CARES Act for Individuals - Coronavirus (COVID-19)

CARES Act just passed Congress - How can the CARES act help you in this stressful times.

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SECTION I - Recovery Rebates for Individuals

1. In case of an eligible individual, there shall be allowed as a one time payment for the first taxable year beginning in 2020 an amount equal to the lesser of -

A. Net Income Tax Liability ; OR

B. $1,200 for Single filers and $2,400 for Joint Filers.

C. Additional $500 rebate to be increased by multiplied by the number of qualified children.

2. Taxpayer defined as (based on 2018/2019 numbers):

A. has Qualifying income of at LEAST $2,500 OR

B. Has:

i. Net Income Tax Liability which is greater than zero, AND

ii. Gross Income which is greater than Basic Standard Deduction.

3. Different Examples of Qualifying and Non Qualifying Taxpayer.

A. Single (No Kids) - W2 Income of $55,000 = QUALIFIED TAXPAYER

i. Has Income higher then Standard Deduction of $12,200.

ii. Will receive $1,200 in Recovery Rebate.

B. Joint (1 Child)- Combined W2 Income of $26,000 = QUALIFIED TAXPAYER

i. Has Income higher then Standard Deduction of $24,400.

ii. Will receive $2,400 in Recovery Rebate for Joint and $500 for the child.

C. Single (No Kids) - Student with no income = NOT QUALIFIED TAXPAYER

i. Has Income under then Standard Deduction of $12,200.

ii. Will not receive Recovery Rebate.

ii. Even though they are not eligible for a rebate - they can be eligible for other income- benefit programs as well.

4. Qualifying Income :

A. Earned Income (Not including net earnings from self employment which are not taken into account in computing taxable income

B. Social Security Benefits

C. Any Income or Pension received as defined in Chapter 11, 13 or 15

5. Net Income Tax Liability means the excess of:

A. The sum of the taxpayer's regular tax liability over

B. The credits allowed

6. Eligible Individual means:

A. Any nonresident alien individual,

B. Any individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which the individual’s taxable year begins, and

C. An Estate or Trust 7. Limitations based on Adjusted Gross Income (AGI):

A. Amount of credit allowed shall be reduced (but not below zero) by 5 Percent of so much of the taxpayer's adjusted gross income as exceeds $75,000 single, $112,500 for Head of Household, and $150,000 joint.

B. Example - Single Taxpayer AGI with Income of $90,000 will receive a recovery rebate of $450

C. This is calculated as the difference between $90,000 and $75,000 is $15,000. 5% of $15,000 is $750 - which is reduced from $1,200 leaving $450 rebate.

8. If you are a high income tax payer in 2018/2019 but was laid off or greatly impacted by COVID-19, you are unable to file for the rebate recovery in 2020 but once your 2020 Tax Return is filed, you can apply for the relief in 2021

9. Payments may not be mailed out for another 3-6 weeks.

Section II - Unemployment Compensation Benefits

1. With the largest spike in single-week unemployment claims ever, up 3.3 million in just a week - Unemployment benefits have been improved.

2. Regular unemployment compensation is increased by $600 per week and the benefit period is extended to 13 Weeks. Average benefits are $400 or less.

3. 7 Day Waiting period is waived. Can collect unemployment the week of the claim.

4. Unemployment Compensation Benefits are now eligible for Self Employed individuals who in the past have never been eligible. Also other individuals who are ineligible for 'regular' unemployment, extended unemployment or pandemic unemployment insurance or run out of such insurance, will be legible for up to 39 weeks of benefits via this provision.

5. Also other indi

Section III - Student Loan Payments Deferred

1. Student Loan Payments on Federal Student Loans are deferred until September 30th, 2020 and employers can exclude student loan repayments from compensation until this date.

2. No Interest will be accrued on this debt.

3. Payments will continue unless the individual take proactive measure to pause payments. This is on the individual and not the lender.

4. To note - this period of time WILL continue to count towards any loan forgiveness program.

5. All involuntary debt collections are suspended until September 30th, 2020. This not only includes wage garnishment or the reduction of other federal benefits but the refuction of any tax refund.

Please contact us today to discuss more how the CARES Act can help you!