26 Oct I emptied my IRA when the stock market crashed. Are there penalties?

Q. I am 68 and retired. As the stock market started to tumble, I emptied my IRA. Will I have to pay any penalties? Is there a provision under the CARES act that will help me?
— Retired

A. You didn’t say that the withdrawal from the IRA would qualify as a “coronavirus-related distribution” under the CARES Act.

People need to have adverse financial circumstances for specified reasons listed in the law such as the loss of a job or being unable to work for various specified reasons, said David Ritter, chair of the tax practice at Brach Eichler in Roseland.

Those reasons apply if you, a spouse, or a dependent is diagnosed with COVID-19, if you were quarantined, furloughed, laid off, had work hours reduced or if your business closed. It also includes if you could not work because of a lack of child care.

Either way, you’re off the hook for penalties because of your age. Normally, there are penalties on withdrawals by those under age 59 1/2.

“The distribution, while subject to income tax, should not be subject to a penalty since you are age 68,” Ritter said.

Note that you have three years to pay off the tax bill if it was a coronavirus-related distribution.

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This story was originally published on Oct. 26, 2020.

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