BY STEVE DINNEN
Important changes have come to your retirement savings accounts and income tax calculations by way of the financial stimulus package enacted in the wake of the COVID-19 pandemic.
The CARES Act that was passed last month drew a lot of attention because of the federal jobless benefits it extended to the new legions of unemployed people. Almost lost inside the 800 pages of the financial stimulus bill were provisos that could have an impact on your taxes and charitable giving. With help from Nathan Stelter, president of the Stelter Co., and Lynn Gaumer, senior gift planning consultant at that Urbandale-based firm that supports nonprofit organizations, we looked at three items from the CARES Act that are most likely to affect you:
- Required minimum distributions from IRAs are suspended for 2020. Once you reach age 72, you are required to annually withdraw a percentage of funds accumulated in your retirement account, such as an IRA, Simple IRA or SEP IRA. That money is taxed as ordinary income. But for 2020 only, there is no RMD mandate.
- The savings can be considerable. If you are a 76-year-old man with $2 million tucked into an IRA, normal IRS rules would mandate that you withdraw at least $90,909 this year, and owe taxes on that.
- You still can withdraw money from the account. And if you took a withdrawal prior to passage of the law, that will count as a distribution.