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April 5, 2020
The CARES Act And What It Means For Individuals
By: Chris

On Friday March 27, 2020 the President signed into Law the Coronavirus Aid, Relief, and Economic Security Act or the “CARES Act”. In addition to the additional funding for hospitals and broader access to additional virus testing across the country the CARES Act includes over $2 Trillion in funding for individuals and businesses of all sizes through a variety of direct cash payments, loans, tax credits, and payment deferrals. The total Act is 880 pages long not including amendments, so we are outlining various provisions below, but we expect to have further clarity and potentially changes to many of the points below in the coming days. We are working to decipher the options available to you, and are planning to have discussions with all of our clients in the coming days regarding a plan of action – please do not hesitate to reach out with any questions you have

For Individuals:

  1. Individual stimulus payments – The Government will be making payments directly to taxpayers with incomes under $99,000 ($198,000 for joint filers) for a maximum of $1,200  ($2,400 for joint filers), but payment is reduced for every dollar made over $75,000 for individual taxpayers ($150,000 for joint filers) with an additional $500 payment for each child claimed by the taxpayer(s). Calculation is based on your 2019 tax return, or if not filed either your 2018 tax return or your social security statement. Taxpayers with income over $99,000 ($198,000 for joint filers) will not receive any payment.
  2. Student loan payment suspension – The Treasury has suspended student loan payments on Federally issued loans until September 30, 2020 and will not accrue interest on the balance during that period.
  3. Charitable giving – The CARES Act added the ability for taxpayers who take the standard deduction to include an additional $300 for charitable giving on their 2020 tax return. The CARES Act also suspended the adjusted gross income limitation for charitable giving starting in 2020. Taxpayers must make an affirmative election on their 2020 tax returns for the limitation to not apply to their 2020 giving.
  4. Retirement plan distributions – Eligible individuals can withdraw up to $100,000 from their retirement accounts during 2020 without being subjected to the 10% early withdrawal penalty, and the taxpayer can also spread the income over 3 years. Repayments of distributions over the next 3 years will be treated as tax-free rollovers (up from 60 days). The bill also makes it easier to borrow money from 401(k) accounts, raising the limit to $100,000 from $50,000 for the first 180 days after enactment, and extending the payment dates for any loans due the rest of 2020 for a year. Individuals also do not have to take their 2020 required minimum distributions from their retirement funds. 
  5. Extended deadlines – In addition to extending the federal income tax filing and payment deadline to July 15, 2020 the Government also allowed for additional time to contribute to IRAs, HSAs, and Archer MSAs for individuals. As part of the extension the IRS has also announced that there will not be any additional interest and penalties on any taxes due. Notably, the extended deadline does not apply to federal informational returns such as the form 3520.
  6. Estimated payments – As the IRS has postponed the filing and payment deadline for personal tax filings to July 15, 2020 they have also postponed the first quarter estimated payment to July 15, 2020. Currently, the second estimated payment is still due on June 15, 2020.

As we noted above this is an extremely fluid situation, and we expect there to be additional clarifications to the current CARES Act over the coming days and weeks. Additionally there is an expectation that this will not be the only stimulus funding available to taxpayers, so as new information comes out we will keep providing updates on information that is useful to you. We hope that you are all healthy and safe, and we thank you for your continued trust in us – as always we are only a phone call away.

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