The Coronavirus Aid, Relief, and Economic Security Act, better known as the CARES Act, gave some big breaks to retirement savers. How do you know if you qualify? You are qualified to have the 10% penalty waived for early retirement distributions if:
- You are diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention;
- Your spouse or dependent is diagnosed with SARS-CoV-2 or with COVID-19 by a test approved by the Centers for Disease Control and Prevention;
- You experience adverse financial consequences as a result of being quarantined, being furloughed or laid off, or having work hours reduced due to SARS-CoV-2 or COVID-19;
- You experience adverse financial consequences as a result of being unable to work due to lack of child-care due to SARS-CoV-2 or COVID-19; or
- You experience adverse financial consequences as a result of closing or reducing hours of a business that you own or operate due to SARS-CoV-2 or COVID-19
- The distribution must be made from an eligible retirement plan to a qualified individual meeting the condition above. It had to have been made from January 1, 2020, to December 30, 2020, up to an aggregate limit of $100,000 from all plans and IRAs.
- The distributions are included in income and recognized over a three-year period, starting with the year in which you receive your distribution. You can also elect to recognize the full amount in the first year instead of the three-year period.
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