CARES Act as means to withdraw from Roth IRA early?

[bhuether]

Hi,

I am under 59.5. My wife and I live overseas, in Montenegro, where pretty much everyone depends on tourism. My wife could not work as a property manager as planned due to collapse of tourism here over last year, and moreover, since local schools are now online here for children, my wife can't seek work outside the home, as she has to constantly manage our 12 year old's school work.

We had planned to buy a house (overseas), but not being able to save any money over past year has impacted that plan, and other plans that depended on an expectation of income (car purchase, etc). Having just read about this CARES act:

https://www.thetaxadviser.com/issues/2020/jul/tax-savings-opportunities-coronavirus-cares-act.html

it got me thinking, maybe I could withdraw earnings from my Roth IRA penalty free? If I understand the provision of the CARES act pertaining to retirement accounts, I could, say, withdraw $90K of earnings, then over period of 3 years return as much of that as I can, then pay taxes on the amount $90K minus what I return?

Does that mean over 3 years, I would not pay tax on the amount I withdrew, instead pay at the three year point? Or would I pay 33% each year on amount withdrawn, then receive credit back after 3 years based on the amount returned?

Just trying to understand the criteria, timing and mechanics of all this!

thanks

[dmertz]

The deadline to receive a coronavirus-related distribution was December 30, 2020.  Had you taken a CRD from the Roth IRA, the taxable amount could have been included in income in equal parts over 3 years and there would have been no early-distribution penalty.

[bhuether]

Thanks for the reply. I just read about the Consolidated Appropriations Act:

https://www.jacksonhewitt.com/tax-help/jh-tax-talk/cares-act-covid-irs-401k-withdrawal/

If I am reading correctly, does this mean that the early withdrawal provisions of the CARES Act effectively now apply through June of this year?

thanks

[dmertz]

No.  Despite early (incorrect) media reports to the contrary, the deadline for having taken a coronavirus-related distribution remains December 30, 2020.  Section 301(1)(B) of The Consolidated Appropriations Act, 2021 explicitly excludes coronavirus-related distributions from being disaster distributions to which section 301 of this act applies.