April 1, 2020

Benefits Available to Individuals Under COVID-19

Benefits Available to Individuals Under COVID-19 Tax & Business

The Federal government’s legislative responses to the COVID-19 crisis have included economic relief to individuals who qualify as well as businesses and distressed industries. Here are some simplified guidelines for individuals to understand.

CARE Act relief funds for individuals:

  • Are at $1,200 per person plus $500 per qualifying child.
  • To qualify, your adjusted gross income (AGI) must be under $75,000 for individual taxpayers and $150,000 for taxpayers who are married filing jointly.
  • The amount of relief phases out from $75,000 of AGI with payments completely phased out at $99,000 per single person and $198,000 per couple.
  • Payments will be based on 2019 income tax return if filed, or 2018 if the 2019 return has not yet been filed.
  • If you are not required to file a tax return, but you receive Social Security, your payment will still get to you and it will be based on the amount of Social Security you receive annually.
  • If you have not filed a tax return, or have not been required to file a return previously or if you have moved, you should go on-line to notify the Service. This should be the site https://www.irs.gov/coronavirus but at the date of this article, the information is not yet available.
  • If your income starts to exceed these limits, you will not be required to repay the funds.
  • Payments are due to be made as soon as possible, but no later than December 31, 2020.

While the rules regarding unemployment benefits are driven by the states, and so the rules will vary from state to state, here are some general guidelines that may help. However, be sure to check with your state unemployment office:

  • You can add 13 weeks of benefits to your current state rules.
  • You can add an additional $600 to the weekly amounts. This incremental amount will only last for four months.
  • Certain criteria have been waived to allow applying for and qualifying to be much easier and faster.
  • It currently appears that self-employed and free-lance contract workers will qualify.

If you are a self-employed individual or an employer, you can defer payments of the employer’s share of the Social Security tax. (For 2020, it is 6.2% on the first $137,700 of compensation.) It can then be paid over two years with half of the amount paid by December 31, 2021 and the other half by December 31, 2022.

You can now access your Retirement Funds without being penalized the usual 10% on distributions from qualified retirement plans (e.g., 401(k) and 403(b)) for anyone under 59 1/2 if taken for COVID-19 related hardships. To qualify you must have contracted the disease yourself or someone in your immediate family had the disease or you have experienced adverse financial hardships as a result of the disease. These amounts drawn out of the plan can be repaid within three years of the distribution (with no tax implication) or, if not repaid, you may spread the income as taxable over three years.

If you are 70 1/2 or older, your required minimum distributions (RMD) from your plan are not in effect for 2020 for current or new RMD’s; and if your first RMD from the plan was scheduled for April 1, 2020, the distribution requirement is waived.

The caps on loans from your qualified retirement plan may be increased from $50,000 to $100,000 and 100% of the plan value vs. 50%. However, we are not yet certain if this is mandatory for all plans or at the option of your plan sponsor (employer). So check before you act.

For any student loan held by the Federal government, you will not be required to make any payments of either principal or interest through September 30, 2020 and interest will not accrue on the loan during the suspension period. If your employer makes payments on your student loan on your behalf, it will be a tax-free benefit to you for up to $5,250. However, this will need to be decreased by any other educational assistance programs you may benefit from. And, of course, you cannot deduct the loan interest paid by the employer. All such payments will need to be made by January 1, 2021.

And finally, filing and payment deadlines for your individual taxes have been extended to July 15, 2020.

Coronavirus Resource Center

Have more questions about the impact of the coronavirus on your business? Visit Marcum’s Coronavirus Resource Center for up-to-date information.