How to Skip Your Required Minimum Distribution in 2020

The government rolled out The Coronavirus Aid, Relief, and Economic Security (CARES) Act in the recent stock market downturn, which allows retirement account owners to take withdrawals for emergency costs related to the pandemic and partially delays the tax consequences. To be eligible, you must meet one of the following criteria:

  • You tested positive for COVID-19.
  • You have a spouse or a dependent who tested positive for COVID-19.
  • You have experienced adverse financial consequences as a result of being quarantined, laid off, reduced work hours, unable to work or furloughed.

If you meet one of these requirements, you are eligible to take emergency withdrawals from your retirement account in any amount up to $100,000 from a 401(k), IRA or a similar type of retirement account until December 31, 2020, without being charged the usual 10% early withdrawal penalty.

The CARES Act also allows account owners to spread the income tax due as a result of these withdrawals over a three-year period, beginning in the year the distribution is taken. Account owners can choose to pay all of the income tax on the distribution in the first year, if so desired. This will would make sense for those in which 2020 ends up being a low-income year.


Retirement account owners are usually required to take distributions from their retirement accounts each year after age 70.5, also known as Required Minimum Distributions (RMD), but the CARES Act has now increased this age to 72. If you turned age 70.5 in 2019 and owe an RMD by April 1, 2020, the CARES Act allows the account owners to skip your 2019 RMD if it was your first year and you had not yet made an RMD by this date. If you already took an RMD for 2019 in 2020, then within 60 days of the distribution, you can do a rollover to an IRA account and not have it treated as a taxable distribution if it is a direct rollover from a 401(k) account. If the 60-day deadline for a rollover contribution falls between April 1 and July 14, you have until July 15, 2020, to put the funds in a retirement account.

The CARES Act also allows retirees to skip required minimum distributions in 2020 from a 401(k), IRA, 403(b), 457(b) and inherited IRA account, which saves retirees from making distributions from their retirement accounts when the stock market is low, possibly withdrawing from a depleted account and pushing it to an investment loss. Distributions from traditional 401(k)s and IRAs are taxed as ordinary income. If a retiree does not need to make any distributions in order to maintain a standard of living, it is highly recommended to postpone making any distributions in 2020 and defer paying income taxes on these retirement savings. 

As always, the professionals at Harris CPAs are here to help you navigate these new benefits, and other aspects of the CARES Act. 

By Melissa Liu, Harris CPAs

< Back to Harris CPAs COVID-19 Resource Page

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