CARES Act: What You Need to Know 

Coronavirus Aid, Relief, and Economic Security (CARES) Act 

On Friday the number of COVID-19 cases in the US surpassed 100,000. In response to the ever-growing economic crisis due to the global pandemic, President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) act, a $2 trillion emergency fiscal stimulus package. There are many facets to this legislation, many we are still sorting out. Below is a list of a few of the important aspects that may help you organize your cash flow in the coming months and year. 

1.Many Americans will receive direct payments from the government. Individuals with adjusted gross income (AGI) of $75,000 or less will receive $1200. Couples with AGI of $150,000 will receive $2400. In addition, taxpayers will receive $500 for every qualified child. Payments are reduced by $50 for $1000 of AGI above these thresholds. Payments will be handled by the IRS. Your 2018 or 2019 return (whichever is the latest) will determine your eligibility to receive a check. However, qualification is based on 2020 income. Whether you receive a check or not, you will “true-up” when you file your 2020 return. In other words, Congress is “fronting” you a check. Someone not getting a check at all may receive an appropriate amount in tax credit depending on his AGI when he files his 2020 return, but overpayments due to 2020 income will not be clawed back. 

2.Required Minimum Distributions (RMDs) waived for 2020, including inherited IRAs. 

• This waiver covers anyone who deferred their first RMD from 2019 (the April 1 deadline) 

3.Federal tax return deadline delayed from 4/15 to 7/15 

• Including payments due for that return 
• Including prior year retirement plan and Health Savings Account contributions 

4.Illinois tax return deadline delayed from 4/15 to 7/15 

• Not all states though. Be sure to check with your state for guidance 

5.4/15 estimated payments delayed until 7/15 

• Not sure about 6/15 payment 

6.Charitable changes: 

• Above-the-line deduction for up to $300 of charitable gifts (this is a permanent change) 
• 50% AGI limit on cash charitable contributions suspended for 2020 (corporate 10% limit increased to 25%) 

7.Loans/withdrawals from retirement plans: 

• 10% early withdrawal penalty waived on withdrawals up to $100,000 for “corona-related purposes.”* 
• Income attributable to such distributions would be subject to tax over three years 
• Funds may also be recontributed within three years 

8.Payroll taxes: 

• Refundable payroll tax credit for 50 percent of wages paid by employers to employees, if 1) operations were fully or partially suspended, due to a COVID-19-related shut-down order, or 2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year. 

• Employers and self-employed individuals can defer payment of the employer share of the Social Security tax (6.2%). Half to be repaid by 12/31/21 and the other half by 12/31/22. 

9.Student Loans: 

• Interest on all federal student loans is waived through Sept. 30th  
• Borrowers may skip payments through Sept. 30th. Info circulating last week was that borrowers could be granted an emergency 60-day forbearance upon request that would be automatically applied after 31 days of delinquency, but it seems this has been updated to 6 months.  
• Skipped payments will still qualify for Public Service Loan Forgiveness 

• Collection of federal student loan debt is suspended 

Hence, clients may want to reconsider refinancing their federal student loans until the 0% interest benefit has expired. 

There’s a lot here. Please let me know if you have any questions or comments. 

Be safe, and stay healthy! 

Henry

*”A coronavirus-related distribution is a one made to an individual: (1) who is diagnosed with COVID-19, (2) whose spouse or dependent is diagnosed with COVID-19, or (3) who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care due to COVID-19, closing or reducing hours of a business owned or operated by the individual due to COVID-19, or other factors as determined by the Treasury Secretary.”