So have inherited IRA from family member that passed away a few years ago (was $200k+). I have read off IRS website that can take $100k without penalty and spread out the income amount over 3 years. Not sure if anyone has pulled from their ira this year, like what is best to do? Pull out all $ this year to spread out over 3 years? Pull out just $100k and eat the penalty taxes next two years? Just trying to acoid as much taxes as possible really.

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Posted by CrawfishOfWallstreet

Member since Oct 2020

253 posts

Posted on 10/27/20 at 5:27 pm to Robertson coach

The CARES Act coronavirus-related distribution (CRD) exemption only exempts someone from the 10% early withdrawal penalty, which already doesn't apply to inherited IRAs. You could get some benefit out of the income being spread over 3 years, though I admit the language surrounding whether that applies to inherited IRAs is a bit fuzzy.

Additionally, the relief only applies in the event the distribution is an approved CRD, as defined under IRS Notice 2020-50 as:
•an individual (or the spouse or a dependent of that individual) who is diagnosed with COVID-19 or SARS-CoV-2 in an approved test;
•a spouse or a member of the individual’s household being:
-quarantined, furloughed or laid off or having work
hours reduced due to COVID-19
-being unable to work due to lack of childcare due to
COVID-19
-having a reduction in pay due to COVID-19;
-having a job offer rescinded or start date for a job
delayed due to COVID-19;
-closing or reducing hours of a business owned or
operated by the individual’s spouse or a member of
the individual’s household due to COVID-19
•or an individual who suffers from other factors as determined by the Secretary of the Treasury.

This post was edited on 10/27/20 at 5:28 pm

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Posted by LSUcam7

Member since Sep 2016

7906 posts

Posted on 10/27/20 at 7:27 pm to Robertson coach

quote:
family member that passed away a few years ago (was $200k+).

I believe this changes things with respect to the new inherited IRA rules versus someone who passed away 1/1/2020. Don’t overlook this part.

quote:
Just trying to acoid as much taxes as possible really.

Have you been withdrawing the required amount every year so far?

Withdraw what you need as far as cash and then the rest next year when it comes times to file & pay. You may be able to spread that tax liability over three years.

This post was edited on 10/27/20 at 7:32 pm

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