CARES Act Overview

David L. Johanson |

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act.  The bill was approved 96–0 in the Senate and passed by voice vote in the House of Representatives, with the intent of providing financial aid to families and businesses impacted by the COVID-19 pandemic.   

New information on the CARES Act is coming out daily, so we will try and keep you abreast of any critical and time sensitive updates.  Here are a few key elements of the new law. 

 

Tax Day Changes

The IRS has changed the federal tax filing deadline from April 15, 2020 to July 15, 2020.  The deadline for making a 2019 IRA contribution has also been extended to July 15, 2020.  Most states, but not all, have changed their filing deadlines to align with the new federal date.  California also extended the tax filing deadline to July 15, 2020.

 

Estimated Tax Payment Schedule

The Federal and State of California deadlines are as follows:

Q1 & Q2 are due July 15, 2020

Q3 is due September 15, 2020

Q4 is due January 15, 2021

 

Direct Payments to Individuals

The CARES Act sends a $1,200 stimulus check to eligible single adults earning up to $75,000.  Couples earning up to $150,000 will receive $2,400.  This is based on your 2019 adjusted gross income (or 2018 AGI, if you had not filed your 2019 taxes yet).  Eligible families receive an additional $500 for each child under age 17.

You can expect a direct deposit, if the IRS has your bank information. If not, checks will be sent to your address of record.

The amounts of the stimulus checks do get phased out if incomes rise above the aforementioned threshold.Stimulus support vanishes for a single taxpayer at $99,000, and $198,000 for married couples.

 

Required Minimum Distribution (RMDs) Waived for 2020

RMDs from IRAs and most 401(k)-type defined contribution plans have been waived for 2020.  At the start of the year, the IRS changed the age for RMDs from a start date at age 70 ½ to age 72.  Now no one, regardless of age, is required to take an RMD distribution this year.

Several questions about this provision are not specifically addressed in the CARES Act, including whether a client who took an RMD early in 2020 can roll it back outside the normal 60-day window.  This and other questions are expected to be addressed in IRS guidance in the coming weeks.

 

Hardship Withdrawals From Retirement Accounts

Individuals affected by Coronavirus may take a penalty-free hardship withdrawal of up to $100,000 from their retirement account.  Those who take this withdrawal would owe taxes, but repayment of both the taxes and the withdrawal may be spread over three years.  Any repayment would not count against the contribution limit for that year.

 

Aid for Small Business

The CARES Act made a relief package for small businesses, self-employed individuals, and independent contractors who meet eligibility requirements.  The U.S. Small Business Administration (SBA) has streamlined the application procedure for emergency disaster loans.  Anyone who may want to explore the options available for aid should visit https://taxfoundation.org/federal-coronavirus-relief-bill-cares-act/ or give us a call.

 

Other Interesting Changes Which May Be Applicable

Extends the Real ID deadline from October 1, 2020 to September 30, 2021.

Expands the deduction for charitable contributions for non-itemizers.

Student loans can request to delay payments on Federal Loans until September 30, 2020.

 

This blog post only covers a fraction of the changes, but some you might find interesting.  For a full view of historic $2 trillion deal, you can read it here https://www.congress.gov/116/bills/s3548/BILLS-116s3548is.pdf

Please feel free to contact us with questions and we will continue to keep you informed.