Like a good thriller movie (or perhaps
more accurately, a horror film), the suspense is over and Congress has
passed the stimulus bill that was then signed by President Trump late
Friday afternoon. It is officially called the CARES Act (free package of
TP for anyone who can guess what the “C” stands for).
But who really CARES what it is called? We care what it will do.
Let me see if I can help sort this out a bit.
This bill is over 800 pages long and includes many provisions for both
individuals and small businesses. I am going to focus today on the ones
that affect us most as individual taxpayers.
Stimulus Checks:
- $1,200 for individuals; $2,400 for married couples
- Additional $500 per child UNDER age 17
- Amount is phased out based on your Adjusted Gross Income (AGI) in either 2018 or 2019, whichever tax return is the most current the IRS has on file.
- Phaseouts begin at AGI’s above:
- $150,000 for Married Filing Joint
- $112,500 for Head of Household
- $75,000 for Single
A confusing part of this stimulus check is that although they will be determining the amount we get based off of 2018/2019 AGI, it is actually a 2020 rebate.
For those that may be phased out either partially or in full based on
their prior AGI but are now suffering hardship in 2020, you may still
get a rebate if your 2020 AGI falls into or below the phase out ranges.
You just won’t be getting it now when you need it most.
Unemployment:
- State unemployment benefits are $600/week more than “regular” unemployment
- This additional bonus payment runs for up to 4 months
- Overall benefits are extended by an additional 13 weeks
- Federal Government will pay to cover the one week “waiting period”
- Pandemic Unemployment assistance for those not eligible for unemployment
- Contractors, self-employed, gig workers
FEDERAL Student Loan Relief:
- Payments and interest are deferred until September 30, 2020
- While not required to make payments, voluntary payments are allowed.
- Proactively contact your loan provider to pause payments, it will not happen automatically.
No Required Minimum Distributions (RMD’s) for 2020
- This includes IRA’s and employer plans
- Applies to Inherited IRA’s as well
- If subject to the 5-year rule, 2020 is ignored
Distributions from Retirement Accounts: aka “Coronavirus Related Distributions”
- 10% Early Withdrawal Penalty is waived
- Not subject to mandatory withholding of taxes (usually 20%; this applies to employer plans)
- Up to $100,000 combined from IRA’s or employer plans
- Withdrawn in 2020
- WITHDRAWALS ARE TAXABLE INCOME, but eligible to be “rolled back in” to the account over 3 years. If this is done, an amended return can be filed to claim a refund for any taxes paid on the withdrawal.
- If you do not roll it back in, the income and resulting tax can be spread out over 2020, 2021 and 2022.
Assuming your 2020 income has be greatly affected and you would be
taking this distribution due to a Coronavirus hardship, it may make more
sense for you to include all of this income on your 2020 return. Your
CPA will be able to give you guidance on this. Your advisor will give
you guidance on whether it is good option for you given your overall
financial circumstances.
These are just some of the major highlights affecting a vast majority of US citizens.
If you are unsure whether you will qualify for a stimulus check or what the amount will be if you do, shoot me an email at susan@newshorefinancial.com and I will run through the numbers with you.
All we can do at this point is keep hanging on, be patient with our
families and strangers, control what we can control and let go of the
rest.
With three teenage boys trapped at home, a clean kitchen is NOT something I can control right now and I’m really trying to LET IT GO! What are YOU letting go?