COVID-19 Tax Relief for Individuals

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Individuals elementscpa-covid-19-individual-tax-reliefcan be eligible for a number of COVID-19 relief options, but you may not even know what’s out there or which apply to you. Here’s our view of the landscape accompanied by our pointers and resources so you can avail of what will best help you and your family. (Last updated 15 May 2020 14:20 ET)


What’s Covered Here & How

Just to point out, this is not a full technical explanation of all provisions, but a survey of what’s out there accompanied with enough ‘gist’ so you have a sense of how it works and which are worth pursuing further for you. Also, be sure to see our separate blog post on CARES & Other Coronavirus Relief for Small Business for a summary of provisions available at the business level.

We should also mention that new benefits are continuing to be created, guidance is continuing to be developed, and clarifications are continually forthcoming — so we’ll continue to take everything in stride.

For reference, here’s the legislation reviewed and synthesized for this post: U.S. CARES Act (Coronavirus Aid, Relief, and Economic Security Act); U.S. Families First Coronavirus Response Act; U.S Paycheck Protection Program & Health Care Enhancement Act (PPPHCE); (Additional U.S. legislation could be forthcoming)


COVID-19 Individual Tax Relief Provisions

Here’s an overview of individual Coronavirus relief available:

  • 2020 economic impact payments — The IRS will issue an advanced rebate payment against a new 2020 refundable tax credit equal to $1,200 for individual/ $2,400 for married plus an additional $500 per child. The rebate phases out between $75,000 and $99,000 for single; $112,5000 to $136,500 for head of household; and $150,000 to $198,000 for married filing joint. If no 2019 tax return is filed at the time payments are generated, the IRS will rely on your 2018 return (or Social Security statement for non-filers) — this may impact a decision of when to file your 2019 return. Any rebate payment that turns out to be higher than qualified for on your 2020 return is not expected to have to be repaid. (CARES) // Here’s the IRS’ Economic Impact Information Center for additional details, including how to update your payment information and check status.
  • Penalty-free retirement fund withdrawals — Normally withdrawals from special tax deferred retirement accounts before age 59.5 are subject to normal income tax, plus a 10% penalty. Now amounts up to $100,000 withdrawn after January 1, 2020 due to coronavirus (as defined) will avoid the 10% penalty. They will still be subject to income tax, but that tax can be spread over three years, or entirely avoided if re-contributed. (Re-contributions don’t affect the normally annual contribution limitations.) (CARES) // Here’s the IRS’ guidance page related to special retirement account provisions.
  • Enhanced retirement loan provisions — Normally loans from retirement plans (e.g., 401(k) loans) are limited to $50,000. Now loans up to $100,000 may be made if due to coronavirus (as defined). Plus for loans with payment due dates after the CARES Act was enacted through to the end of the year, the payment due date is delayed by a year and later payments are adjusted. (CARES) // Here’s the IRS’ guidance page related to special retirement account provisions.
  • No required minimum distributions (RMDs) for 2020 — Normally taxpayers over a certain age are required to withdraw a set amount of money from their tax deferred retirement accounts. That requirement is now waived for 2020 to prevent folks from having to liquidate investments at a time when investment markets have collapsed. (CARES)
  • Expanded charitable contribution deductions — Fewer taxpayers itemize as a result of the tax law that took effect in 2018, and therefore aren’t able to count their charitable contributions. Now for 2020 up to $300 in cash contributions can be deducted regardless of whether you itemize. Also, the 50% of income limit on the amount of charitable contributions that can be deducted by individuals is now lifted for 2020. (CARES)
  • Health & child care FSA adjustments — If you participate in your employer’s plan to earmark wages towards a health Flexible Spending Account (FSA) or child care FSA, usually you can’t adjust those earmarks until the start of the next year. Recent IRS guidance now allows you to make those changes mid-year so you can adjust if needed based on changes in spending patterns (e.g., your kids are at home and therefore not spending as much on childcare).


Making Smart Personal Finance Moves

With the above information you can be equipped to make smart personal finances moves to keep your household pointed in the right direct during these uncertain times. ElementsCPA Members should hesitate to reach out to our team with any questions, and stay safe and healthy out there!


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