Major Changes To Retirement Plans Due To COVID-19

Qualified individuals affected by COVID-19 may be able to withdraw up to $100,000 from their eligible retirement plans, including IRAs, between Jan. 1 and Dec. 30, 2020.

These coronavirus-related distributions aren’t subject to the 10% additional tax that generally applies to distributions made before reaching age 59 and a half, but they are still subject to regular tax. Taxpayers can include coronavirus-related distributions as income on tax returns over a three-year period. They must repay the distribution to a plan or IRA within three years.

Some plans may have relaxed rules on plan loan amounts and repayment terms. The limit on loans made between March 27 and Sept. 22, 2020 is raised to $100,000. Plans may suspend loan repayments due between March 27 and Dec. 31, 2020.
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IRS - Retirement Plans

The Internal Revenue Service provided temporary administrative relief to help certain retirement plan participants or beneficiaries who need to make participant elections by allowing flexibility for remote signatures.

The change relates to signatures of the individual making the election to be witnessed in the physical presence of a plan representative or notary public, including a spousal consent (“the physical presence requirement”).

Notice 2020-42 provides participants, beneficiaries, and administrators of qualified retirement plans and other tax-favored retirement arrangements with temporary relief from the physical presence requirement for any participant election (1) witnessed by a notary public in a state that permits remote notarization, or (2) witnessed by a plan representative using certain safeguards. The guidance accommodates local shutdowns and social distancing practices and is intended to facilitate the payment of coronavirus-related distributions and plan loans to qualified individuals, as permitted by the CARES Act.
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Lisa Nason, Tax Advisor

Many of our clients talk to us about setting up retirement plans, contributing to retirement plans, and focusing on the monetary aspects of retirement. But what they don’t do is spend a lot of time thinking about and planning for the nonfinancial aspects of their retirement; they don’t realize it’s the biggest transition they’ll ever go through.

The consequences of not planning can include sitting around with growing boredom. Retirees watch TV an average of 43.5 hours a week, according to Age Wave 2012, and lack of stimulation can be associated with higher risks of alcoholism or depression. Read More

John Dundon

Normally you have 60 days to rollover retirement plan distributions in order to avoid current taxation and possible penalty. If you have special circumstances challenging your ability to complete the rollover within this 60-day time frame, please be advised that there are several circumstances in which the IRS has repeatedly given taxpayers additional time to complete the rollovers.

In an attempt to help taxpayers avoid costs and time, the IRS released Revenue Procedure 2016-47. This ‘Rev Proc’ in tax geek speak has a self-certification statement which should be completed and given to the financial institution receiving the rollover. Be sure to keep a copy of the statement in question along with the Rev Proc in case audited. Read More

According to the US Small Business Administration, small businesses employ half of all private sector employees in the United States. However, a majority of small businesses do not offer their workers retirement savings benefits.

If you’re like many other small business owners in the United States, you may be considering the various retirement plan options available for your company. Employer-sponsored retirement plans have become a key component for retirement savings. They are also an increasingly important tool for attracting and retaining the high-quality employees you need to compete in today’s competitive environment. Read More

Retirement plans come in many different flavors with many different rules.  Maybe there are fewer than the flavors of coffee at Starbucks, but there are still quite a few flavors of retirement plans.  The end of the year is a good time to review your retirement plan decisions.

A few plans need to be funded before the end of the year; a few plans just need to be set up before the end of the year.  IRAs and 401(k) plans are the two common retirement plans and their rules are different.  The 401(k) plans need to be funded by the end of each calendar year through the payroll.  IRA contributions can be made through the due date of the return and still be tax deductible – a nice benefit.  You can wait until spring and prepare your return Read More

Manasa Nadig, EA
Manasa Nadig, EA

You did it! You quit your job and started that small business that had always been your dream! Exciting times, thrilling ups & downs, you are your own boss–but wait, you do miss the paychecks that arrived regularly every other week. You also miss the medical benefits that the company paid for & that retirement plan you contributed to. What’s more, you also miss that extra oomph on your paycheck-the employer contribution to the company 401(k).

In this post on Employer Retirement Plans for Small Businesses, let’s closely examine the Individual 401(k). This is also known as the Solo 401(k). Unlike other retirement plans, a solo 401(k) is only for sole proprietors or S Corps who have no employees. A spouse can contribute if he or she earns income from the business.
It comes in both the Traditional & Roth version. Just like IRA’s, Traditional is money put away pretax & is taxable when withdrawn. The Roth 401(k) is funded with after-tax dollars & is tax free when withdrawn. One can also split the contributions between the two. Loans can also be taken against savings in 401(k)’s.

Why I like these plans?

•They are ideal to sock away large amounts of money in the good years.

•It helps you save both as an employer & an employee. Here’s how for 2013 – you can contribute a maximum of $33500 (Up from $33000 in 2012) as an employer AND $17500 (Up from $17000 in 2012) as an employee- not to exceed a maximum of $51000 (Up from $50000 in 2012) or 100% of the employee’s compensation, whichever is lesser. Read More

TaxConnections Picture - Money EggIf you inherit an IRA from a spouse, parent, or any other person, the inheritance itself isn’t taxable to you for federal income tax purposes. However, the funds in the IRA become taxable to you when you take distributions from the account. Here is what you need to know about taking distributions.

In general, a person who inherits an IRA must take required minimum distributions (RMDs) over his/her life expectancy or draw down the account in full by the end of five years following the year of the IRA owner’s death (“five-year rule”). Life expectancy is determined by looking at an IRS table for this purpose (see Table I in Appendix C of IRS Publication 590 (See

Spousal Beneficiary

If an IRA is inherited by a surviving spouse, he/she can choose to roll over the funds to his/her own IRA. This allows the surviving spouse to postpone distributions until age 70 1/2 as well as to name new account beneficiaries. This rollover option can be used for part of the IRA; the rollover need not be all or nothing. A partial rollover allows the surviving spouse under age 59 1/2 to access the funds in the non-rolled-over account without an early distribution penalty.

Roth IRAs

While distributions from Roth IRAs are not taxable and are exempt from RMDs during the owner’s life, beneficiaries cannot keep the account open indefinitely to accrue tax-free income. Beneficiaries must take RMDs from Roth IRAs over their life expectancy. The same rules apply to distributions from all qualified tax deferred retirement plans. Read More