Financial Briefs

(Tuesday, June 2, 2020, 9:07 p.m. EST) Business owners are in a tight spot: Federal tax rules have eased restrictions to allow those harmed by the epidemic to borrow from their IRA or federally qualified retirement plan; but without careful planning, business owners taking a loan from your retirement savings to support your business could land you in an even worse personal financial position if you are unable to repay it. . Here's what business owners facing challenges need to know now.

Emergency legislation passed on March 27, 2020 -- specifically, Section 2202 of the Coronavirus Aid, Relief & Economic Security (CARES) Act -- eased restrictions on borrowing from 401(k), 403(b) and other federally qualified retirement plans and IRAs. If you've been harmed by the Covid-19 epidemic, the maximum amount you can borrow was doubled to $100,000, and you will not face the usual 10% early-withdrawal penalty.

IRAs and employer-sponsored retirement plans normally impose a 10% penalty on withdrawals made by individuals before age 59 . The CARES Act broadly waives the early withdrawal penalty for individuals hurt by the epidemic. The waiver is extended if you have been diagnosed with SARS-CoV-2 or Covid-19, or if your spouse or dependent is diagnosed with SARS-CoV-2 or Covid-19. Waiver of the early-withdrawal penalty is also extended if you experienced adverse financial consequences as a result of being quarantined, furloughed, or laid off or if your work hours were reduced, or you are unable to work due to lack of childcare.