Cover

CARES Act Waves Required Minimum Distributions (RMDs)

by | May 29, 2020 | Business News

Individuals required to take minimum distributions from their retirement accounts every year can disregard them for 2020. This includes IRAs, 401 (k) and 403 (k) plans. The waiver includes indi-viduals who turned 70 ½ in 2019 who had to take their first RMDs by April 1, 2020 and also ap-plies to beneficiaries. Since most RMDs are based on December 31, 2019 retirement account val-ues, this moratorium can provide a significant benefit to those eligible thanks to the recent drop in the Dow.
The waiver for 2020 provides an opportunity to withdraw IRA funds at lower values and tax rates, and convert them to your Roth IRA. Although you will still have to pay taxes on the conversion, any money you transfer would remove those funds from your IRA and lower the balance subjected to future RMDs. Moreover, the funds would not be subject to lifetime RMDs once converted over to your Roth IRA. Thus, anything you withdraw would be tax-free. Your decision to make this conversion should be based on whether you expect your future tax rate to be lower or higher. If you expect your rate to increase, it probably makes tax sense to convert. Keep also in mind that tax rates will likely increase due to the two-trillion dollar stimulus.
Those affected by CORVID-19 can access up to $100,000 from their retirement plans with IRS approval if:
• they, a spouse or dependent was diagnosed with CORVID-19
• being quarantined, furloughed or laid off caused severe financial consequences
• they were unable to work due to being quarantined
• business hours decreased
• they could not work due to unavailability of child care
You need to be aware that deciding to convert funds to a Roth IRA cannot be reversed. Therefore, we recommend contacting your tax professional or financial advisor to ensure you make the best decision based on your situation.
Professional Tax Services is a locally owned provider serving over 3,500 local residents and businesses. For more information call 661-259-1967 or visit www.protaxservices.com. Through their complimentary EZ2 Thrive program, they provide unlimited free tax planning advice to their clients.

[bsa_pro_ad_space id=3]

ADVERTISE WITH US

ABOUT THE MAGAZINE

Santa Clarita Magazine has set a high standard for excellence in advertising for over 34 years. A family owned and operated business, Santa Clarita Magazine has grown with the Santa Clarita Valley since 1990 and become the #1 place to advertise locally.

SANTA CLARITA MAGAZINE

PO Box 801570
Valencia Ca 91380

For Advertising information
Call or Text:
1 (661) 294-4444

George Simpson

George Simpson