What Could the CARES Act Do for You?

As the U.S. struggles to contain the effects of the coronavirus, it can be tough to get past day-to-day concerns about staying safe both physically and financially. Any thoughts regarding long-term planning have likely been shifted to backburner status, especially for those who are worried about a loved one who’s sick or how they’re going to pay their bills this month.

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And yet, the actions you take now could make a huge difference in securing your future financial security. The impact of the coronavirus already has been significant. With fears escalating over issues that could evolve from a recession, the pandemic could have serious long-range economic implications.

Good news is out there, however. In March, President Trump signed into law a historic $2.2 trillion relief package known as the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which includes several measures aimed at helping Americans deal with the financial fallout as global markets reel and employers are forced to lay off employees or close. Additional aid is also expected.

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The situation is fluid, and the details are still being nailed down. Following are some of the steps that are being taken to help workers, retirees and small businesses in 2020.

Stimulus payments

For families in need, this is huge. Stimulus checks, which are being treated as a tax rebate, are expected to go to those who are eligible within the next few weeks. The aid is intended to help low- and moderate-income families, so payments are based on each household’s adjusted gross income. Individuals who make up to $75,000 will receive $1,200 checks, and $500 for each child under 17 years old. The threshold for married couples who file a joint return is $150,000; and for heads of household the threshold is $112,500. The rebate drops by $5 for every $100 of income over those thresholds, and some may not receive a payment at all. (To see how big your check will be, try our Stimulus Check Calculator.)

Payments will be based on your 2019 tax return, or your 2018 return if you haven’t yet filed for 2019. And, yes, those who receive Social Security benefits qualify.

The checks are expected to be a lifeline for families whose income has been negatively affected by the coronavirus. If you haven’t been impacted financially, you might decide to keep the money for an emergency fund, donate it to charity (more on that below), or invest it — carefully and deliberately — for your future needs.

Tax deadlines

Anyone who hasn’t yet filed a federal income tax return will have until July 15 to file. During that deferral period, they won’t be subject to interest and penalties. Businesses and self-employed workers also will have until July 15 to file the first installment of their quarterly estimated taxes. Of course, procrastination isn’t the best move for everyone: If you expect a refund and need the money, why wait? And while the IRS pushed back deadlines for federal taxes, some state tax deadlines — including Idaho, Mississippi and Virginia — are earlier.

Charitable donations

Worried about how your favorite charity is faring in these uncertain times? Contributions of up to $300 donated to qualifying charities will be treated as “above-the-line” deductions in 2020, so taxpayers won’t have to itemize on their returns to claim those gifts. And for those who do itemize, the CARES Act suspends the limit on cash donations to public charities in 2020. This will make giving a little easier this year for those who are so inclined.

Why Retirees Should Care about the CARES Act: How to Maximize Coronavirus Stimulus Package

Retirement accounts

The CARES Act has a few provisions that apply to retirement savings. If you have questions about how these changes could affect your plan, talk to your account custodian and/or financial adviser.

The date for making 2019 contributions to a traditional or Roth IRA has been extended from April 15 to July 15. (Be sure to let your plan custodian know the contribution should be coded for 2019, not 2020, if that’s your intent.)
Required minimum distributions (RMDs) will be waived for 2020. This will allow retirees who don’t need or want to withdraw retirement funds to avoid these forced distributions. Another plus: It means retirees won’t be paying taxes on withdrawals that are based strictly on Dec. 31, 2019, account values, when the markets still experienced a bull run.
Individuals who are under 59½ can take up to a $100,000 coronavirus-related hardship distribution from a 401(k) or other qualified retirement account through 2020 without paying the 10% early withdrawal penalty. They’ll still have to pay income taxes on any withdrawals, but under this provision, they can stretch those taxes over three years instead of paying them all in one year. Or, they can replace the funds within three years without worrying about the annual cap on contributions. (Savers who are older than 59½ are also eligible to take advantage of the three-year tax deferral/payback provision.) Again, this is a hardship distribution, and should be used only as a last resort by those who are truly strapped for cash.

Small business loans

The federal government also has several programs in the works to help small-business owners and their employees. These include Small Business Administration loans and grants to help with costs such as payroll and paid leave, group health care expenses, rent and utility payments. The loans come with friendly terms and relaxed eligibility standards and may be up to 100% forgivable if expenditures meet certain criteria. The first round of money has already been claimed — don’t delay in applying for the second round. For more information, check out www.sba.gov/coronavirus.

Unemployment and paid sick leave

These programs also have been expanded to help those affected by the coronavirus. Under the CARES Act, unemployed workers may receive a $600 per week increase to what they normally would receive in state benefits for up to four months, until July 31. The temporary Pandemic Unemployment Assistance program also will offer some benefits to workers who traditionally wouldn’t qualify, including those who are self-employed or independent contractors. And the Families First Coronavirus Response Act provides protections for employees at small- to midsize companies and self-employed and gig workers who have coronavirus-related absences. These benefits may take a while to access, depending on demand, so again, start the application process as soon as you are eligible.

These are just a few of the measures designed to offer relief to those who have lost income — or expect to lose income in the future — because of the pandemic. Additional aid is in the works. If you’re working with a financial adviser, ask for regular updates regarding news that pertains to you and your plan. Planning for uncertainty should always be part of your plan in both thriving and declining environments. You don’t have to check your account balances constantly (in fact, you may want to avoid it), but you should stay on top of any rule or benefit changes as they happen.

Get Ready, Get Set, Retire

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The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

Kim Franke-Folstad contributed to this article.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Leslie C. Verkuilen is an Investment Adviser Representative and licensed insurance agent. She is President of Wisconsin-based InPower Investments & Wealth Strategies and Managing Partner of Independent Retirement Group. She is passionate about informing and motivating clients, helping them succeed with their personal and business goals.