What is the CARES Act?
The CARES Act is like a massive care package. Just as an actual care package is meant to get somebody through a tough time, that’s what the CARES Act is designed to do. It contains a number of provisions to help individuals and businesses handle job loss, hours cut back, or drastic changes to their daily lives. What follows is a brief overview of some of the provisions that could affect you and your finances.
Direct Payments to Individuals and Married Couples
Direct Payments: Many tax payers will receive a one-time direct payment to help them cover expenses. Individuals who made up to $75,000 in 2019 will receive $1,200. Married couples filing a joint tax return who made up to $150,000 in 2019 will receive $2,400. On top of this, each taxpayer will receive up to $500 for each child they have under the age of 17. Payments decrease for individuals and married couples with income above their respected thresholds. The IRS started issuing these payments in April.
New Tax Deadline for Filing 2019 Taxes
New Tax Deadlines: This isn’t technically part of the CARES Act, but I’m going to mention it anyway. Due to the pandemic, the IRS has extended this year’s tax-filing and payment deadlines. Now, taxpayers have until July 15 to file their 2019 tax returns. The deadline to make IRA and Roth IRA contributions for 2019 is now July 15 as well.
Unemployment Benefits Boosted
Unemployment: To help combat the high level of unemployment, the CARES Act provides additional assistance for those who lost their jobs. Generally, workers who lose their jobs will receive $600 per week for four months, in addition to what their state unemployment program pays. The CARES Act also adds an additional thirteen months of federal unemployment insurance on top of a person’s state benefits.
Payroll Support for Businesses
Business Support: To avoid additional people losing their jobs, the CARES Act has set aside $350 billion to companies with up to 500 employees to receive loans of up to $10 million. Any portion of this loan used to maintain payroll or retain workers – at least through the end of June – is said to be forgiven. For larger businesses, the CARES Act sets aside around $500 billion in loans and grants, especially for hard-hit industries like airlines.
Withdraw Retirement Funds Without Penalty
Retirement Funds: In a normal year, anyone 72 years or older would need to withdraw a minimum amount from their IRA or 401(k). Not this year. Under the CARES Act, all RMDs are suspended in 2020. That means you can leave that money in your retirement account for the year if you don’t need it now. Note that this applies to both retirement account owners and beneficiaries. The CARES Act also waives the 10% early withdrawal penalty for retirement accounts. Withdrawals will still be taxed, but spread over a three-year period. Under most circumstances, my advice is to leave your retirement savings where they are, but it’s nice to know that early withdrawals are an option if you need them. Finally, the CARES Act increased the 401(k) loan-limit from $50,000 to $100,000.
Funding for Hospitals and Medical Programs
Combatting the Coronavirus: Finally, it should come as a great comfort to know that the brave doctors, nurses, and scientists on the front lines are getting assistance, too. Specifically, the CARES Act provides $100 billion for hospitals, $1.32 billion for community health centers, $11 billion for coronavirus treatments and vaccines, $16 billion for additional medical supplies, like ventilators and masks, and $20 billion for veteran’s health. The Act includes a telehealth program so that if you can’t leave home, you can still have a virtual appointment with your doctor.
As you can see, the CARES Act is a loaded piece of legislation. Time will tell whether more measures are needed, but this is definitely a good start. Of course, my team and I will continue poring over these changes. In the meantime, if you have any questions at all, please don’t hesitate to let me know. Whether we’re in the office or working from our own homes, my team and I are always here for you.
Stay healthy, and stay safe!
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