By Sarah Brenner, JD
Director of Retirement Education
A new customer came to me asking for help with an IRA. Unfortunately, he had already accepted a check from the 401(k) plan made out to him personally. He sat on the check for 5 months and deposited it into his checking account last week. He is only 50 years old. Since we are well after the normal 60-day rollover period, is there any way that this can be repaired? Perhaps under the CARES act of 2020 if his departure was Covid related?
Any direction you can provide would be appreciated.
If this individual meets the definition of an “affected individual” under the CARES Act, the 2020 distribution from the 401(k) could be treated as a coronavirus-related distribution (CRD). An affected individual is generally someone who had the virus, had a family member who did, or who experienced financial hardship due to the virus. If this distribution qualifies as a CRD, then the individual would have up to three years from the date of the distribution to repay it to a retirement account.
If the individual is not an affected person under the CARES Act, another possibility to extend the usual 60-day rollover deadline would be through the self-certification procedure. The IRS has provided a list of situations where retirement account holders can do late rollovers by self-certification. These include a death of family member and illness, among others. If the individual can fit into any of these categories, a late rollover could be possible.
Has the deadline for 2020 SEP IRA plan contributions been extended to May 17?
The SEP contribution deadline has only been extended to May 17 for sole proprietors. S-Corps, LLCs and partnerships remain March 15; C-Corps remain April 15. However, note that the SEP deadline works a little differently because it includes any extensions that a taxpayer has. The IRA contribution deadline does not include such extensions. Therefore, even without a federal extension, the SEP contribution deadline could be as late as October 15, 2021 for those who file for an extension.
Question: A new customer came to me asking for help with an IRA. Unfortunately, he had already accepted a check from the 401(k) plan made out to him personally. He sat on the check for 5 months and deposited it into his checking account last week. He is only 50 years old.