Seven COVID-19 Disaster Relief Benefits for You

By Mitchell J. Smilowitz, CPA

On March 27 the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. This $2.2 trillion disaster relief program is intended to ease the economic impact of COVID-19 on Americans. Here are seven benefits for which you may qualify.

  • Cash payments to eligible taxpayers
  • Federal tax filing deadline postponed to July 15, 2020
  • 2020 Required Minimum Distributions (RMDs) suspended
  • Federal student loan payments suspended for six months
  • Retirement plan loan payments suspended through December 2020
  • Use of retirement plan loans expanded
  • Retirement plan distributions expanded

1. Cash Payments to Eligible Taxpayers

The CARES Act provides cash payments of up to $1,200 for single taxpayers and up to $2,400 for joint filers. Eligible taxpayers also receive a $500 credit for each qualifying child. Rebates begin phasing out for single filers with Adjusted Gross Incomes (AGI) above $75,000 ($150,000 for joint filers). Single filers with incomes of $99,000 and above ($198,000 for joint filers) are not eligible for the cash payment. The AGI is generally based on your 2019 tax return. If you have not yet filed your 2019 taxes, the rebate will be based on your 2018 tax filing. If your AGI exceeds the income limit in 2018 or 2019 but drops in 2020, you can claim a credit when filing your 2020 taxes. You will not owe income taxes on this payment or credit.

People receiving Social Security and disability income are eligible for the payments as long as they meet the income guidelines. Those with no income or whose income comes entirely from non-taxable programs such as Supplemental Security Income (SSI) are still eligible for the cash payment.

The IRS has started making the payments. If the IRS already has your bank account information, it will direct deposit the payment into your account. It will take longer for those who receive their stimulus payment by check. Use the Get My Payment feature on the IRS website to track your payment or enter your bank account information for a direct deposit.

For more information, visit www.irs.gov.

2. Federal Tax Filing Deadline Postponed to July 15, 2020

The IRS has postponed the deadline for filing 2019 federal income taxes from April 15 to July 15, 2020. Penalties and interest will begin to accrue on unpaid balances as of July 16, 2020. To extend the filing deadline beyond July 15, you’ll need to file Form 4868 with the IRS.

If you make estimated tax payments, the IRS has postponed 1st quarter payments until July 15, 2020.

State income tax filing deadlines, including the filing of estimated taxes, are not affected by the IRS decision. While many states have followed the lead of the IRS, check with your state tax department to determine the official filing deadline.

3. RMDs Suspended for 2020

All Required Minimum Distributions for 2020 are suspended by the CARES Act. If you have already taken your RMD, the CARES Act allows you to redeposit the amount you received into your JRB account within 60 days of April 1, 2020.

4. Federal Student Loan Payments Suspended for Six Months

Payments for all federal student loans, including interest, are suspended through September 30, 2020. All payments during the moratorium will be applied to principal, not interest. The rules for receiving payment relief are not finalized; check with your lender for details.

5. Existing JRB Loan Payments Can Be Suspended Through 2020

The CARES Act allows “qualified individuals” to suspend payment of loans taken against your JRB account through the end of 2020. To qualify, you will need to certify that you, a spouse or a dependent has been diagnosed with COVID-19 or experienced adverse financial consequences as a result of the pandemic.

While there are no penalties for missed payments during this period, interest will continue to accrue.  You are not required to delay payment of the loan; you can stay on your regular repayment schedule. 

6. Expanded Use of Retirement Plan Loans

The CARES Act expands the ability to access your retirement savings during the pandemic. The Act increases the retirement plan loan limit to $100,000 or 100% of the account balance for “qualified individuals.” COVID-19 related loans must be taken by September 24, 2020. In addition, you can choose to delay loan repayment through the end of 2020.

7. Expanded Access to Retirement Plan Distributions

The Act allows “qualified individuals” to take a distribution up to $100,000 or 100% of the account balance from their retirement savings, including their JRB account. The $100,000 cap includes distributions from all of an individual’s retirement accounts. For those younger than 59½, the 10% early withdrawal penalty is waived on these coronavirus related distributions.

Federal income tax from these distributions can be paid over three tax years. You can also repay some or all of the distribution back into your retirement account within these three years. The repayment does not count against your annual retirement plan contribution limit.

Using your retirement savings to pay for current expenses, either through a loan or a distribution, is a last resort for two major reasons. First, you are making withdrawals from your account while the value of the assets is down. This locks in your losses. Second, you are endangering your future: consider how you will meet your retirement needs if you use the money now.

These seven provisions of the CARES Act offer significant benefits. To discuss how you can make best use of these opportunities, please call the JRB at 888-JRB-FREE (572-3733) or send us an email.