I woke up this morning and started my work as usual (Except there’s nothing usual about being at home working in a makeshift office). About noon, a CPA friend of mine texted about how weird today seems. That’s when the light bulb moment happened. It’s APRIL 15th! I can’t believe it took me half the day to realize it was April 15th. That’s what this Coronavirus has done to me and my colleagues around the country.
While the tax deadline has been extended from April 15th to July 15th, there hasn’t been a lack of excitement around CPA offices. That’s because the government has initiated ways to get money into American’s hands, and based on the number of phone calls and emails I’ve received, people are making full use of the opportunity.
The first way of getting money to people is the individual Stimulus Checks. That’s a $1,200 check per adult and $500 per dependent. Well, I wish it was that simple. The dependent has to be under 17 and the taxpayer has to be below an income phaseout. These thresholds are:
Single Filer: $75,000
Head of Household: $112,500
Married/Joint Filer: $150,000
If you make more than these amounts, your check is reduced by $5 for every $100 over the threshold. Therefore, there will be a significant number of people not receiving any check at all.
The Second and more complicated methods of getting money into the economy are the SBA loans for small businesses. I won’t go into a lot of the details, but these were designed to help business owners pay for payroll, mortgages/rent and utilities during these difficult times. The difficulty has been getting these loans applied for and approved.
As a financial planner, I didn’t want to let this opportunity go without addressing a couple of investment and tax planning concepts that were also in these bills. The most impactful of those relate to retirement accounts and distributions from these accounts. Some important things to realize are:
Required Minimum Distributions (RMD) are waived in 2020 (In most cases).
The 10% penalty for early withdrawal is waived if due to virus related challenges.
The taxability of these distributions can be spread over 3 years, and you can make recontributions to the account over those 3 years.
Also, they have established a $300 above the line charitable contribution deduction. This allows even those that don’t itemize to benefit some from their generosity. I’m hopeful that this is the beginning of allowing larger charitable deduction for non-itemizers.
Hopefully, some of these items will benefit you and our economy as we go through this strange and challenging time. If we can be of assistance, we would appreciate the opportunity to help out our neighbors.