Here are the highlights of the stimulus bill:
Relief rebate for individuals – $1,200 per adult plus $500 per child under 17 that you claimed on your taxes.
The direct payment is an advance on a new 2020 tax credit. If you receive a smaller rebate than you are eligible for based on 2020 income, you will receive the difference after filing a 2020 tax return. If you are overpaid on the credit you will not need to repay it.
If your AGI on your last return (2019 or 2018 if you have yet to file 2019) was over $75,000 (for singles) or $150,000 (for married),?or $112,500 (for head of household), your payments will go down by $5 for every $100 over.
If you are of Social Security age and did not have enough income to have to file, you will still qualify and receive your payment the same way your social security is administered.
Your payment will go to you the same way you got your tax refund, either by direct deposit or mail. If you did not get a refund, you will get it by mail.
Payments will go out as quickly as the IRS is able to process them (that’s a lot of people). Payments will be between now and December 31.
These payments are not optional. If you qualify, you will receive it.
There is currently no explicit provision for people whose bank accounts have changed since the last return was filed, or married couples who have gotten a divorce since the last returns were filed. For people with a change in bank accounts, the IRS will likely treat it the same way it treats tax refunds – it will attempt to deposit the money in the original account, and the bank should reject it. The IRS will then send a check in the mail.
The CARES Act adds a new provision for avoiding the 10% early withdrawal penalty. You can take out up to $100k from your retirement plan without penalty due to the Coronavirus. You will still owe your regular tax on it, and keep in mind, you will lose that value and any future value that money would grow to if you left it in your account. However, if you take it out and then put it back in within three years, you will not have to include it in your income or pay tax on it.
The bill temporarily suspends the required minimum distribution rules in Sec. 401 for 2020.
Charitable contributions are normally itemized deductions, but most people are no longer itemizing. If you do not itemize, you are now allowed to take a $300 charitable contribution deduction off of your income “above the line”. This is similar to how student loan interest is deducted from your income. This is for 2020 and future years. The bill also modifies the AGI limitations on charitable contributions for 2020, to 100% of AGI for individuals and 25% of taxable income for corporations.
If you have any questions or concerns, please contact our office.