After the usual partisan haggling, Washington has presented citizens with the Coronavirus Aid, Relief, and Economic Security Act, cleverly known as CARES.* What does it mean for you? Here, as usual, are the very broad strokes of the Act that affect most people, along with my snarky comments.
For more technical information, please read this article: https://www.investopedia.com/what-s-in-the-usd2-trillion-coronavirus-stimulus-bill-4800882
Provision: The government sending money to people making under $75,000/year (or $150,000 for married couples). Yes, your government is going to send you a $1,200 check per adult and $500 additional for each kid under the age of 17 in your home.
Snarky comment: People qualify for the check based on your 2018 or 2019 tax filing, which may be way higher than your current income because of, oh…say…CORONAVIRUS, meaning lots of people who need the money now won’t get it until much later in the year. Or, if you happen to be in toilet paper manufacturing business, you may qualify based on 2018 income, but wouldn’t based on your much higher 2020 income, but you get the check anyway. Children born since your 2018 tax filing won’t get the check. In the best case scenario the money likely won’t get to you until May and if you’ve moved or changed back accounts since your 2018 tax filing, more like Novembnever.
Provision: No Required Minimum Distributions in 2020 from pretty much any type of tax-deferred retirement account. That counts for IRAs, 401(k), 403(b), 457 accounts, SIMPLE IRAs, and SEP IRAs. The good news is that people won’t have to take RMDs calculated on year-end 2019 high retirement balances out of potentially much lower 2020 current balances.
Snarky comment: Required Minimum Distributions are stupid and should be abolished anyway. This is especially true with the new inherited IRA provisions of the SECURE* Act.
Provision: You can now take up to $100,000 in loans and up to 100% of your vested value from your 401(k) plan. This is up from the usual $50,000 or 50% of value maximum.
Snarky comment: Yay, another reason for people to think of their retirement accounts a slush funds. What happens if the loan doesn’t get paid back? Up to $100,000 is taxable income to the borrower, potentially landing them in hot water with the IRS if they can’t pay the tax bill.
Provision: Student loan payments can be delayed until September 2020 without interest or penalties.
Snarky comment: Overall, this is good news, but I wonder if the delay will be long enough for the 3.3million people who filed for unemployment last week alone.
Provision: Tax deadline have been extended to July 15th – including your deadline to contribute to eligible retirement accounts for 2019.
Snarky comment: An absolute godsend for all these poor CPAs whose offices are closed due to social distancing with children running around their makeshift home offices. Good move, Government!
There are lots of other fun provisions in the CARES act like a pathetic attempt at increasing charitable donations, a delay on self-employment tax that will sort of help a few people, help for small businesses who qualify and figure out the jungle of paperwork needed to get the money, funding for virus testing, and on and on, paid sick leave for some extra people (but not even close to everybody), funds to shore up states’ unemployment programs, and more workers/business owners eligible for said unemployment benefits. Good stuff, too, about helping hospitals get the equipment they need.
I sound crabby, but really, it’s a good first attempt. There will probably need to be more help for our most vulnerable workers, so stay tuned and listen up in your local community for opportunities to give and help. Lord knows, the federal government alone is not going get us out of this mess.
*Note, when I get out of this financial planning career, I want to be hired to name large acts of legislation.