The 2 trillion-dollar CARES Act was recently signed into law. This is CMP’s summary of how you or your business might be impacted. Although most families with disabilities will receive a recovery payment of ($1,200 per single or $2,400 per married couple), any adult who is claimed as a dependent, including many individuals with disabilities, will not be receiving this emergency payment.
Key aspects of the bill are only briefly summarized. Although we are happy to discuss your general tax questions as to how the new bill might apply to your situation, we recommend discussing specific tax implications of the CARES Act with your tax preparer.
Payments of $1,200 per individual; $2,400 per married couple; $500 for each child under the age of 17. Does not apply to adult dependents.
Recovery payments are limited by the 2018 or 2019 (latest IRS return on file) by the taxpayer Adjusted Gross Income (AGI) of:
*Recovery payments are not taxable
RMD requirement suspended for 2020.
Note: The primary benefit of not taking the RMD in 2020 is to avoid paying the income tax on the distribution this year. Clients will need to weigh the tax benefit of skipping the IRA withdrawal(s) to the need to meet current living expenses.
Retirement account holders can withdrawal up to $100K from IRAs or 401K .
Note: COVID-19 hardship guidelines require evidence of adverse financial consequences as a result of being quarantined, furloughed or laid off. Although the intent of Congress is to liberally define these guidelines, the IRS has yet to do so.
SBA loans up to a max of $10 million or 2.5 times the average monthly payroll whichever is less.
Loan forgiveness: First 8 weeks of eligible expenses. Must have same number of employees compared to prior year quarter and compensation not less than 75% for current employees paid less than $100K
Reference: Levine, Jeffrey. March 2020. “CARES ACT Provisions for Financial Advisors and their Clients,” kitces-CAREs-Act