Tax Facts: CARES Act eliminates IRA early withdrawal penalty

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JACKSON, Miss. (WJTV) – Congress passed the $2 trillion stimulus package to help families hurt financially by the coronavirus.

Still some people haven’t got their stimulus checks. Certified Public Accountant Tony Huffman said don’t give up yet.

“There’s some income level qualifiers that make you eligible or not eligible for the stimulus payment so if your income falls below a certain threshold in 2020 which is highly likely, right, for a lot of tax payers because they were laid off from work or unemployed or furloughed. There’s a high probability that their income has dropped from 2020 and that stimulus payment could be received later in the year,” said Tony Huffman of Huffman & Company, CPA, P.A.

Huffman said it could also be taken as a credit on your 2020 tax return, just let your tax preparer know you haven’t received your stimulus payment.

But if you have gotten your stimulus check and you still haven’t filed your return with the IRS,  remember, that money isn’t taxed.

Huffman said it’s been confusing to people because there’s such a wealth of information out there.

“It’s keeping the stimulus payments straight, the PPP loans, economic injury disaster loans, retention tax credits, the payroll tax credits, look it’s hard enough for someone like me who deals with it everyday to keep it all straight.”

If you need a cash resource, tapping into your IRA may be a good option because under the CARES Act, there’s no penalty.

“If you were laid off from your job and incurred financial hardship , had COVID-19 and medical expenses, you can take a distribution of up to 100-thousand dollars from your IRA and you can either repay that over three years with no penalty and no tax or you can elect to keep it and recognize the distribution as income over a three year period.”

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