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More to report. The Senate has reached unanimous consent on a much-needed Stimulus Package. The House is set to take up the bill today. Some highlights of the final Cares Act:

  • Stimulus Checks
    • $1,200 per adult ($2,400 for a married couple).
    • $500 for each dependent child under age 17.
    • Dependent children do not get a check.
    • Payments phase out for individuals with adjusted gross income over $75,000 ($150,000 for married couples). The payments are completely phased out at $99,000 ($198,000 married).
    • The checks are based on reported 2019 adjusted gross income (if filed) or reported 2018 adjusted gross income.
    • For those who are not required to file a return, the IRS will use social security benefits to determine the payment.
    • The stimulus payment is not considered taxable income.
    • If the taxpayer’s adjusted gross income for 2020 is less than the amount used to determine the stimulus payment, the taxpayer will receive a credit on their 2020 return.
    • Alternatively, if 2020 adjusted gross income is higher, there is no requirement to return the stimulus payment.
  • Retirement Accounts
    • There will be a temporary waiver of required minimum distributions for 2020 for retirees and beneficiaries of retirement accounts.
    • The 10% penalty for early withdrawal from a retirement plan will be waived for “hardship” distributions related to the coronavirus; not to exceed $100,000.
    • The income tax on “hardship” distributions is paid over 3 years.
    • Or, if the distributions are replaced within 3 years there is no taxable income.
    • To qualify for a “hardship” distribution the taxpayer must have lost income due to being quarantined, furloughed, laid off or had work hours reduced due to the coronavirus outbreak or lack of child care.
  • Unemployment insurance was extended to be available to more categories of workers, including self-employed individuals and independent contractors and extends benefits to 39 weeks.
  • Small business loans will be available, and to the extent used to meet payroll, rent and utilities, convertible to grants that do not have to be repaid.
  • Payments on federal student loans will be suspended through 9/30/20 without accruing interest. Also, employers can make tax-exempt contributions toward their employees’ student-loan payments.
  • If consumers must defer or skip loan payments during the outbreak it will not affect their credit report.
  • Federally backed mortgage lenders are required to provide a 360-day forbearance to borrowers that have been harmed by the outbreak. Additionally, owners of multi-family properties can request a forbearance of up to 90 days.
  • Individuals can deduct up to $300 in charitable contributions in addition to the standard deduction.
  • Businesses can apply losses from 2018, 2019 or 2020 to prior years and claim refunds.
  • Employers can defer their share of 2020 payroll taxes and pay one-half in 2021 and the remaining half in 2022.
  • Certain employers and tax-exempt organizations whose operations were suspended by coronavirus related government orders or have experienced a significant decline in gross receipts are eligible for a credit up to $10,000 per employee through payroll tax filings.

We will keep you posted on final provisions. Please call us if you have any questions.