On July 29, 2020 the IRS issued a reminder that the Coronavirus Aid, Relief, and Economic Security (CARES) Act can help eligible taxpayers access funds from retirement plans and IRAs

The IRS issued a reminder on July 29, 2020 that retirement account (e.g., solo 401k plans) and IRA account holders affected by COVID-19 may be able to access their retirement funds under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, provided they meet one of COVID-19 requirements (see below).

The Deadline

As the law currently stands under the CARES Act, self-employed individuals eligible for coronavirus-related relief may be able to withdraw up to $100,000 from IRAs or their self-employed solo 401k plans before December 31, 2020.

Important Note: The $100,000 maximum distribution does not apply per IRA or per solo 401k plan. Instead, the $100,000 is aggregated between your IRAs and your solo 401k plan.

Things to know about the coronavirus-related distributions:

  • May be included in taxable income either over a three-year period (one-third each year) or in the year taken, at the individual’s option.
  • Are not subject to the 10% additional tax on early distributions that would otherwise apply to most withdrawals before age 59½,
  • Are not subject to mandatory tax withholding, and
  • May be repaid to an IRA or solo 401k plan within three years.

Taking a Solo 401k Participant Loan

Self-employed Individuals who participate in a solo 401k plan and qualify for COVID-19 relief  may also, until September 22, 2020, be able to borrow as much as $100,000 (up from $50,000) from their solo 401k plan. Loans are not available from an IRA.

Tip: Since a solo 401k plan  is for owner-only businesses and their spouses with no full-time W-2 employees, each participant can borrow up to 100,000 from their respective solo 401k funds. Therefore, if both spouses have funds in the same solo 401k plan, they can each borrow $100,000 from their respective participant funds under the solo 401k plan.

More Information

COVID-19 FAQs

CARES Act Further Broken Down

Solo 401k Participant Loan 

Solo 401k Distributions

Spreading the Income Tax Over 3 Years

Deep Dive-Cares Act Distributions & Payback Over 3 Years

June 19, 2020 IRS Notice 2020-50

IRS Notice 2020-51 Extends RMD Rollover Period to August 31, 2020

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About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>

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