topic Am I a qualified individual for purposes of section 2202 of the CARES Act? in Retirement tax questions

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

andreenc — Sat, 29 Aug 2020 17:57:29 GMT

We have a 6 year old in 1st grade and her elementary school district has decided to go full virtual for the first semester. Since both my wife and I work full-time, we hired a private tutor to assist her with her learning and school-work. Would this be sufficient for qualifying under "experience adverse financial consequences as a result of being quarantined"?

Re: Am I a qualified individual for purposes of section 2202 of the CARES Act?

macuser_22 — Sun, 30 Aug 2020 00:56:16 GMT

Qualifying for what? - an early IRA or 401(k) distribution? The distribution is still taxable, just exempt for the additional early distribution penalty.

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

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.

Re: Am I a qualified individual for purposes of section 2202 of the CARES Act?

andreenc — Sun, 30 Aug 2020 01:09:35 GMT

I would like to take the penalty free 401k distribution (up to $100K), but my question is about whether or not I am qualified to do so, under the CARES act, given my specific circumstances. The wording provided by the IRS is somewhat vague, in my opinion.

Re: Am I a qualified individual for purposes of section 2202 of the CARES Act?

macuser_22 — Sun, 30 Aug 2020 02:11:41 GMT

@andreenc wrote:

I would like to take the penalty free 401k distribution (up to $100K), but my question is about whether or not I am qualified to do so, under the CARES act, given my specific circumstances. The wording provided by the IRS is somewhat vague, in my opinion.

Here is the exact wording of the tax law as passed by Congress (I highlighted paragraph I-III):

IRC §2202(A)

(4) DEFINITIONS.—For purposes of this subsection—
(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).
(B) EMPLOYEE CERTIFICATION.—The administrator of
an eligible retirement plan may rely on an employee’s
certification that the employee satisfies the conditions of
subparagraph (A)(ii) in determining whether any distribution
is a coronavirus-related distribution.

Re: Am I a qualified individual for purposes of section 2202 of the CARES Act?

dmertz — Mon, 31 Aug 2020 03:38:54 GMT

IRS Notice 2020-50 expanded the definition of a qualified individual, but it still seems to me that your circumstances would not make you an individual who is qualified to receive a Coronavirus-Related Distribution because neither you nor your spouse has been diagnosed with COVID-19, neither you nor your spouse is working reduced hours and no member of your household is quarantined. Being required to do distance learning does not constitute being quarantined.

IRS Notice 2020-50: https://www.irs.gov/pub/irs-drop/n-20-50.pdf

Re: Am I a qualified individual for purposes of section 2202 of the CARES Act?

andreenc — Mon, 31 Aug 2020 15:46:53 GMT

"Being required to do distance learning does not constitute being quarantined." -- I made this same realization late last night. Thanks for confirming! I do hope some of the language changes to include our situation, because I know a lot of families are being forced to pay for either private tutors (or schools) versus keeping their jobs. Here's a CNBC article about it: https://www.cnbc.com/2020/08/10/parents-turn-to-learning-pods-this-fall-amid-covid-what-it-can-cost.html