April 24, 2020 As the folks here in Michigan conclude our 5th week of quarantine,…
The CARES Act & Some Lesser-Known Benefits Beyond the Check We Are All Still Waiting For
Earlier this week, in support of the CARES Act, and the stimulus checks due yet to arrive, IRS.gov launched a new tool on its website that allows you to check on the status of your payment. If you are like a good chunk of the citizenry, upon entering your Social Security number, date of birth, address and zip code, you will be treated to a message asking you to, “try again later…” It seems the good folks at the Internal Revenue Service are “unable to provide you with the status of your payment.” Presumably, this is as a result of the amount of traffic currently driven to the site. Sort of like Ticketmaster.com when Opening Day tickets would go on sale, back when the Tigers used to win more than 47 games. Unlike Ticketmaster, however, continuously hitting the refresh button on your computer won’t make your check arrive in your bank account any faster. But I digress…
These are truly unprecedented times. Many of us likely know someone who has been affected by the most serious health crisis that we will likely experience in our lifetimes. At the time of this writing, over 29,000 cases are diagnosed in Michigan, almost 700,000 cases in the United States. Five million unemployment claims nationwide were filed this week. Six million claims were filed the week prior.
The CARES Act was a $2 Trillion stimulus bill passed to address the economic ramifications of the current state of the country. The goal was to provide relief to individual citizens, small businesses, the health care industry and education. By all accounts, it was one of the most ambitious pieces of economic-centered legislation to ever come from Congress. The figure I heard at the time of passage was that the $2 Trillion accounts for 10% of the total annual gross domestic product of the country. That’s a huge number. And despite the IRS’ current inability to provide for the whereabouts of my stimulus check, there are some additional, less well-advertised, parts to the legislation that are worth bringing to your attention.
– For clients currently taking required minimum distributions (RMD’s) from their retirement accounts (IRA’s, 401k’s, 403(b)’s), this requirement is being waived for 2020. Depending on the amount of the distribution, this could amount to a tax savings for 2020 of hundreds or thousands of dollars. If RMD’s apply to your financial situation, you should speak to your financial advisor or servicing company about whether it makes sense to skip your RMD for 2020.
– Additionally, for those who are having a difficult time right now, financially and might need to tap into their retirement account to pay the mortgage or car payments, the CARES Act is “waiving” the 10% penalty normally associated with such distributions, up to $100,000. However, please be cautioned that there are a number of requirements to take this distribution that go beyond the scope of this blog. I would strongly recommend speaking with your financial or tax advisor first before raiding your retirement. However, for those in current financial straits, this is a potential short term life-line.
– Last, the CARES Act adds a new deduction against gross income for charitable contributions up to $300. This may not seem like much, but for the many charities that do good work in this country year-in and year-out, and rely on donations of any and all sort, this is a way to show support and enjoy a bit of a tax break too.
For questions on any of the above, please feel free to call or email. I wish everyone a happy and healthy week-end! If any of you happen to have success with the IRS’ new site feature, I would love to hear about it. Be safe!