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What's a CRD?

Updated: Apr 29, 2020

The CARES Act came with a number of implications for your IRA.  For instance, folks who don’t need their RMDs don’t have to take them in 2020. 

What if you’re in the opposite situation?  What if you NEED to dip into your IRA, but you haven’t reached 59 ½?  Enter the CRD: Coronavirus Related DistributionThese are penalty-free distributions that come with an option for repayment. For 2020, the 10% early penalty tax has been waived on up to $100k of early distributions.   

Is everyone allowed to take a CRD? No.  (However, there’s a good chance you will qualify if you find yourself considering the “last-resort” option of early IRA distributions.)

You’re eligible if:

  • You or your spouse or dependent is diagnosed with the virus.

  • You have experienced adverse financial consequences as a result of:

o Quarantine, furlough, layoff or having work hours reduced

o Being unable to work due to lack of childcare

o Closing or reducing hours of a business you own or operate.

  • NOTE: This list may expand with further guidance.

Are CRD’s taxable? Yes fully taxable, if not repaid.  It’s just the 10% early-distribution penalty that’s been waived.

Am I required to repay the distributions back to myself? No, but you can (and should, if possible!)  You have 3 years to repay.

Options for Tax Planning of Distributions?

  1. Pay full taxes in 2020. (Possibly good choice if your income is reduced in 2020)

  2. Spread taxes over 3 years (You will make that choice upon filing for 2020 tax year and get 1/3 of 1099-R amount each year for 3 years)

  3. Repay by end of 3rd year.  With this option, you would avoid any taxation, but you would have to amend prior years tax returns (not a red flag).

Securities and Advisory Services offered through LPL Financial, a Registered Investment Advisor, member FINRA/SIPC.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

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