COVID-19 Update: CARES Act Impacts for IRAs | Millennium Trust Company

COVID-19 Update: CARES Act Impacts for IRAs

On March 27, 2020, the President signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) into law. The legislation, which contains more than $2 trillion of stimulus and relief measures, has been widely publicized, and provides Americans much needed assistance as we all cope with the COVID-19 pandemic.

The CARES Act also has several provisions that specifically impact IRAs to help provide relief for many Americans. To learn more, please continue reading the summary of changes regarding the IRA contribution deadline, RMD waivers and tax-advantaged distributions for those affected by COVID-19.

Extension of IRA Contribution Deadline

Since the IRS has extended the federal income tax filing date to July 15, 2020, the deadline to contribute to an IRA has been extended to July 15 as well.

The IRS, in Notice 2020-23, has extended the time IRA custodians will have to prepare Form 5498 for 2019 to August 31, 2020. Normally, Form 5498, which reports IRA contributions made for a tax year, must be filed with the IRS and sent to IRA owners by June 1. This year, the IRA contributions for 2019 may be made by IRA owners as late as July 15, 2020. IRA custodians will likely need to report some 2019 IRA contributions (those made on or shortly prior to July 15, 2020) on the 2020 Form 5498.

Waiver of 2020 Required Minimum Distributions

The CARES Act waives the requirement to take a required minimum distribution (RMD) in 2020 and is available to all IRA owners and beneficiaries of inherited IRAs, not just those directly affected by the COVID-19 pandemic.

For IRA owners, RMDs must be taken when the owner reaches a certain age. This age is 70½ for individuals born before July 1, 1949 and age 72 for individuals born on or after July 1, 1949, as recently changed by the SECURE Act.

Some IRA beneficiaries are subject to a “five year rule” requiring the account to be distributed within five years of death of the IRA owner. For those beneficiaries subject to the “five year rule,” 2020 is disregarded – in other words, the beneficiary receives an additional year to completely distribute the account.

Some IRA owners may have already taken a RMD in 2020. In that case, the RMD is now treated like a normal, non-RMD distribution. On April 9, 2020, the IRS issued Notice 2020-23, which indirectly included an extension of the 60 day rollover rule for IRA’s until July 15, 2020, but only for RMD’s taken between February 1 and May 15 of 2020. If a RMD was taken in January of 2020, the extension does not apply and the RMD cannot be returned to an IRA to avoid taxes due.

However, if an IRA owner chooses to roll the RMD back into the IRA, he or she would not be eligible to complete any other rollovers for 12 months. Likewise, if an IRA owner performed any IRA to IRA (including ROTH IRA) rollover within the 365 days preceding the receipt of the 2020 RMD, they would not qualify for the relief provided by the extension of the 60 day rollover rule, because doing so would break the one-per-year rollover rule. Direct trustee-to-trustee transfers from one IRA provider to another IRA provider are not restricted.

The one-per-year rollover rule does not apply to direct trustee-to-trustee transfers from one IRA provider to another IRA provider, or to employer sponsored retirement plans. For example, if an RMD was taken from a 401(k) plan, the 60-day rollover extension can be used to roll it back into the plan or an IRA and vice versa to eliminate the tax bill. The rule also does not apply to Roth IRA conversions; therefore, an unwanted IRA RMD that cannot be rolled over due to the once-per-year rule can be converted to a Roth IRA, since any pre-tax portion of the rollover would be taxable for 2020 anyway.

RMDs taken from beneficiary accounts may not be rolled over, with the exception of a surviving spouse beneficiary, who may rollover an RMD to the spouse’s own non-beneficiary retirement account.

If you already took an RMD in 2020 and are contemplating putting it back into your IRA, we encourage you to consult with your tax advisor.

Tax-Advantaged Distributions of up to $100,000 for Affected Individuals

If you are an IRA owner affected by the COVID-19 pandemic (see below for eligibility), you may take a distribution from your IRA of up to $100,000 and will be entitled to special tax benefits. This is called a “coronavirus-related distribution,” or CRD, and must occur in 2020.


A CRD entitles the IRA owner to three benefits:

1. The income from the distribution can be spread equally over three years on the IRA owner’s federal income tax return.

2. If the IRA owner is under age 59½, the 10% early distribution penalty is waived.

3. The IRA owner can repay some or all of the CRD within three years, in which case it is treated like a rollover.

A CRD may also be taken from an inherited IRA and from a Roth IRA, provided that the total amount taken from all IRAs may not exceed $100,000 per affected individual.


To be eligible to receive a CRD, the IRA owner must meet one of three criteria:

1. The IRA owner has been diagnosed as having the coronavirus by a test approved by the Centers for Disease Control and Prevention (CDC).

2. The IRA owner’s spouse or dependent has been diagnosed with the coronavirus.

3. The IRA owner experienced adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to the coronavirus, being unable to work due to lack of child care due to the coronavirus, or because of the closing or reduced hours of a business owned or operated by the IRA owner.

As the IRA owner, you are not required to prove to Millennium Trust that you meet the criteria to receive a CRD or receive the tax benefits listed above. Although the IRS has not yet issued any guidance, it is expected that the distribution will be reported similarly to any other IRA distribution.

Millennium Trust will continue to track the most recent guidance regarding these provisions, and will update this page as appropriate.

To learn more about how the CARES Act impacts your IRA, please view the CARES Act FAQ page.