Key Provisions of the CARES Act

Recently, the $2 trillion “Coronavirus Aid, Relief, and Economic Security” (“CARES”) Act was signed into law. The CARES Act is designed to help those most impacted by the COVID-19 pandemic, while also providing key provisions that may benefit retirees.

To put this monumental legislation in perspective, Congress earmarked $800 billion for the Economic Stimulus Act of 2008 during the financial crisis.

The CARES Act has far-reaching implications for many. We know you may have a lot of questions on how this may affect you and your investments.  Here are the most important provisions to keep in mind:

Stimulus Check Details.

Some Americans can expect a one-time direct payment of up to $1,200 for individuals (or $2,400 for married couples) with an additional $500 per child under age 17. These payments are based on the 2019 tax returns for those who have filed them and 2018 information if they have not. The amount is reduced if an individual makes more than $75,000 or a couple makes more than $150,000. Those who make more than $99,000 as an individual (or $198,000 as a couple) will not receive a payment.  These payments will also be provided for Social Security recipients who qualify based on their income.  So, the payments are based on total taxable income, regardless of the type of income.

Business Owner Relief.

The act also allocates $500 billion for loans, loan guarantees, or investments to businesses, states, and municipalities.

RMDs Suspended.

Required minimum distributions (RMDs) for 2020 are suspended for retirement plans, IRAs and Inherited IRAs (traditional and Roth) to help retirement accounts try to recover from stock market losses. This includes the first RMD, which individuals may have delayed from 2019 until April 1, 2020 for those who turned 70 ½ in 2019. In 2009, Congress passed a similar rule, which gave retirees some flexibility when considering distributions.

Withdrawal Penalties.

Affected, eligible participants in workplace retirement plans and IRA owners can take an aggregate distribution in 2020 of up to $100,000 from all retirement accounts without incurring the usual 10% early withdrawal penalty. To qualify for this, the affected participant or IRA owner (including a spouse or dependent), would need to either be diagnosed with SARS-COV-2 or COVID-19 or experiencing adverse financial consequences as a result of an event, including but not limited to quarantine, furlough, lay-offs, reduced work hours, no available childcare, business closing or reduced business hours (self-employed), or other factors determined by the Secretary of the Treasury. In addition, the income tax on the distributions may be spread evenly over 3 years. Or, the distribution may be repaid to an eligible retirement plan within a 3-year period. 

Tax Deadlines

While this was not part of the CARES Act, it is also important to note that the Federal Government extended tax deadlines. The deadline for filing and payment of 2019 federal income taxes has been moved from April 15 to July 15, 2020, by the Internal Revenue Service (IRS). The IRS confirmed that July 15, 2020, will also be the deadline to make 2019 contributions to IRAs and health savings accounts (HSAs). Deadlines associated with contributions to workplace savings plans are not affected.

Kendall Capital is Here for You.

Many businesses and individuals are struggling with the realities that COVID-19 has brought to our communities. The CARES Act, however, may provide some much-needed relief. Kendall Capital is here to guide you through ways to take advantage of these changes to meet your short- and long-term financial goals. We are a phone call or email away and encourage you to reach out as needed during this challenging time.