The Secure Act

Volume No. US-20-01

2020 – Into the breach once more..

Welcome to our inaugural U.S. Tax Tip for 2020.  Everyone at Cadesky U.S. Tax Ltd. hopes you and your family had an enjoyable holiday season and wish you all a prosperous, safe, enjoyable and profitable 2020.  It is hard to believe that we are already 2 weeks into 2020!  Where does the time ago? 

The Secure Act

On December 20, 2019 President Trump signed into law The Setting Every Community Up for Retirement Enhancement Act (aka the “Secure Act”).  A number of authors have described The Secure Act as one of the most dynamic changes to retirement legislation since the Pension Protection Act of 2006.  All changes are effective as of January 1, 2020.  In particular there are 4 main changes (with respect to pension items):

  1. The starting age for required minimum distributions (“RMD”) has increased from 70 ½ to age 72.

    If you turned age 70½ in 2019 (born prior to July 1, 1949), you will still need to take your RMD for 2019 no later than April 1, 2020. If you are currently receiving RMDs (or should be) because you are over age 70½, you must continue taking these RMDs. Only those who will turn 70½ (born on or after July 1, 1949) in 2020 or later may wait until age 72 to begin taking required distributions.  

  2. You can contribute to your traditional IRA after age 70 ½.

    As of January 1, 2020, taxpayers will be allowed to contribute to their traditional IRA, after age 70 ½, provided they have earned income.

  3. Inherited Retirement Accounts.

    Previously a non-spouse beneficiary of certain retirement accounts (such as an IRA) could take distributions out over their life (as opposed to the life of the account owner).  These became known as “stretch” accounts and allowed the beneficiaries to defer the income inclusion and continue to build the value of the account on a tax free basis for potentially many years.  These have now been curtailed.   Distributions to non-spouse beneficiaries must now in general be taken within 10 years of the death of the account owner.  There are, however, limited exceptions.

  4. Adoption/Birth Expenses

    The new law allows a penalty-free withdrawal from retirement plans for birth or adoption expenses, up to $5,000 for each parent. As such, a couple could take out up to $10,000 from their retirement savings, as long as they both have separate accounts in their own names.

Some additional changes

Though not a comprehensive listing The SECURE Act also had the following changes:

The 2017 Tax Cuts and Jobs Act changed the rules on how the “kiddie tax” was computed.  As drafted, some of these changes resulted in unintended and unwelcome consequences.  The SECURE Act has changed these rules not only for 2020 but can be applied retroactively to 2018 and 2019.  Taxpayers who paid kiddie tax in 2018 and 2019 may want to consider filing amended returns.

The Secure Act also increased the penalty for failure to file affected federal tax returns to the lesser of: (1) $400 or (2) 100% of the amount of tax due. This change applies to returns that are due in 2020 and beyond, including any extensions. Previously, the dollar limit for returns due in 2020 was $330.

Who we are

Cadesky U.S. Tax Ltd. is a full service advisory and compliance firm.  We monitor U.S. tax news that may be of interest to our readers and share our thoughts in U.S. Tax Tips.   

If you require our assistance please do not hesitate to reach out to us.

The material provided in this U.S. Tax Tip is believed to be accurate and reliable as of the date of posting. Tax laws are complex and are subject to frequent change. Professional advice should always be sought before implementing any tax planning arrangements. Neither Cadesky Tax nor Cadesky U.S. Tax can accept any liability for the tax consequences that may result from acting based on the contents hereof.


U.S. TAX TIP is provided as a free service to clients and friends of Cadesky U.S. Tax.

The material provided in this U.S. Tax Tip is believed to be accurate and reliable as of the date of posting. Tax laws are complex and are subject to frequent change. Professional advice should always be sought before implementing any tax planning arrangements. Neither Cadesky Tax nor Cadesky U.S. Tax can accept any liability for the tax consequences that may result from acting based on the contents hereof.