Today, the Coronavirus Aid, Relief and Economic Security Act (CARES) — a $2 trillion stimulus package to provide financial relief to individuals, families and businesses — was signed into law. The 2020 coronavirus stimulus package will deliver relief through a range of measures, including an advanced tax rebate to taxpayers.
Stimulus Checks for Individuals and Joint Taxpayers
Stimulus checks — up to $1,200 for individuals, $2,400 for joint taxpayers and an additional $500 for each qualifying child — will be based on information from your most recent tax filings, either 2019 or 2018 if you have not yet filed this season.
The first step you should take right now is to file your 2019 tax return, if you have not already. And, if you are getting a tax refund, choose to receive that refund through direct deposit. This will ensure that the IRS has the most current tax filing and direct deposit information for you, which they will use to determine individual stimulus check amounts.
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According to the IRS, 80% of Americans will be eligible to receive full or partial payments through the CARES Act.
If you have an adjusted gross income (AGI) of up to $75,000 ($150,000 married filing jointly), you should be eligible for the full amount of the recovery rebate.
*Note, adjusted gross income (AGI) is your gross income like wages, salaries, or interest minus adjustments for eligible deductions like student loan interest or your IRA deduction. Your AGI can be found on line 8b of your 2019 Form 1040.
As your AGI increases, the stimulus amount you get will go down. The stimulus check rebate completely phases out at $99,000 for single taxpayers, $146,500 for those filing as Head of Household and $198,000 for joint filers with no kids.
The stimulus check will be paid this year based on information from your most recent tax return and will be reconciled in tax year 2020 to ensure you received the correct rebate amount.
Student Loan Payment Relief
Under the CARES Act, employers can still make student loan payments on behalf of their employees on a tax free basis, up to $5,250 annually. This means the loan payments would be excluded from the employee’s income. The provision is applicable on loan payments an employer makes from the day the bill was signed into law (March 27, 2020) through Jan. 21, 2021.
Increase in Unemployment Payments
Unemployment payments will be increased by $600 weekly for four months through July 31, and the bill also includes those who were previously not eligible for unemployment, including part-time employees, freelancers, independent contractors, gig workers, and the self-employed.
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Financial Assistance Provided for Eligible Non-Profits and Self-Employed Individuals
The Small Business Administration’s loan program is now accessible to more businesses and has an increased cap on loans. This Act provides $349 billion for the Small Business Administration to distribute through a new loan program titled the Paycheck Protection Program (PPP), making non-profits, self-employed individuals and contractors eligible to receive assistance.
The Federal Reserve lending program will also receive $454 billion in support — loans from this fund will be for no longer than 5 years and will be aimed at aiding nonprofits and businesses with around 500-10,000 employees with the goal of retaining at least 90% of their workforce with full compensation and benefits.
Penalty Waived for Early Retirement Withdrawal
If you need to take money out of your retirement plan ASAP, keep in mind that the 10 percent early withdrawal penalty will be waived on up to $100K of retirement funds withdrawn.
Additionally, income attributable to such distributions would be subject to tax over three years, and you may recontribute the funds to an eligible retirement plan within three years without regard to that year’s cap on contributions.
Delay of Social Security Payroll Tax Payment for Employers
Employers, including the self-employed, can delay the payment of the employer portion of the Social Security payroll tax for the remainder of the year and pay back the liability over the next two years.
We’ve Got You Covered
You can be confident that TurboTax is here to keep you informed and help you file now up until the extended July 15, 2020 federal deadline. Remember, our team of credentialed TurboTax Live CPAs and EAs are available on demand via one way video to help you out should you have any questions as you file at home. TurboTax Live CPAs and Enrolled Agents are available in English and Spanish, year round and can also review, sign and file your return.
Be sure to keep checking back here for the most up to date tax information and changes in response to COVID-19.