CARES ACT – Highlights for Individuals

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act, H.R. 748) was signed into law on Friday, March 27th, 2020. The act is meant to provide economic relief nationwide with a $2 trillion stimulus package. Titles I, II, III, and IV of the Act  (Keeping American Workers Paid and Employed Act,; Assistance for American Workers, Families, and Businesses, Supporting America’s Health Care System in the Fight Against the Coronavirus (schedule C – Labor Provisions), Economic Stabilization and Assistance to the Severely Distressed Sectors of the United States Economy, respectively) pertain to the economic welfare of the taxpayer. Provisions have been made for individuals and businesses alike.

Individuals

Section 2201

Filing status will have an impact on the amount of the one-time tax rebate an individual will receive. This will be based on the gross adjusted income on your last filed tax return (be it 2019 or 2018).

If you file as individual, expect $1,200.

If you file as joint filer, expect $2,400.

There is a $500 per child credit under 17 to be included. There are limitations however. For every $100 of income over the amounts below, $5 is phased out of the rebate:

Filing as Single $75,000

Filing as Head of Household $112, 500

Filing as Joint Filers $150,000

Thus, there is a cap on receiving this rebate – single filers over $99,000, head of household over $136,500, and joint filers over $198,000 will be phased out completely (this is without child tax credits).

In order to receive this rebate, you

  • cannot be a non-resident alien
  • cannot be a trust or estate
  • cannot be able to be claimed as a dependent on someone else’s tax return
  • Cannot be an ITIN holder.

 The taxpayer MUST have a valid social security number for themselves and any child they are claiming. ITIN holders are ineligible.

How are individuals receiving this money? The disbursements will be made electronically “to any account to which the payee authorized, on or after January 1, 2018, the delivery of a refund of taxes under this title or of a federal payment” (B, Delivery of Payments).

The IRS Economic Impact Payments website provides further details, including:

  • Signing up for Direct Deposit
  • Tracking your Money
  • FAQs and more…
VISIT THEIR PAGE

Retirement Plans

Section 2202

Early withdrawals of up to $100,000 from certain retirement plans will have the 10% penalty waived. The waiver will apply to “Coronavirus-related distributions” under the following:

  • Distributions will be made if the person or spouse is diagnosed with COVID-19, in accordance with a CDC approved test
  • The individual has suffered financially due to the outbreak — being laid off, business closed, quarantine, or any reduction in workable hours

Any Coronavirus-related distributions (“income”) will be subject to tax over a span of three years, if the funds are not paid back within the three-year span upon receiving them. That is, if you cannot repay the amount within the three years of the date one receives the distribution, you can pay the income tax on the amounts, ratably over the same span of three years [1] [2] [3]

Additional sources for this posting were provided by:

https://www.congress.gov/bill/116th-congress/house-bill/748/text

https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rSVHQuPeCB_g/v0

https://www.npr.org/2020/03/26/821457551/whats-inside-the-senate-s-2-trillion-coronavirus-aid-package

https://www.forbes.com/sites/leonlabrecque/2020/03/29/the-cares-act-has-passed-here-are-the-highlights/#5c2beaa368cd

https://www.natlawreview.com/article/individual-tax-benefits-coronavirus-aid-relief-and-economic-security-act-cares-acthttps://www.natlawreview.com/article/business-tax-benefits-coronavirus-aid-relief-and-economic-security-act-cares-act


[1] https://www.bloomberg.com/news/articles/2020-03-27/coronavirus-bill-lets-struggling-americans-tap-retirement-money

[2] https://www.kramerlevin.com/en/perspectives-search/covid-19-update-retirement-relief-in-the-CARES-Act.html

[3] https://www.fidelity.com/learning-center/personal-finance/coronavirus-stimulus-package