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Federal Stimulus Package - Benefits for Individuals


Stimulus Checks

  • One-time stimulus checks will be sent to most American taxpayers who meet certain eligibility requirements. Eligible individuals, include anyone who is a legal resident, is not claimed (or eligible to be claimed) as a dependent on someone else’s tax return and whose adjusted gross income doesn’t exceed certain thresholds.
  • The amounts of the one-time stimulus checks will be granted as follows:
    • $1,200 payment to individual taxpayers
    • $2,400 payment for married couples filing jointly
    • An additional $500 per qualifying child under the age of 17.
  • Will everybody receive these payments?
  • No. There are income limitations based on your filing status. For singles, the payments are reduced for those with Adjusted Gross Incomes (AGI) above $75,000. For married couples filing jointly, the phase-out begins at an AGI of $150,000. For those filing as head of household, the reductions begin at $112,500. . Stimulus amounts will be paid out based on 2019 income (or 2018, if an individual hasn’t yet filed their 2019 tax return).
  • Stimulus payments will be reduced by $5 for every $100 in AGI over the above limits. As a result, a single tax filer would see no payments for an AGI of $99,000 or higher. For a married couple filing jointly with no children, their payment would phase-out completely with an AGI of $198,000.
  • What happens if I haven’t filed my 2019 tax return?
  • If you have filed your 2019 tax return, that return will be used to determine your eligibility. For taxpayers who have not filed 2019 returns, their 2018 tax returns will be used. Those who receive Social Security (either retirement or disability) but were not required to file a return in 2018 or 2019 (because they earn too little to be required to file), will also receive stimulus checks, based on the information sent to the IRS on 2019 forms SSA-1099 and RRB-1099. (College students and older teens who are dependent on their parents for more than half their support aren’t eligible for the checks, even if they earn a little money on the side).
  • Will my 2020 tax returns have any effect on my stimulus payment?
  • The stimulus checks are technically a refundable tax credit for your 2020 tax return. If your income in 2018 and 2019 is too high for you to be eligible for the stimulus payment currently but your income in 2020 drops significantly and you would be eligible for the stimulus payment based on your 2020 income. The credit will be reflected on your 2020 taxes that will be filed in 2021. Additionally, if based on your 2020 tax returns you would be entitled to a larger payment than calculated based on your 2019 or 2018 returns, you will be eligible to receive the difference as a tax credit when you file your 2020 tax return in 2021.
  • It appears that individuals who qualify for the stimulus based on their 2019 returns (or their 2018 returns, if they haven’t yet filed for 2019), yet would not qualify based on their 2020 income, do not need to pay any of the stimulus amount back when filing their 2020 return.

Unemployment Insurance

  • The new law expands unemployment benefits dramatically, with an additional federal payment boosting normal benefits. In addition to normal state benefits, an additional $600 per week will be paid to individuals for up to four months.
  • Regular state unemployment eligibility of 26 weeks has been expanded by an additional 13 weeks, for a total of 39 weeks.
  • The package expands unemployment insurance to those who don’t typically qualify. Gig economy workers who are classified as independent contractors and self-employed individuals will be eligible for unemployment benefits.
  • Individuals who haven’t been laid off, but can’t work due to a variety of reasons related to COVID-19, would also be eligible for unemployment checks. These reasons would include a case where they were diagnosed with COVID-19, were awaiting a diagnosis, or had a family member diagnosed with the disease; Individuals who were scheduled to start a job and could not because their future workplaces had been shut down due to the COVID-19 pandemic, would also be eligible. Additionally, individuals whose head of household died from COVID-19 will be eligible.
  • Workers who are furloughed, but haven’t been fully laid off, are eligible.
  • The typical 7-day waiting period before an unemployed worker can get benefits is being waived to help individuals receive cash as quickly as possible.

Paid Family Leave

  • The new law expands the family leave provided in the Families First Coronavirus Response Act that President Trump signed into law on March 18. That bill covers workers in businesses with fewer than 500 employees. Those covered by the act can get up to 12 weeks of family leave (with the first two weeks unpaid) if they must stay home with children whose schools and day care centers have closed because of the pandemic.
  • The expansion allows individuals who were laid off on or after March 1, but then rehired before the end of 2020, access to this family leave. (To be eligible for this leave, they need to have worked in that job 30-60 days before the initial layoff).
  • The benefit paid to individuals eligible for this family leave is two-thirds of pay, with a maximum of $200 per day, or an aggregate $10,000 per worker. In other words, it can be a maximum of $1,000 per week. (Employers cut the family leave checks and then get reimbursed by the federal government through the IRS.)

Paid Sick Leave

  • Employees (both part-time and full time) will get 80 hours of paid sick leave at full pay, capped at $511 per day, or an aggregate $5,110 per worker, with part-timers receiving a proportionate number of hours. Individuals who are unable to work or telework because they are under medical quarantine or treatment for COVID-19, suspect they have the illness or are ordered to quarantine at home are eligible for the pay.
  • Additionally, individuals who are staying home to care for someone else who has COVID-19 or is suspected of having it, or who have a child whose school or day care is closed because of coronavirus, are eligible for two-thirds of pay capped at $200 per day, or an aggregate $2,000 per worker.

Mortgage and Renter Relief

  • Borrowers with federally backed mortgage loans — loans under Fannie Mae and Freddie Mac — who are experiencing financial hardship due to COVID-19 can request forbearance on their payments for up to six months. Borrowers must submit a request to their mortgage servicer and affirm that they’re experiencing a financial hardship during the crisis. Additionally, no foreclosures or evictions from properties with federally backed mortgages can occur during this period.
  • During the mortgage forbearance period, interest will still accrue. However, additional fees, penalties or extra interest cannot be added to mortgages.
  • Renters have some eviction protection, but only if they live in a multifamily building or single family home that has a federally backed mortgage. Landlords cannot evict tenants of these buildings or charge any late fees, penalties or other charges for late rent payments.

Student Loan Relief

  • The Department of Education implemented student loan relief measures last week. The stimulus package expands those measures, giving protection to borrowers pursuing loan forgiveness programs and those who have defaulted loans.
  • Interest will not accrue on federal student loans from April through September 30 and no payments must be made.
  • Even though payments are suspended during this time period, the Department of Education will treat it as if the borrower made a payment toward public service loan forgiveness or other forgiveness programs.
  • Borrowers who are in loan rehabilitation programs will also have the suspension period count toward rehabilitation. These programs are for borrowers working to pull their loans out of default.
  • Credit reports and scores will not be impacted during the suspension of payments period.
  • Wage garnishment and tax refund seizures will be halted during the forbearance period.
  • Additionally, the Department of Education announced on Wednesday it will be refunding approximately $1.8 billion in offsets to more than 830,000 borrowers. The announcement also requires private collections agencies to stop pursuing defaulted borrowers through such methods as phone calls, collection letters and billing statements.

Retirement Plan Changes

  • Normally, individuals who withdraw funds early from retirement accounts early (typically before age 59 1/2) must pay a 10% penalty as well as ordinary income taxes. The stimulus relief package, however, provides that “coronavirus-related” distributions of up to $100,000 will be allowed, without the early withdrawal penalty being applied. The sum withdrawn may be re-contributed to a retirement account within three years, without being subject to the usual annual contribution caps. If it’s not repaid, the withdrawal will be taxed at ordinary income tax rates over a three-year period.
  • In addition, the limit for retirement plan loans has been temporarily raised from the normal $50,000 to $100,000, while the current rule that loans may not exceed half of a 401(k) participant’s vested account balance has been waived.
  • Required minimum distributions (RMDs) — which those over 72 (70 ½ in certain cases) must take from traditional IRAs, SEPs and 401(k) accounts (but not from Roth accounts) have been waived for 2020. This provides many opportunities for tax planning in 2020.

Payroll Tax Relief

  • Other forms of relief provided to employers under the CARES Act include a refundable tax credit and payroll tax deferral. Businesses may apply a 50% refundable credit towards their payroll tax liability on up to $10,000 in wages per employee. However, only businesses that suffer from suspended operations or experience at least a 50% decrease in gross receipts compared to the same quarter from last year are eligible. If an eligible business has more than 100 employees, it can only apply the credit for retained employees who are not working due to the COVID-19 crisis.
  • In addition to the refundable tax credit, there is a provision whereby the employer can opt to defer deadlines to pay employer social security payroll taxes for 2020. Half of the deferred payroll taxes are due on December 31, 2021, and the remaining amount due on December 31, 2022. These forms of tax relief are a direct measure in sustaining employment in businesses that are temporarily closing or suffering a significant decline in revenue due to the COVID-19 crisis.
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