Introducing legislative package that waives tax penalties, exempt Social Security benefits from taxes
Washington (March 18, 2020) – Senator Edward J. Markey (D-Mass.) today announced a legislative package aimed at protecting seniors and retirees during the economic downturn as a result of the coronavirus pandemic. The first bill will suspend the penalty on Required Minimum Distribution (RMDs) for retirement accounts for calendar year 2020, and the second piece of legislation would exempt Social Security benefits from income taxes for calendar year 2020.
“From increased vulnerability to the virus, to the economic vulnerabilities facing their retirement accounts because of a sinking stock market, we must protect our seniors during this incredible time of need,” said Senator Markey. “All Americans will require time and support to recover from this crisis, but seniors should not face unfair tax burdens due to this emergency.”
The first piece of Senator Markey’s legislative package would suspend the penalty on Required Minimum Distribution (RMDs) for retirement accounts for calendar year 2020. Current law requires individuals over 72 to withdraw a certain percentage of tax-deferred retirement accounts each year, or face a 50 percent tax penalty on the required withdrawal amount. For 2020, the RMD calculation is based on an account balance of December 31, 2019. However, since January 1 the S&P 500 stock market index is down nearly 25.5 percent, meaning that seniors will be forced to deplete a far larger percentage of their retirement accounts than anticipated, or face penalties. Senator Markey’s legislation would suspend the RMD requirement and waive the 50 percent tax penalty for calendar year 2020.
A copy of that legislation can be found HERE.
Senator Markey’s second piece of legislation would exempt Social Security benefits from income taxes for calendar year 2020. Currently, seniors with a total income of more than $25,000 ($32,000 for a married couples) must pay income taxes on your Social Security benefits. This legislation will exempt Social Security benefits from income taxes for 2020. A lessened tax burden on seniors who rely on Social Security benefits will mean more money in their pockets in the face of unpredictable health and spending requirements.
A copy of Senator Markey’s Social Security tax exemption legislation can be found HERE.