Like many people, you may have worked hard to accumulate a nest egg in your traditional IRA. Knowing the finer points of the distribution rules is critical—particularly as some of these rules have temporarily changed under the Coronavirus Aid, Relief and Economic Security (CARES) Act.

The COVID-19 pandemic has caused many people to take or consider taking early IRA distributions. The CARES Act allows you to withdraw up to $100,000 on or after Jan. 1, 2020, and before Dec. 31, 2020, on a tax-advantaged basis if you meet one of various conditions related to the COVID-19 crisis—even if you’re under age 59½.

If you qualify, the CARES Act waives the 10 percent early withdrawal penalty and allows you to spread the tax liability over three years. You can avoid tax by recontributing the withdrawn amount within three years (regardless of annual contribution limits in those years). We can help you determine whether you qualify.

People with traditional IRAs generally must begin taking annual required minimum distributions (RMDs) by April 1 of the year following the year in which they reach age 72 (70½ if you turned 70½ before Jan. 1, 2020). RMDs are also generally required for inherited retirement accounts regardless of the heir’s age (unless the heir is the original owner’s spouse).

The CARES Act allows you to skip a 2020 RMD. Doing so can allow funds to continue growing on a tax-advantaged basis. Plus, if the values of investments in your account have declined because of the economic downturn, taking a distribution means selling shares at a much lower price.

Remember, your RMD for 2020 is calculated based on the account’s value as of Dec. 31, 2019. If that value has declined, the RMD will represent a larger percentage of the account’s total value than you originally anticipated. Skipping your 2020 RMD can enable you to maintain the account’s value as much as possible for another year in the hope that investment values will improve in the future.

Prudently planning how to take money out of your traditional IRA can mean more money for you and your heirs. Contact us to review your account as well as to discuss any aspect of retirement planning. Finally, be aware that the CARES Act relief discussed here can also apply to many employer-sponsored retirement plans, such as 401(k)s.

INSIDE Public Accounting (IPA) has named Hawkins Ash CPAs as both a 2020 IPA 200 Firm and a 2020 IPA 200 Fastest-Growing Firm (based on the 2020 annual IPA Survey and Analysis of Firms).

IPA 100, 200, 300 and 400 firms are ranked by U.S. net revenues and are compiled by analyzing the more than 540 responses received this year for IPA’s Survey and Analysis of Firms.

This is IPA’s 30th annual ranking of the largest accounting firms in the nation.

Hawkins Ash CPAs is proud to remain a local full-service public accounting firm since 1956. Now more than 60 years later with nine locations in Wisconsin and Minnesota, the $20 million firm continues to respond to market and industry trends while attracting and retaining professional talent.

When the Tax Cuts and Jobs Act (TCJA) was passed in 2017, it contained an inadvertent drafting error by Congress. The error made it so that any qualified improvement property (QIP) placed in service after Dec. 31, 2017, wasn’t considered eligible for 100 percent bonus depreciation. This typically includes upgrades to retail, restaurant and leasehold property.

As a result, businesses that owned the eligible property couldn’t take advantage of the additional tax deduction of 100 percent of the cost of qualifying upgrades. The problem became commonly known as the “retail glitch.”

Fortunately, when drafting the Coronavirus Aid, Relief and Economic Security (CARES) Act, Congress fixed the glitch. Most businesses can now claim 100 percent bonus depreciation for QIP, assuming all applicable rules are followed. Better yet, the correction is retroactive to any QIP placed in service after Dec. 31, 2017. (Improvements related to a building’s enlargement, elevator or escalator, or internal structural framework don’t qualify.)

Because of the slowdown in the U.S. economy, your business (like so many others) may not be in a financial position to undertake a QIP project right away. However, you may have made eligible improvements earlier this year or in earlier tax years after December 31, 2017. As economic conditions improve, factor this tax break into your considerations for making future property improvements.