On April 30, the Internal Revenue Service announced that taxpayers who had their stimulus payments deposited into any account that has favorable tax treatment may withdraw the funds without penalty. Announcement 2008-68 by the IRS details the special allowance that the IRS has made regarding stimulus direct deposits.
Taxpayers that chose to have their federal refunds direct deposited into a tax-advantaged account, such as an IRA also will receive their stimulus payments deposited into that same account. The IRS is allowing for these funds, or a portion of these funds to be withdrawn without penalty.
That means that if you received $600 as a stimulus payment into a tax-advantaged account, then you may withdraw up to $600 from that account without the normal penalty for early distributions. Only stimulus payments that were deposited into a tax-deferred account may be withdrawn without penalty.
Taxpayers that had their refunds split into different accounts will receive a paper check instead of direct deposit for their stimulus payment. Additionally, any taxpayer that received their regular income tax refund would also receive a paper check.
The IRS is allowing for this special rule so that taxpayers may have access to their entire stimulus payments for discretionary spending. The allowance includes traditional and Roth IRAs, health savings accounts, Archer MSAs, Coverdell education savings accounts, and qualified tuition plans known as 529s.
Here are the IRS Announcements regarding this special allowance:
Tags: IRA distribution, stimulus