News & Insights
CARES Act: Individuals & Families
March 31, 2020
Retirement Plan Changes:
Coronavirus Related Distributions from IRA Accounts:
This year, individuals under age 59 1/2 will be able to take out IRA or other retirement plan funds without the normal 10% penalty that would otherwise apply. If one takes a “Coronavirus-Related Distribution,” they will have up to three years to repay that distribution back into the retirement account. Otherwise, taxpayers can elect to spread the income from that Coronavirus-Related Distribution over a three-year period, or include it in their 2020 income.
Suspension of Required Minimum Distributions:
The CARES Act also eliminates the required minimum distributions from IRAs and other retirement plans. If you took a distribution already this year, you will be allowed to return the money to the retirement account. Inherited IRAs are included in this rule too. However, people who inherited IRAs and already took distributions are not eligible to return the money back into the account.
Subject to plan approval, an employee may be allowed to borrow up to 100% of their vested account balance or $100,000, plus payments on new and existing loans may be delayed for up to one year (e.g., no loan payments required through March of 2021).
The government will be issuing checks directly to individuals. The IRS will look at 2019 tax returns (or the 2018 return if the 2019 return has not been filed).
-$1,200 to single filers with adjusted gross income below $75,000
-$2,400 to joint filers with AGI below $150,000
-The government will add $500 for each dependent under the age of 17
-Dependents over the age of 17 are not eligible for the direct payment
-Benefits phase out at $99,000 for a single filer with no children and approximately $198,000 for joint filers
-Payments are expected to be disbursed in May
How the Rebates Work:
The rebate is not taxable. It is considered to be a refundable tax credit, and will not increase your income on your 2020 tax return.
Where will recovery rebate payments be made?
-We believe that individuals receiving Social Security benefits will receive their recovery rebate in the same account they receive their social security benefits.
-The CARES Act also authorizes recovery rebate payments to be made to the account into which a taxpayer’s 2018/2019 tax refund was deposited.
-Other payments, for those who didn’t have a refund, will be sent to the last known address on file.
-The IRS will provide a phone number for individuals to report recovery rebates issues.
What happens if your income is substantially less in 2020 than 2019 because of a layoff? You would be eligible to receive a check, based on the same criteria that applied for the previous tax year.
When check recipients prepare their 2020 tax returns, they’ll have to re-compute the payment that they should be receiving based on 2020 tax data. If they earned more money in 2020 than they did previously, or if a 17 year old turned 18, they will have received an excess. This excess will be forgiven under the current Act.
Expansion of Unemployment Benefits:
The Act expands the duration of unemployment insurance benefits by 13 weeks, and increases payments by $600 per week for four months. It makes so-called ‘gig economy’ workers and the self-employed eligible for unemployment benefits for the first time.
Federal Student Loans and Health Savings Accounts:
If you have a Federal student loan, you will be allowed to suspend payments through September 30, and no interest will accrue on this debt.
Participants in Health Savings Accounts, Archer Medical Savings Accounts and Healthcare Flexible Spending Accounts will be allowed to use these assets to buy over-the-counter medications—something that was not permitted before.