How the CARES ACT Helps Individuals Suffering Financially During the COVID-19 Shutdown

As COVID-19 has forced the nation to remain in their homes, the economy has suffered a sudden freefall. Congress passed the CARES Act to help individuals as well as businesses retain their workforces during this trying time. To help you understand the range of benefits available, Breon & Associates presents this brief summary of highlights from the new law. We are also prepared to give online personalized guidance to individuals.

Enhanced unemployment Insurance provisions in the CARES Act

Despite the assistance given to business, some will be forced to furlough staff. The CARES Act helps cushion the blow for unemployed workers in several ways:

• Self-employed and independent contractors can receive unemployment during the health emergency.
• The sum of $600 in federal pandemic unemployment compensation is added to the amount of unemployment compensation determined under state law.
• When state unemployment benefits are exhausted, individuals may receive an additional 13 weeks of federally funded unemployment benefits through December 31, 2020.

A record 3.28 million workers filed unemployment claims in the week ending March 21, according to U.S. Department of Labor. We hope these enhanced benefits provide the safety net you need.

CARES Act financial provisions for individuals

President Trump had already acted to push back the filing date for 2019 taxes to July 15. The CARES Act provides this additional help:

2020 Recovery Rebate – You can receive an advanced refund of a future 2020 tax credit. Amounts are as follows:

• Single filer – $1,200 for single filer
• Married filing jointly – $2,400
• Qualifying children – $500 for each qualifying child under age 17

The rebate phases out at a rate of $5 for every $100 starting at $75,000 adjusted gross income for single filers; $150,000 for joint filers; and $112,500 for head of household. If you have not yet filed your 2019 return, your AGI will be based on 2018. A true up of sorts will occur when you file your 2020 return.

Retirement fund early distributions – If you must take an early distribution due to COVID-19 in 2020, the amount up to $100,000 is not subject to the 10 percent penalty. To qualify, the distribution must be made:

• After Jan. 1, 2020 and before Dec. 31, 2020
• To an individual diagnosed the with virus SARS-CoV-2 or COVID-19
• To a spouse or dependent of a person so diagnosed
• To persons who, due to the pandemic, experience adverse financial consequences from being quarantined, furloughed, laid off or having work hours reduced; being unable to work due to lack of child care; closing or reducing hours of a business the person owns or operates; or other factors as determined by the Secretary of the Treasury.

The income tax on the distributions is payable over three years, starting in 2020. You can also avoid income recognition if you repay the amount to your plan within three years.

The CARES Act also increases the amount you can borrow from your retirement fund from $50,000 to $100,000 for 180 days following the enactment of the law. If you have a current outstanding plan loan, you can get a one-year delay of payments.

Required minimum distributions – Waived for 2020 under CARES.

Charitable contributions — The Act allows a $300 charitable contribution deduction for taxpayers who use the standard deduction (the contribution must be made in cash to a qualified charity). The 50%/60% limitation on cash contributions is suspended for taxpayers who itemize in 2020.

Employer payment of employee student loan — If your employer is repaying your student loans, up to $5,250 of that repayment is tax free to you in 2020. The $5,250 limit represents all employer education assistance for the year.

The summary we’ve presented is necessarily brief and general and is subject to change as additional information becomes available or revisions are made. This is a very fluid environment. As always, the nitty-gritty of the law is complex, and this summary is not all inclusive. Before taking any action, please seek professional advice.