Key Provisions of the CARES Act You Need to Know for 2020
“CARES” stands for “Cornonavirus Aid, Relief and Economic Security” and was designed to help people whose livelihood was affected by the COVID 19 virus. It outlined assistance the government is providing for people during these tough times. The government has implemented provisions within the CARES Act that may benefit retirees as well. Let’s take a look at some of the areas of the CARES Act that should have an impact on our population, remembering to keep in mind that the rules are changing daily.
Economic Impact Payment Checks Are Coming
Economic Impact Payment aka stimulus checks were to be sent out to every American to help with these tough financial times. It was in the amount of $1200 per individual and $500 per child within that home that was under the age of 17. A married couple would receive $2400. This payment was based on the tax paperwork that was filed in 2018, should the 2019 tax filings not be completed. Some people did not have their 2019 taxes filed when this all started. There were some rules for getting this check. The amount was reduced for those that make more than $75K per year or for a couple that makes $150K per year. The people that make over $99K will not be getting a stimulus check and couples over $198K will also not be eligible. Haven’t received your stimulus check yet? Click here to find out your status, but make sure to have your 2019 taxes on hand.
Business Owner Relief is Coming
During COVID 19 businesses have been extremely hard hit. This assistance was meant to help them get through this. The CARES act issued $500 billion in loans, investments to businesses, municipalities, and loan guarantees. According to the Small Business Administration “In response to the Coronavirus (COVID-19) pandemic, small business owners in all U.S. states, Washington D.C., and territories were able to apply for an Economic Injury Disaster Loan advance of $1,000 per employee up to $10,000, . This advance is designed to provide economic relief to businesses that are currently experiencing a temporary loss of revenue. This loan advance will not have to be repaid.” This is an ever-changing situation so it’s best to monitor their website for further updates.
Inherited 401(k) Distributions Waived
For 2020 inherited accounts, IRAs, 401 (ks)s distributions can be waived. The CARES Act makes it easier to withdraw funds saved in certain tax-advantaged retirement accounts like 401(k)s and traditional Individual Retirement Accounts (IRAs). These changes are temporary and eliminate tax penalties on certain early withdrawals and relax the rules on loans you can take from some types of accounts. Be warned, however, not all tax-advantaged retirement account holders are able to take advantage of the CARES Act’s relaxed early distribution and loan provisions. You should know that the legislation restricts this form of relief to qualified participants with a valid COVID-19 related reason. You must:
- Be diagnosed with COVID-19
- Have a spouse or dependent diagnosed with COVID-19
- Experience a layoff, furlough, reduction in hours, or inability to work due to COVID-19 or lack of childcare because of COVID-19
Withdrawal Penalties Waived
If you want to remove your money from your IRA in 2020, you may do so without the penalty before the age of 59 1/2. There are some limits though, you can only withdrawal $100K and you will still have to pay the taxes on the money you withdraw. Under the CARES Act, the 10% penalty has been waved. Referred to as “coronavirus related distributions,” these penalties are waived only in 2020.
Required Minimum Distributions Suspended for 2020
As you are probably aware of, RMDs are the government’s way of finally getting ahold of some of the money that’s grown tax-deferred for decades in your traditional 401(k) or IRA. From the age of 72, retirees must withdraw a minimum amount from their account each year and pay income taxes on it. For 2020 the CARES Act will help cover those in need by waving the minimum people can withdraw from their 401 (k)s and IRAs.
There are plenty of businesses and individuals that are struggling with COVID-19 and the Shelter in Place that has come with it. This has brought on financial, emotional, and stressful burdens to many families and businesses. The CARES Act was enacted to hopefully relieve some of these burdens and help keep the economy going through these tough times. Many businesses have been fully closed down, the unemployment rates are skyrocketing and the economy is veering towards a recession. The CARES Act is a sign of hope.
What Should I Do Now?
During these unprecedented times, you should know that things will get better. We are stronger together and will weather this experience like we have weathered many others in our nation’s history. The Law Offices of Joel A Harris are more than prepared to provide you with legal counsel pertaining to your planning, execution, or, and any other legal concerns or questions you may have. The Law Offices of Joel A Harris, located in Concord, Walnut Creek, and Antioch are available to help you to the best of their abilities. If you are not sure if your estate is protected or you just want some help navigating the legal side of planning your estate, feel free to visit us online, in person, or call us by phone at (925) 757-4605.