On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. This legislation is aimed at providing relief for individuals and businesses that have been negatively impacted by the coronavirus outbreak. While that is great news, in and of itself, here’s a look at some of the key provisions included in the bill and what that may mean for you:
• Direct payments: A $1,200 stimulus check will be sent to eligible adults earning up to $75,000. Couples earning up to $150,000 will receive $2,400. Eligible families receive an additional $500 for each child under the age of 17. The amount phases out after $75,000 of income for individuals ($150,000 for couples) and phases out completely at $99,000 singles ($198,000 for couples). Those who receive Social Security benefits but don't file a tax return will receive a check based on information provided by the Social Security Administration.
• Unemployment: The program provides $250 billion for an extended unemployment insurance program and expands eligibility and offers workers an additional $600 per week for four months, on top of what state programs pay. It also extends UI benefits through Dec. 31 for eligible workers. The deal applies to the self-employed and independent contractors.
• Payroll taxes: The measure allows employers to delay the payment of their portion of 2020 payroll taxes until 2021 and 2022.
• Use of retirement funds: The bill waives the 10% early withdrawal penalty for distributions up to $100,000 for coronavirus-related purposes, retroactive to Jan. 1. Withdrawals are still taxed, but taxes are spread over three years, or the taxpayer has the three-year period to roll it back over.
• 401(k) Loans: The loan limit is increased from $50,000 to $100,000.
• RMDs suspended: Required Minimum Distributions from IRAs and 401(k) plans (at age 72) are suspended.
• Charity. There is a new provision that provides an above-the-line deduction for charitable contributions, plus, the limits on charitable contributions are changed.
• Small business relief: $350 billion is being dedicated to preventing layoffs and business closures while workers have to stay home during the outbreak. Companies with 500 employees or fewer that maintain their payroll during coronavirus can receive up to 8 weeks of cash-flow assistance. If employers maintain payroll, the portion of the loans used for covered payroll costs, interest on mortgage obligations, rent, and utilities would be forgiven.
• Temporary student loan relief: All loan and interest payments would be deferred through Sept. 30 without penalty to the borrower for all federally owned student loans.