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The IRS has extended the deadline for 2019 IRA, HSA and ESA contributions to July 15, 2020.
The CARES Act waives the 2020 Required Minimum Distribution (RMD) for IRA holders and participants in defined contribution qualified retirement plans. This includes RMDs for the 2020 calendar tax year, as well as 2019 first-time RMDs required to be taken by April 1, 2020 that were not already taken in 2019. The waiver for 2020 also extends to beneficiaries, including those who have elected to deplete the account under the five-year rule, in effect extending the period to six years.
The CARES Act and IRS Notice 2020-50 is allowing for coronavirus-related eligible withdrawals by certain IRA holders and participants within plans. The provision generally permits withdrawals in 2020 of up to $100,000 for individuals who have been diagnosed with the virus SARS-CoV-2 or coronavirus disease 2019 (COVID-19), individuals whose spouse or dependent is diagnosed with such virus or disease, or individuals who experience adverse financial consequences as a result of:
For purposes of applying these additional factors, a member of the individual's household is someone who shares the individual's principal residence.
These distributions qualify for an exception to the IRS early distribution penalty (if under 59 ½ years of age), and allow for taxation to be spread ratably over a three-year period. These withdrawals can also be re-contributed within the three-year period following the withdrawal, and are not subject to normal qualified plan mandatory 20% withholding.
IRS Notice 2020-23 allows individuals who had a 60-day rollover deadline falling on or after April 1, 2020 and before July 15, 2020 to have until July 15th to complete the rollover.
IRS Notice 2020-51 allows individuals who have already taken a required minimum distribution (RMD) from certain retirement plan accounts in 2020 to roll those funds back into a retirement account following the CARES Act RMD waiver for 2020. The 60-day rollover period for RMDs already taken this year has been extended to August 31, 2020. This includes 2020 RMDs as well as 2019 RMDs required to be taken by April 1, 2020. This rollover ability also extends to IRA owners and beneficiaries who may have already taken a distribution in 2020 that otherwise would have been a RMD. The owner or beneficiary can repay the distribution to the IRS by August 31, 2020. Under the Notice, the repayment is not subject to the one rollover per 12-month period limitation and the restriction on rollover for inherited IRAs.
You must have earned income (compensation) in order to contribute to a Traditional IRA.
For 2019 tax year deposits: You must not have attained the age of 70½ during the year 2019 you contribute to a Traditional IRA for 2019.
Starting tax year 2020 there is no age restriction to contribute to a Traditional IRA.
Contributions may be deductible from your gross income on your federal income tax return for the tax year for which the contributions are made. Earnings grow on a tax-deferred basis. Deductible contributions and earnings are subject to federal income tax when withdrawn.
The Saver's Credit may provide a tax credit for those who save for retirement. You may be able to take a credit of up to $1,000 — up to $2,000 if filing jointly.
The credit is designed to help offset part of your first $2,000 contributed to a Traditional IRA, Roth IRA, SIMPLE IRA, or 401(k) account by reducing the amount of federal income tax you owe dollar for dollar. However, it is not a refundable tax credit. The credit ranges from 10% to 50% of your contributions and is based on several factors including your filing status, adjusted gross income, and tax liability. Special rules apply.
Visit the IRS website or talk to your tax advisor for more information.
|Tax Year||Under Age 50||Age 50 or Older|
You can make annual contributions to a Traditional IRA of up to $6,000 or 100% of your earned income, whichever is less. Current law permits most couples to contribute up to $6,000 each to their IRAs as long as their combined compensation is at least $12,000.
This allows a spouse with lower or no compensation to take advantage of the tax savings offered by an IRA. The annual contribution limits apply to the combination of all of your Traditional and Roth IRAs.
If you are age 50 or older, you may make an additional $1,000 "catch-up" contributions to your IRA.
You can make contributions to a Traditional or Roth IRA from Jan 1st to December 31st for the current tax year. You may also make contributions for the prior tax year from January 1st up to the tax filing deadline, excluding extensions, which is generally April 15th. For a prior year contribution a tax year designation must be postmarked by the current year’s income tax filing deadline, which is generally April 15th.
If you are covered by a retirement plan at work, use this table to determine if your income affects the amount of your deduction:
|Your Tax Filing Status||Tax Year||Full Deduction up to the contribution limit||Partial Deduction||No Deduction|
|Single/Head of Household/Married Filing Separately and did not live with your spouse at any time during the year||2020||$65,000 or less||More than $65,000, but less than $75,000||$75,000 or more|
|Married Filing Jointly or qualifying widow(er)||2020||$104,000 or less||More than $104,000 but less than $124,000||$124,000 or more|
|Married Filing Separately||2020||N/A||Less than $10,000||$10,000 or more|
|Single/Head of Household/Married Filing Separately and did not live with your spouse at any time during the year||2019||$64,000 or less||More than $64,000, but less than $74,000||$74,000 or more|
|Married Filing Jointly or qualifying widow(er)||2019||$103,000 or less||More than $103,000 but less than $123,000||$123,000 or more|
|Married Filing Separately||2019||N/A||Less than $10,000||$10,000 or more|
If you are not covered by a retirement plan at work but your spouse is, these deduction ranges apply to you:
|Tax Year||Full Deduction up to the contribution limit||Partial Deduction||No Deduction|
|2020||$196,000 or less||More than $196,000, but less than $206,000||$206,000 or more|
|2019||$193,000 or less||More than $193,000, but less than $203,000||$203,000 or more|
Note: If you are married filing separately with a spouse who is covered by a plan at work, partial deduction is available if the MAGI is less than $10,000 and no deduction if the MAGI is $10,000 or more. For other filing status, including married filing jointly or separately with you and your spouse not covered by a retirement plan, full deduction is available up to the contribution limit.
Distributions may be taken at any age — in specific amounts, as a lump sum, or as a series of systematic payments. Distributions are taxed at ordinary income tax rates for the year the distribution was made. Distributions taken before age 59½ are generally subject to the 10% tax penalty. For 2019: you're required to start taking Required Minimum Distributions (RMD) from your Traditional IRA by April 1 of the year following the year in which you reach age 70½. For 2020: You are required to start taking RMD’s from your Traditional IRA by April 1 of the year following reaching 72 years of age. Calculate your RMD.
In general, you have 60 days from the date you receive an IRA or retirement plan distributions to roll it over to another eligible plan or IRA.
You may make only one IRA tax-free rollover in a rolling twelve-month period, regardless of the number of IRAs you own. This includes Traditional, Roth, SEP, and SIMPLE IRA's.
The following transactions are not subject to the one rollover per 12-month limitation:
For educational purposes only.
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