Due to the outbreak of the Coronavirus this year, there has been plethora of information coming in from various sources.
My goal today is to give you a summary of all of these topics in a more concise way so you can see if something applies to you or someone you know. Bear in mind, this blog could be pages longer than what I'm outlining here. I'm trying to hit on the key points that are more common. If you have a unique circumstance, please reach out to me to discuss.
Let's start with the CARES ACT. The Coronavirus Aid, Relief and Economic Security (CARES) Act has been passed and signed into law.
This bill includes expanded benefits for unemployment. This includes an additional 13 weeks of benefits on top of the regular benefit. Those applying will also see an additional $600 a week (up to 4 months) to their regular unemployment benefit.
There is also a provision for those not otherwise eligible such as independent contractors. This a still a foggy area and we are still waiting on how this will play out (Info as of 4/1/2020).
Benefits will be fast tracked as the first week of unemployment which eliminates the one week waiting period.
Direct payment to taxpayers
Individuals with up to $75,000 of adjusted gross income will receive a one-time payment of $1,200. Married filing jointly with adjusted gross income up to $150,000 will receive $2,400. (For every $1,000 one is over, they will lose $50). You will also receive $500 for each qualified child under the age of 17. One does not have to have earned income in 2019 to qualify.
Tip. Since the income is based on the latest tax return the IRS has and tax filing deadline for 2019 has been extended to July 15, 2020, if your income was too high in 2018 to qualify, filing your 2019 taxes can make sense if your income was lower.
Nothing for you to fill out here. These checks will be deposited in your bank if the IRS has that info. Otherwise, a check will be mailed to your address of record. These checks may not arrive until sometime in May of 2020.
IRA and employer sponsored retirement plans
If one is impacted by the virus (they themselves diagnosed or a spouse/dependent), can't work due to no childcare, have a business that closed, experienced financial hardship, one is allowed to withdraw up to 100k from their plan (total across all plans).
This withdrawal has some key benefits:
- Not subject to the 10% penalty for early withdrawal if under 59 ½. However, the taxes owed on this withdrawal are still subject to ordinary income taxes.
- That being said, the taxes can be spread over the 2020, 2021, and 2022 tax years if desired.
- One is also allowed to put the money back over three years.
Tip. If one does put the money back, they can file amended tax returns and get the taxes back they paid on the distribution. This 3 year repayment option allows for some creative tax planning. One should look at their income projections and see what makes sense.
Required Minimum distributions
No distributions required for 2020. If one began taking their required minimum distributions (RMD's) from their IRA or other retirement plan before January 1, 2020, they have the option of putting back any RMD's they took this year. This does not apply to an inherited IRA for a non-spouse.
Tip. If a non-spouse has an inherited IRA and they have not taken their required minimum distribution (RMD) yet for 2020, they do not need to. This allows for another year of tax deferral (or tax free deferral if in a Roth IRA). If they took their RMD already for 2020 and they are not a spouse, they cannot put the money back.
Federal Student Loans
Here is some relief for those making student loan payments. All payments have been postponed until September 30th of this year. Bear in mind, this applies to federal loans only.
On top of that, interest will not accrue. This one is a good deal that applies to all regardless of income and other obstacles.
Tip. If you are making automatic payments from your checking account, you should suspend these payments until September 30th. If you can continue making the payments until September 30th, it might be wise to not do so unless you have an emergency fund set aside and no credit card debt first.
If you are having difficulty paying your mortgage and your loans are backed by Fannie Mae and Freddie Mac, you should contact your lender and let them know you need relief from your mortgage payments. The lender is required to offer up to 90 days relief from payments. This request can be done up to four times.
Bear in mind, unlike the student loan relief, interest can still accrue on your mortgage and in fact could put you in a worse place financially in the long run. This option is really best for those that are in real dire straits with no other options.
Small Business Relief
There is quite a bit here so I'm providing links from some reliable resources.
Chamber of Commerce – Emergency Loans. Click HERE
Tax Foundation – Click HERE
Small Business Paycheck Protection Program Click HERE
Paycheck Information Sheet Click HERE
Paycheck Protection Application Click HERE
Employee Retention Credit Click HERE
Trouble sleeping? The link to the whole 335 page CARES Act Click HERE
Please don't hesitate to reach out to us for more detailed information.
I'm here to help.
All the best.
Rick Fingerman, CFP®
Information obtained from government sources as well as Michael Kitce's Nerd Eye View
Financial Planning Solutions, LLC (FPS) is a Registered Investment Advisor. Financial Planning Solutions, LLC (FPS) provides this blog for informational and educational purposes only. Nothing in this blog should be considered investment, tax, or legal advice. FPS only renders personalized advice to each client. Information herein includes opinions and source information that is believed to be reliable. However, such information may not be independently verified by FPS. Please see important disclosures link at the bottom of this page.