In a Friday afternoon news release, the Internal Revenue Service (IRS) clarified rules for distributions from retirement plans and IRAs for individuals impacted by major disasters.
The Frequently Asked Questions (FAQ) in Fact Sheet 2024-19 relate to the SECURE 2.0 Act of 2022 (SECURE 2.0) provision that provides for ongoing disaster relief for certain distributions and loans in the case of federally declared major disasters.
“These FAQs are being issued to provide general information to taxpayers and tax professionals as expeditiously as possible,” according to the release. “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.”
The FAQs are are divided into four categories:
- General information
- Taxation and reporting of qualified disaster recovery distributions
- Repayment of qualified distributions taken for the purpose of purchasing or constructing a principal residence in a qualified disaster area
- Loans from certain qualified plans
“SECURE 2.0, enacted on Dec. 29, 2022, amended the Internal Revenue Code to provide for special rules for distributions from retirement plans and individual retirement arrangements (IRAs) and for retirement plan loans, for certain individuals impacted by federally declared major disasters occurring on or after Jan. 26, 2021,” the IRS added.
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.
