I hope this note finds you and your loved ones safe and well.
On Friday March 27, 2020 the CARES Act became law. This legislation is aimed at providing relief for individuals and businesses that have been negatively impacted by the coronavirus outbreak. Here’s a look at some of the key provisions included in the bill and what that may mean for you:
- Direct payments: Americans who pay taxes will receive a one-time direct deposit of up to $1,200, and married couples will receive $2,400, plus an additional $500 per child. The payments will be available for incomes up to $75,000 for individuals and $150,000 for married couples. This will be based on your 2019 income tax return or 2018 if you have not yet filed 2019. The payments should be direct deposited into the bank account you used on your tax return or a check will be mailed to your home. For those receiving Social Security benefits, the payment should be directly deposited into the bank account where your SS benefit is paid.
- Unemployment: The program provides $250 billion for an extended unemployment insurance program and expands eligibility and offers workers an additional $600 per week for four months, on top of what state programs pay. It also extends UI benefits through Dec. 31 for eligible workers. The deal applies to the self-employed, independent contractors and gig economy workers. For anyone whose employment has been impacted, you should file for unemployment as soon as possible. Here is link to NJ https://myunemployment.nj.gov/ and NY https://labor.ny.gov/ui/how_to_file_claim.shtm
- RMDs suspended: Required Minimum Distributions from IRAs and 401(k) plans are suspended. For those who can afford to not take their RMD (or take a lower amount) I would encourage you to consider doing that. It will leave more capital in your retirement account to participate in the recovery. Feel free to call me to discuss.
- Use of retirement funds: The bill waives the 10% early withdrawal penalty for distributions up to $100,000 for coronavirus-related purposes, retroactive to Jan. 1. Withdrawals are still taxed, but taxes are spread over three years, or the taxpayer has the three-year period to roll it back over. This should be a “last resort” step.
- 401(k) Loans: The loan limit is increased from $50,000 to $100,000. This is also a “last resort” step.
- Student Loan Payments: Borrowers can request to delay payments on federal student loans until Sept. 30, 2020.1 All federally-owned student loans will automatically have a 0% interest rate until then. Contact your federal student loan servicer to request forbearance. This does not apply to private student loans.
The IRS also announced the delay in 2019 income tax deadline from April 15th to July 15th. This applies to both filing your return as well as making any payment due. If you feel you are entitled to a refund I encourage you to still try to file your return now (assuming your tax preparer is available).
There are several provisions for small business owners in the CARES Act that I will address in a separate note.
As more information on this legislation and any future legislation is available I will share it with you.
Also note the IRS will NOT call you about this. Any call you receive is a scam.
Soruces: Forbes.com, TheBalance.com
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