Information on CARES Act

Information from Edward Jones Investment on CARE act:

Cash Payments and Unemployment Assistance

• 2020 Recovery Payment: All U.S. residents with adjusted gross income up to $75,000 ($150,000 joint filers) are eligible for a $1,200 ($2,400) payment, as well as an additional $500 per child (under age 17).
  • There are no minimum income requirements for the payment. Individuals with little or no income are eligible provided they are not a dependent of another taxpayer and have a work-eligible Social Security number.
  • This amount is reduced by $5 for every $100 over the income limit above, so it would be fully phased out for those with incomes over $99,000 (single) and $198,000 (joint filers) with no children.
• Increased Unemployment Assistance: Provides an additional $600/week payment to each recipient of unemployment insurance for up to four months.
  • Provides an additional 13 weeks of unemployment benefits through Dec. 31, 2020, for those who remain unemployed after state unemployment benefits are no longer available.
• Delay in Tax-filing Requirements: Individuals now have until July 15, 2020, to file their 2019 tax returns instead of April 15.
  • The Treasury Department has also postponed the deadline for making IRA contributions until the earlier of the taxpayer filing their 2019 tax return or July 15.

Retirement Account Changes

The following apply to qualifying individuals including those who are diagnosed with COVID-19, have a spouse or dependent who is diagnosed with COVID-19 or experience adverse financial consequences as a result of COVID-19, including quarantines, layoffs, business closures or child care responsibilities.

• Elimination of Early Withdrawal Penalty: Waives the 10% early withdrawal penalty for withdrawals up to $100,000 from qualified retirement accounts, including IRAs and 401(k) plans, for retirement plan participants who qualify for COVID-19 relief. Income tax on the distribution would still be owed but could be paid over a three-year period. Individuals could "recontribute" the funds to the plan within three years without regard to contribution limits. While the law allows for these types of penalty-free distributions from these retirement plans, the participant must contact their plan administrator to determine whether their plan allows for COVID-19 distributions.
• Increase in the Retirement Plan Loan Amount: Increases the amount that can be taken as a loan from a qualified retirement plan from $50,000 to $100,000 for 2020.
• 2020 RMDs Waived for Retirement Accounts: With the exception of defined benefit plans, required minimum distribution (RMDs) are waived for all employer plans and IRAs in 2020, including inherited accounts. This provision also applies to RMDs due in 2020, but attributable to 2019. Individuals do not need to meet COVID-19 qualifying criteria to waive RMDs for 2020.
• Items for Consideration:
  • In general, we recommend exhausting some of the other provisions associated with the CARES Act first, such as mortgage and student loan relief, or using the recovery payment to bridge the gap on current expenses before taking a distribution or loan from your retirement accounts.
  • For any withdrawal or loan, we recommend working with your financial advisor to consider developing strategies to recontribute/pay back these funds over time to reduce any long-term impact to your retirement goals.

• Small-Business Owners

  • Small-Business Loans: Many small businesses are now eligible for disaster relief loans from the Small Business Administration. Additionally, the CARES Act provides conditions for when loan payments may be deferred, and loan amounts forgiven.
  • Other Provisions: There are additional tax and accounting provisions such as:
    • An employee retention tax credit for employers subject to full or partial suspension of business due to COVID-19
    • The ability to delay payment of employer payroll taxes
    • Modifications for rules around net operating losses
    • Modifications for rules around corporate AMT (alternative minimum tax) credits
    • A temporary increase in the limitation on interest deductions imposed by the Tax Cuts and Jobs Act