What constitutes “Being quarantined?”
On page 1 of In your May 2020 IRA Advisor Newsletter, you state:
“Individuals who experience “adverse financial consequences” from:
1. Being quarantined
qualify for relief from the 10% early withdrawal penalty under Coronavirus-Related Distributions (CRD) and are eligible for the $100,000 distribution, the ability to spread the income over 3 years, and the ability to repay the $100,000 within 3 years.
My question is: what constitutes being quarantined?
If the governor of my state ordered everyone to stay home and I self quarantine, does this qualify me under the definition of “Being quarantined?”
More specifically, if I quit my job because I have a compromised immune system and have been “self quarantining” to stay away from everyone in order to avoid getting the virus, does this qualify me under the definition of “Being quarantined” for spreading an IRA withdrawal I take this year over 3 tax years [2020, 2021, and 2022] ?
I am not self-quarantining because I have been in contact with someone who has the virus.
Permalink Submitted by Alan - IRA critic on Wed, 2020-05-27 17:51
As CRD is current defined in the CARES Act, you must be quarantined by an authority (perhaps as a result of someone else in your household being infected). You cannot just voluntarily quit your job to self quarantine. That said, it is expected that the IRS (or perhaps Congress is future relief bills) will broaden the eligibility for a CRD considerably, and they need to produce these regulations ASAP to avoid too many gray areas for too long. CARES was signed 2 months ago today. If you badly need this money and want to gamble by taking an aggressive approach before further guidance is issued, I would recommend only taking out what you need to tide you over until the guidance is released. That cuts down on you risk, since the failure of a large distribution to meet CRD requirements is tax and penalty with no rollover allowed after 60 days. If you report your exposure to your employer, good chance you will be quarantined by your employer, and that should qualify right now.
Permalink Submitted by Robert Wright on Wed, 2020-05-27 21:23
Thanks Alan.