COVID 19 - Individuals

 Individual Recovery Rebate / Credit (Individual Stimulus Funds)Under the CARES Act, an eligible individual is allowed an income tax credit for 2020 equal to the sum of $1,200 ($2,400 for married filing joint) plus $500 for each qualifying child (as defined under Code Sec 24(c) relating to the child tax credit).  Individuals other than dependents or nonresident aliens are eligible for the credit.  The IRS will issue refunds to eligible individuals early (as soon as possible) based upon 2019 (or 2018) tax filings.  The amount of the advance repayment issued to an individual reduces the credit available on the 2020 income tax return.

• The Takeaway:  Most individuals will be receiving "stimulus" checks ($1,200 per individual, $500 per dependent) in the next several weeks either by direct deposit or mail, dependent on the information provided on the 2019 (or 2018) tax return filed with the IRS.  For most individuals, there is nothing you will need to do to make sure that you receive your check.  IRS is still working on guidance for additional filing that may be necessary for individuals who don't usually file tax returns.
• Take Note:  You are receiving an advance payment of a 2020 tax credit.  The final credit is based on your 2020 taxable income.  If your income is under $75,000 ($150,000 for married filing joint), on your 2019 tax return, but increases in 2020, you may be liable to repay part of that credit on your 2020 income tax return. 

No 10% Additional Tax on Coronavirus Retirement DistributionsThe new CARES act provides that distributions of up to $100,000 from a qualified retirement plan are not subject to the 10% additional tax.  A coronavirus-related distribution is any distribution made during 2020 from an eligible retirement plan to a qualified individual.  A qualified individual is one who is diagnosed with the virus, whose spouse or dependent is diagnosed, or who experiences adverse financial consequences from being quarantined, laid off or reduced work hours as a result of the virus.  The taxable income related to the distribution is automatically spread over a three year period starting with the tax year of the distribution.

• The Takeaway:  Taxpayers who were diagnosed, spouse or dependent was diagnosed, or was financially affected by the virus can pull up to $100,000 from a qualified retirement plan without paying the 10% penalty normally required in this situation AND the taxable income related to the distribution is spread over three years (2020 distributions will be taxed 1/3rd in 2020, 2021 and 2022).

No RMD Required in 2020Under the CARES act, required minimum distributions do not apply for 2020 for defined contribution plans (ex 403(a) and 403(b)), a defined contribution plan under 457(b), and individual retirement plans.
Above the Line Deduction for Charitable DonationsIndividuals who elect not to itemize in 2020 can take a deduction against their gross income for an amount not to exceed $300 for cash donations to qualified charitable organizations.
No Limitation on Individual Charitable DonationsThe CARES act removes the 60% limit on cash charitable donations to qualified charitable organizations for individuals who elects to apply the provision in 2020.  This could allow individuals who were disallowed charitable deductions in years past due to income limitations to deduct charitable donation carry-forwards in 2020.
Tax-Excluded Education Payments by Employer Temporarily Include Student Loan RepaymentsThe Act adds to the types of educational payments that are excluded from an employee's gross income, eligible student loan repayments (limited to $5,250 per employee for all educational payments).  Eligible loan repayments are made by the employer to the employee or lender, for principle or interest on any qualified higher education loan.

• Take Note:  Student loan repayments for which the exclusion is allowable, can't be deducted under Code Sec 221 (which allows for student loan interest to be deducted).