Submitted by Alan - IRA critic on Tue, 2020-01-21 23:56

  1. Amended 1/22/20. If an IRA distribution for these expenses is made, repayments are handled as rollovers of the distribution, but without the 60 day time limit. Appears that a 1099R will be issued to report the distribution, but the repayment reporting is not clear. The IRS will have to release guidance on how the custodian and the taxpayer are to report repayment. Amended returns may be required to eliminate the taxable income for the distribution if repayment occurs after the tax return has been filed. The IRS has plenty of work to do to button down the handling of repayments. If handled as an extended rollover, it will have to be exempt from the one rollover limit. Therefore, definitive answer is not yet available.
  2.  You are correct. The additional contribution space created by this provision would be non deductible and reported on Form 8606 as such.

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