IRS Updates to Your Individual Retirement Account and Health Savings Account
The Coronavirus Aid, Relief and Economic Security Act (CARES Act) provides several changes to retirement accounts and plans, offering account owners access to funds that otherwise may not be available. Some of these changes are highlighted below.
Individual Retirement Accounts (IRAs)
- Required minimum distributions (RMDs) normally required to be taken for 2020 are waived. Individuals are required to begin taking withdrawals from their IRA (and certain other types of retirement plans) when they reach the age of 72 in 2020. (It was age 70½ before 2020.) The CARES Act waives the RMD payments for 2020.
- IRS allows penalty-free withdrawals from an IRA. Generally, IRA owners who are younger than 59½ and withdraw money from their IRA are subject to an IRS 10% early withdrawal penalty, plus the income tax owed on the amount withdrawn. The CARES Act waives this 10% penalty for IRA (and certain other types of retirement plans) withdrawals up to $100,000 for coronavirus-related expenses and financial hardship during 2020. Individuals who withdraw funds from their retirement account have up to three years to pay taxes on the withdrawals.
- About IRAs »
Health Savings Accounts (HSAs)
- New qualified medical expenses. Certain medicines or products do not need to be a “prescription” to be qualified medical expenses for HSA purposes.
- The IRS now allows high deductible health plan holders to waive or reduce deductibles for coronavirus treatment. Deductibles can be waived for any “medical care services and items purchased relating to testing for and the treatment of COVID-19,” without affecting the eligibility to make HSA contributions. Please consult your health plan provider for more information.
- About Personal HSAs » | About Business (Employer) HSAs »
Additionally, the U.S. Treasury has extended the 2019 tax filing date to July 15, 2020. This also extends the deadline for making a 2019 contribution to an Individual Retirement Account (IRA) and a Health Savings Account (HSA) to July 15, 2020.
- Note: Each state has decided when 2019 tax filings are due. Please investigate if your state has deferred tax filings.
Please consult your tax adviser for tax related information on the IRA and HSA changes.