Retirement plan withdrawal related to CARES act

[markalanstone]

Do you know whether the tax breaks related to withdrawals from an IRA under the CARES act (waiver of the 20% withholding requirement, for example) would apply to withdrawals from my retirement plan if my wife lost her job because of Covid-19? 

[macuser_22]

Yes, that would be Corona virus related for a 2020 distribution.  See paragraph III  below in the CARES act text that would seem to apply to your situation.

(A) CORONAVIRUS-RELATED DISTRIBUTION.—Except as provided in paragraph (2), the term “coronavirus-related distribution” means any distribution from an eligible retirement plan made—

(i) on or after January 1, 2020, and before December 31, 2020,

(ii) to an individual—

(I) who is 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,

(II) whose spouse or dependent (as defined in section 152 of the Internal Revenue Code of 1986) is diagnosed with such virus or disease by such a test, or

(III) who experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, closing or reducing hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Secretary of the Treasury (or the Secretary's delegate)

[markalanstone]

This is helpful. Thank you.

[Critter]

Be aware ... the distribution is still taxable and the min 20% withholding may still be imposed ... what was waived it the 10% early withdrawal penalty. 

[fanfare]

I believe the Act reduces the 20% withholding minimum to a minimum of 10%.

More programming changes for financial custodians.

[Critter]

Hence the use of the word "may" not must or will. 

[dmertz]

SEC. 2202 of the CARES Act removes the statutory minimum withholding requirement on Coronavirus-Related Distributions from qualified retirement plans that would otherwise be subject to 20% minimum withholding on eligible rollover distributions.  This make CRDs subject to default 10% withholding, with the option for 0% withholding or more than 10% withholding on the taxable amount, the same as for IRA distributions.