Stimulus – Cares Act Package
Senate Bill S. 3548 Cares Act, which stands for” Coronavirus Aid Relief and Economic Security Act”. As we speak the bill has passed the senate and is awaiting passage in the House of Representatives. Below I have summarized the pertinent provisions as it relates to individuals. My next communication will summarize these provisions relating to small business.
Recovery Rebates for Individuals
- Eligible individuals are entitled to a credit/rebate of $ 1200 ($ 2400 in case of a joint tax return).
- The amount is increased by $ 500 multiplied by number of qualifying children of the taxpayer.
- Must filed a 2018 or 2019 tax return.
- Income limits are $ 75,000/year for singles and $ 150,000 per year for joint returns and $ 112,500 for head of household. The IRS will base the income on 2019 return if filed or 2018.
- Children claimed as dependents on someone else’s return do not qualify for the rebate.
- The rebates will be direct deposited to your bank accounts if the IRS has that information from a tax return. If not checks will be mailed.
- Rebates will go out in 3 weeks. Also, these rebates are not considered income so you will not have to pay tax on them.
Delays of Deadlines
As previously reported certain tax filing and payment deadlines have been extended
- Any tax return or payment that was due on April 15th is now due July 15th Nothing needs to be done.
- Applies to businesses and individuals, regular income tax and estimated Q1 income tax.
- Does not apply to payroll taxes or Q2 estimated income taxes.
The CARES Act allocates $ 250 billion to unemployment benefits and significantly enhances those eligible to apply. So long as the unemployment is related to COVID outbreak.
- Part time employees, freelances, independent contractors, self- employed will qualify.
- The normal work history requirements are waived, this helps the newly hired.
- Federal government will add $ 600 per week, gets added to the normal State benefit amount.
- Benefits are extended from normal 26 weeks to 39 weeks, additional 13 weeks of benefits.
For the calendar year 2020, no one would have to take a required minimum distribution from any individual retirement accounts or workplace retirement savings plans, like a 401(k). That way, you aren’t forced to sell investments that may have fallen in value, which would lock in losses. If you don’t need the money now, you can let the investments sit and hope that they recover. Other provisions.
- Penalty free withdrawals from IRA or retirement plan up to $ 100,000, no 10% penalty. The income tax can be spread over 3 years. This only applies to coronavirus related withdrawals.
- 401k loans are allowed up to 100% of the value of the account up to $ 100,000.
- Existing 401k loans get an additional year to repay if due by 12/31/2020.
- Automatic suspension of student loan payments until 9/30/2020 for any student loan held by the federal government. Most loans should qualify.
- Interest will not accrue on the loan will be suspended during this six- month period.
- Wage garnishments and tax refund offsets to pay defaulted student loans will be suspended during this six- month period.
- $ 300 above the line deduction for 2020 and forward
- AGI limit of 40% is increased to 100%.
We at Franskoviak Tax Solutions will continue to keep you up to date in regards to the latest news. If you have a question that you would like answered in regards to the latest tax news please contact our Michigan IRS tax resolution experts at (248) 524-5240.
We are still scheduling virtual meetings for tax preparation, and for IRS and State tax issues.
Call our office at (248) 524-5240 or text (248) 522-1509 if you want to schedule a virtual meeting.