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CARES Act: Important Individual Provisions


There has been much written about the massive $2 trillion coronavirus Stimulus Bill aka The CARES Act, but we would like to highlight several important provisions that apply to individuals.

CASH REBATES: Cash payments should start showing up this week for those who qualify of $1,200 for individuals and $2,400 to married couples. An additional $500 may be paid for each qualifying child. These amounts are subject to reduction if the individual’s Adjusted Gross Income (AGI) exceeds $75,000 ($150,000 for a married couple). The cash payments will be based on the recent tax information available to the IRS, based on the 2018 or 2019 tax return filed. Ask your CPA is you qualify.

RETIREMENT FUNDS: There are some significant changes to retirement funds and distribution rules.

Required Minimum Distribution (RMD) rules for qualified plans, individual retirement accounts and inherited retirement accounts are suspended for 2020. This means you can forgo taking money out of your retirement account this year and forgo paying the corresponding taxes. This could be appropriate for folks who don’t need the cash flow from their accounts to sustain their lifestyle.

Distributions from retirement accounts for coronavirus-related purposes of up to $100,000 can be made with the related income tax payable over a three-year period. Additionally, the distribution amount can be recontributed back to plan over a three-year period without affecting that year’s contribution limits.

Loans from qualified plans such as a 401(k) or 403(b) for coronavirus-related purposes have been increased to the lesser of $100,000 or 100% of the individual’s accrued benefit.

CHARITABLE CONTRIBUTIONS: The CARES Act added provisions to incentivize people to contribute to charity in 2020. Up to $300 of charitable contributions can be taken as a deduction in calculating Adjusted Gross Income for the 2020 tax year. This will provide a tax benefit even to those who don’t itemize. In addition, for the 2020 tax year, a taxpayer can elect to disregard the 50% AGI limitation on deductible contributions.

TAXES: Separate from The CARES Act legislation, the IRS has delayed taxpayer filing and payment deadlines from April 15, 2020 until July 15, 2020.

SMALL BUSINESS LOANS AND TAX CREDITS: As part of the legislation,there are several small business loans and tax credits that you may apply for and/or use. Please see https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources or https://www.irs.gov/coronavirus/coronavirus-tax-relief-for-businesses-and-tax-exempt-entities.

We are happy to answer any questions you have and/or coordinate with your tax advisor.
  1. https://www.congress.gov/bill/116th-congress/house-b-ill/266/text
  2. https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program#section-header-4
  3. https://www.congress.gov/bill/116th-congress/house-bill/748/text
  4. https://www.irs.gov/coronavirus-tax-relief-and-economic-impact-payments
  5. https://home.treasury.gov/policy-issues/cares

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.