Retirement tax questions

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@armondf1 wrote:

If only it were only written as you have it, but you left the key phrase “due to COVID” off of the second bullet.  I suffered adverse financial consequences as a result of being laid off, but I don’t know what the decision makers knew, when they knew it, nor on what they based their decision.  Given three similar businesses in the same block, the first was losing money and was about to announce a permanent closing (regardless of COVID), the second very profitable and having a long history with the community chooses to keep the employees working, while the third marginally profitable elects to lay off employees.  All experienced COVID, but other factors were the cause of the layoffs, as clearly they could have chosen to keep the employees working.  An IRS audit of the failing business and their unpaid taxes will show that the lay offs were not “due to COVID” and any employee claiming so is subject to penalties and interest (even though they didn’t ‘know’ and had wrongfully assume that their layoff was due to COVID).  Some clear examples of “due to COVID” are bars which were closed by regulation.  However, many other businesses could have gone virtual or altered their business model to align with restrictions, but instead chose to layoff employees due to other factors (e.g., profitability), not due to COVID.

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Here are the IRS rules:

https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-...

Q3. Am I a qualified individual for purposes of section 2202 of the CARES Act?

A3. You are a qualified individual if –

• You are diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention;

• Your spouse or dependent is diagnosed with SARS-CoV-2 or with COVID-19 by a test approved by the Centers for Disease Control and Prevention;

• You experience adverse financial consequences as a result of being quarantined, being furloughed or laid off, or having work hours reduced due to SARS-CoV-2 or COVID-19;

• You experience adverse financial consequences as a result of being unable to work due to lack of child care due to SARS-CoV-2 or COVID-19; or

• You experience adverse financial consequences as a result of closing or reducing hours of a business that you own or operate due to SARS-CoV-2 or COVID-19.

Under section 2202 of the CARES Act, the Treasury Department and the IRS may issue guidance that expands the list of factors taken into account to determine whether an individual is a qualified individual as a result of experiencing adverse financial consequences. The Treasury Department and the IRS have received and are reviewing comments from the public requesting that the list of factors be expanded.