This week’s blog explains how the CARES Act will impact the vast majority of our clients and blog subscribers. I have spent several hours over the weekend reviewing this information.
The 2 Trillion Dollar CARES Act is equal to 10% of the United States GDP in a “normal year”. This is a ton of money to begin supporting the economy as we work through, getting life back to normal. I will not be surprised if additional stimulus is needed and provided.
Below is an explanation of various aspects of the CARES Act:
Tax Filing Deadline
The typical April 15th deadline is now extended to July 15th. Traditional IRA and Roth IRA contributions for 2019 also receive the extension to July 15th.
Businesses that pay estimated quarterly Federal Tax estimates are able to postpone their 1st quarter 2020 payment from 4/15/2020 to 7/15/2020.
Normal extensions are also available.
This information has been updated on our Key Financial Data 2020 located by clicking HERE.
Checks to Taxpayers
Checks will be issued to approximately 93% of taxpayers, as follows:
- $1200 for Individuals
- $2400 for Married Couples
- Additional $500 per child under Age 17
These checks are however subjective to phase outs for people with higher incomes.
Phase outs begin after your Adjusted Gross Income reaches the following levels:
- $75,000 for Single Filers
- $112,500 for Head of Household
- $150,000 for Married Filing Joint
Your Income (AGI) above those amounts will reduce your total check by $5 for each $100 over your respective threshold.
Which Tax Return Year Counts?
Your most recent tax return on file will be used to determine your eligibility. If you have not filed your 2019 return, your 2018 return will be used. Here are a few thoughts:
- If you don’t qualify based on your 2018 return however you do based on your 2019 return, file the 2019 return immediately.
- If you qualify based on 2018 return and will not in 2019, do NOT file your 2019 return until the deadline (There will not be any “claw-back”, meaning you will not have to repay your check).
- If you don’t qualify in 2018 and 2019 however you will qualify in 2020, unfortunately you will not receive your check until sometime late this year.
How will you receive your check?
If you typically receive a refund direct deposited into your checking account, your check will arrive in that account. (Did you change your checking account since?)
If you typically receive your refund in the mail, your stimulus check will arrive the same way. (Did you change your address? If you need to change your address, you can fill out and sign IRS Form 8822. That form can be found HERE.)
If you typically do NOT receive a refund, whatever address the IRS currently has on file is where the check will be mailed. (Look on your 2018 return…. Did you Move?)
If you need to change your checking account on file with the IRS, please call the IRS @ (800) 829-1040. If you did change your account and do not notify the IRS, they will send a paper check to the address on file after the direct deposit is rejected.
When to Expect your Check?
We’ve hearing that checks will be received approximately 3 week from the signing of the CARES Act on 3/27/2020. This is a very large undertaking so I would not be surprised if it takes a couple more weeks….
2020 Required Minimum Distributions (RMDs)
Your requirement to take RMDs from your IRA’s, Employer Sponsored Retirement Plans, 403B and 457b is waived for 2020. This also applied to Inherited/Beneficiary IRAs.
So what if you already took the distribution in 2020?? Can you put it back? We’re working on this one… however it appears if you return your distribution back into an IRA with 60 calendar days of your receipt, the distribution will be classified as an indirect rollover, and will not be taxed. I’m looking deeper into this, as I do have a handful of questions that are not yet answered. Stay tuned for more information on this one!!!
- When available, Medicare Beneficiaries will receive a NO COST COVID-19 vaccine (when available).
- Part D Prescription Drug plan recipients can now request up to a 90 day supply of medication.
Additional Provisions Included
- Unemployment Compensation is significantly expanded
- Federal student loan payments are suspended until September 30, 2020. No interest will accrue however by default, payments will continue unless individuals take proactive measures to contact their loan provider and pause payments.
- Business Provisions; there are several programs that provide incentive to keep people employed during this period of time. There are several options that we’re in the process of examining details so we can provide guidance as needed.
I will certainly be examining additional information as it become available. If you have any questions or need clarification, please send an email to firstname.lastname@example.org or call (856) 354-3200 extension 202.