Are you withdrawing from your IRA or 401(k) because you must, due to “RMD” rules? RMDs (required minimum distributions) are mandated by the tax laws. They apply to “owners” of an IRA or 401(k), beginning when they are in their 70s (age 72 if you were born after June 30, 1949; age 70 1/2 if you were born before July 1, 1949). RMDs apply regardless of age to those who inherit from an IRA owner. (Note that there are special rules for spouses who inherit.)

Because of the CARES Act (Coronavirus Aid, Relief, and Economic Security Act) that was just signed into law a few weeks ago (March 27, 2020), RMDs for everyone with IRAs and 401(k)-type accounts (but not defined benefit plans) are suspended for 2020. There are no exceptions in the provision, which you can read in Section 2203 of the CARES Act, “Temporary Waiver of Required Minimum Distribution Rules for Certain Retirement Plans and Accounts.” (Read the full act here: https://tinyurl.com/qvsvtcy.) And the law says 2020, meaning the suspension of RMDs is effective for the full year -- Jan. 1, 2020, to Dec. 31, 2020.

That brings up some practical questions, the answers to which may still evolve, depending on whether the IRS issues guidance.

Say you are over age 70 1/2 and have been taking your RMDs yearly. RMDs are waived for 2020. If you did not take your RMD yet, should you? That depends on whether you need the funds to live on. If you don’t, there is no reason to take the RMD, and there is every reason to avoid the tax hit of the RMD, as your withdrawal triggers “income” that is taxable.

What if you already took your RMD earlier in 2020? Can that money be put back into the IRA or 401(k)? This requires your tax adviser’s input, since he or she will be doing your 2020 tax return.

But here is the logic behind putting it back, using a hypothetical example that applies to owners of tax-deferred accounts, not inheritors. Say your RMD was $10,000 for 2020. You withdrew the full amount on March 1, 2020. Normally an RMD cannot be rolled over. However, due to the CARES Act, it should be considered a distribution instead of an RMD. Attorney Natalie Choate of Nutter McClennen & Fish Law Firm sees it this way: What was an RMD is “magically transformed” into an "eligible rollover distribution" by the CARES Act. Since the withdrawal was within 60 days of today, you would redeposit that distribution into the IRA under 60-day rollover rules. Among other things, those rules limit you to one rollover per 12 months.

Keep in mind that this rollover approach won’t work for inherited IRAs. According to Hayden Adams, director of tax and financial planning at Schwab Center for Financial Research (SCFR): “Inherited IRA distributions are not generally eligible for a rollover; therefore, assuming the IRS offers no other guidance, distributions that have already been taken can’t be re-contributed. However, it’s possible that a beneficiary affected by the coronavirus will be able to count the amount as a coronavirus-related distribution and re-contribute the amount.”

What if you withdrew your RMD in January? The 60-day limit will prevent a rollover unless there is relief, which is a possibility. So, your accountant will need to stay on top of developments and guide you on whether you can re-deposit those amounts as well.

Adams believes, however, that if you are able to apply Section 2202 of the CARES Act, which governs coronavirus impacts: “Broadly speaking, it’s an ’impact‘ if you, a spouse or somebody in your household got the virus, or if the virus negatively affected you financially (such as making you unable to work, or getting laid off). You may be able to count the distribution as coronavirus-related and re-contribute the amount over the next three years.”

On the other hand, if you need that withdrawal because you have no other financial sources, you may be forced to take those funds irrespective of the tax hit.

Read Hayden Adams’ thoughts in SCFR’s "Can You Forgo Taking RMDs in 2020?" (April 2, 2020) here: https://tinyurl.com/qu8vxn8.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant Investment Advisers, Inc. of Stamford, Conn.) and award-winning author, welcomes your questions/comments (readers@juliejason.com). Please visit www.juliejason.com.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

A week after President Donald Trump signed H.R. 748, the CARES (Coronavirus Aid, Relief, and Economic Security) Act, into law following its passage in the House of Representatives, we’re starting to see progress.

My column of last week describing the small business provisions of the CARES Act generated some comments in support and in opposition. Is the “help” to small businesses “really helpful”? In disruptions such as these, only time will tell, and the amount of time needed to make that judgment will not be clear until we know how to beat the coronavirus itself.

Given that state of uncertainty, there is no question that small businesses, the lifeblood of our economy, need help.

First, check out the Paycheck Protection Program. These loans are potentially forgivable based on how you use the proceeds. The amount of the loan that a small business can receive can be substantial. It’s worth taking a look.

To get started, I recommend you read the U.S. Senate Committee on Small Business and Entrepreneurship report called “The Small Business Owner’s Guide to the CARES Act,” an excellent guide, at https://tinyurl.com/v22z3kz. There you will find eligibility requirements, how the loan size will be determined and the circumstances under which it can be forgiven.

Then take a look at a sample application: https://tinyurl.com/qkbgf24. Applications will be processed through Small Business Administration lenders beginning April 3, 2020, according to the Connecticut Business and Industry Association. You can find a list of the 100 most active lenders here: https://tinyurl.com/v9elp3n. Lenders in my home state, Connecticut, are listed here: https://tinyurl.com/u7ba8ee.

Applications will likely be limited to online portals. For example, Manuel Venegas, a communications consultant at Wells Fargo, informed me today (April 2) that Wells Fargo is working on its portal now; the best way to check on progress is to visit https://tinyurl.com/smuuqwm.

Getting the money is one thing. Getting the loan forgiven is another.

Before applying, you have to think about how you would use the funds. In order to be forgivable, the funds need to be used for payroll (with some exceptions), mortgage obligations, rent, utilities and the like. Be sure to understand the specifics.

For the loan to be forgiven, you would apply for forgiveness through your lender. The application would show that the funds you received were used for approved purposes. That means that documentation will be required, such as IRS payroll tax filings; unemployment insurance filings; and documentation verifying payments on covered mortgage obligations, lease obligations and utilities. That sounds somewhat cumbersome, but potentially worthwhile.

If you need a small amount of cash quickly, learn about the Emergency Economic Injury Grant. In this SBA resource, you will find the streamlined requirements to process a request for a $10,000 advance, which your small business can receive within three days of a successful application by providing your bank deposit information. I understand this program is now available. The application is here: https://covid19relief.sba.gov/#/.

You may have a current SBA loan that may be subject to debt relief. Learn about the Small Business Debt Relief Program at https://tinyurl.com/svbo2xu.

Finally, if you need to talk about these or other options, the SBA’s resource partners provide free counseling. Check them out here: https://www.sba.gov/local-assistance/find/.

For more resources, I have a page on my website that I will be updating for you with new developments. Go to https://juliejason.com/coronavirus. There you will find answers to many of your questions about employers, loan applications, economic impact payments and more, as well as analyses provided by law firms.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant Investment Advisers, Inc. of Stamford, Conn.) and award-winning author, welcomes your questions/comments (readers@juliejason.com). Please visit www.juliejason.com.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION