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BTB Stock Income Tax Updates

Disaster Relief Available Through Retirement Plans and IRAs

The SECURE 2.0 Act of 2022 (SECURE 2.0), enacted on Dec. 29, 2022, amended the Internal Revenue Code to provide for special rules for distributions from retirement plans and IRAs and for retirement plan loans, for certain individuals impacted by federally declared major disasters occurring on or after Jan. 26, 2021.

Prior to the changes made by SECURE 2.0, there was no disaster relief allowing these distributions and loans that applied generally for all major disasters; instead, Congress would enact relief on a disaster-by-disaster or year-by-year basis. Under SECURE 2.0, Congress has provided for ongoing disaster relief for these distributions and loans in the case of federally declared major disasters.

To assist taxpayers and tax professionals, the IRS has issued frequently asked questions (FAQs) in Fact Sheet 2024-19, relating to rules for distributions from retirement plans and IRAs and for retirement plan loans, for certain individuals impacted by federally declared major disasters.

These FAQs are being issued to provide general information as expeditiously as possible. Accordingly, these FAQs may not address any particular taxpayer’s specific facts and circumstances, and they may be updated or modified upon further review. Because these FAQs have not been published in the Internal Revenue Bulletin, they will not be relied on or used by the IRS to resolve a case. Similarly, if an FAQ turns out to be an inaccurate statement of the law as applied to a particular taxpayer’s case, the law will control the taxpayer’s tax liability.

Nonetheless, a taxpayer who reasonably and in good faith relies on these FAQs will not be subject to a penalty that provides a reasonable cause standard for relief, including a negligence penalty or other accuracy-related penalty, to the extent that reliance results in an underpayment of tax. Any later updates or modifications to these FAQs will be dated to enable taxpayers to confirm the date on which any changes to the FAQs were made. Additionally, prior versions of these FAQs will be maintained on IRS.gov to ensure that taxpayers, who may have relied on a prior version, can locate that version if they later need to do so.

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