Starting January 1, 2020, individuals may use funds in HSAs, health flexible spending accounts, and health reimbursement arrangements to purchase over-the-counter (nonprescription) medical products
Required Minimum Distributions are not required in 2020
If you don’t want to take a Required Minimum Distribution from your IRA/401K/403B in 2020, then you don’t have to. Nothing special to do – just don’t take the money out of your retirement plan.
You still should consider making Qualified Charitable Distributions from your retirement plan (giving money directly from the retirement plan to charity) since this is one of the only ways to take money out of these plans tax-free.
Since you are not required to take RMDs, you will have a lower overall income and might be in the lowest tax bracket of the remainder of your life and might want to consider rolling money from your retirement plan to a Roth IRA this year (voluntarily paying tax on the retirement distribution in a low-tax year to avoid ever having to pay tax on the money or the earnings again). Ask us if you are a good candidate for this.
Little-known employee gifting rules
• Because of the COVID-19 Federally Declared Disaster, employers may gift amounts to their employees and not withhold payroll taxes AND still deduct the gifts – this can only be done during Federally Declared Disasters. Thus, beginning immediately, employers may provide tax-free payments to employees — while still claiming a full deduction for the payments (and not report gifted amounts on the employee’s W-2s). Some care should be taken with this (there is very little guidance on how this works in reality):
• Enacted in 2002 (as a result of the 9/11 events), but unused until now, a reasonable interpretation of the statutory text, reveals that, at a minimum, the following payments from employer to employee should be treated as deductible to the employer and tax-free to the employee, provided the expenses relate to the COVID-19 pandemic:
o Medical expenses of the employee that are not compensated for by insurance (for example, the employees deductible and out-of-pocket expenses);
o The cost of over-the-counter medications and hand sanitizer;
o Funeral costs of an employee or a member of an employee’s family;
o The costs associated with enabling an employee to work from home throughout the pandemic, including the cost of a computer, cell phone, printer, supplies, and even increased utility costs of the employee.
o The cost of an employee’s child care or tutoring for family members that are not permitted to attend school throughout the pandemic;