The most recent federal economic relief package was signed into law on March 27th, 2020.
The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, is the largest economic relief bill in U.S. history and will allocate 2.2 trillion dollars in support to individuals and businesses affected by the pandemic and economic downturn.
For this article we are going to focus on individuals.
First, many Americans are going to get stimulus payments starting this week. The IRS is using information from your latest tax return to determine how much you will be eligible for. The maximum amount is $1,200 for individuals or $2,400 for married couples. An additional $500 will be granted for each qualifying dependent child under 17 years of age.
However, there are income limits that determine who will be getting a check. If your adjusted gross income, or AGI, was above $99,000 for a single filer, or $198,000 for joint filers, you will not get a stimulus check.
You will get a reduced check if you are a single filer who's AGI was between $75,000 and $99,000 or a joint filer who's AGI was between $150,000 and $198,000. The reduction is $5 for every $100 your AGI exceeded the threshold ($75,000 for single, $150,000 for joint).
So, if you are a single filer and your AGI was $80,000 then your check will $950. The formula for single filer is (1200-((AGI-75,000)/100)*5). So for this example it is (1200-((80000-75000)/100)*5).
The formula for a joint filer is (2400-((AGI-150000)/100*5).
You can pop those formulas into Excel after and = sign and it will figure it out for you. You just have to replace AGI with what your actual Adjusted Gross Income was on your last return.
In addition to stimulus checks, the act also allows for penalty free distributions from retirement accounts up to $100,000. Normally, if you withdraw funds from any retirement account prior to age 59 ½ you are subject to a 10% penalty. The IRS is not enforcing that penalty through the rest of 2020. In addition, they are allowing you to spread any taxes owed on that distribution over the next three years. Lastly, if you pay the money back within the next three years you won’t owe any taxes on the distribution at all.
In order to qualify, the penalty free withdrawal must be for COVID-19 related purposes. Including a COVID-19 diagnosis for you, your spouse, or your dependent. Or if you are suffering a financial hardship due to layoff, furlough, reduced work hours, lack of childcare, or other factors as determined by the Treasury Secretary.
The relief package effects unemployment benefits as well. It adds an additional 13 weeks of unemployment assistance on top of the usual 26 weeks (varies a bit from state to state). Coverage also now includes previous ineligible workers, such as part-time workers and independent contractors. The CARES Act also allocates, for the next four months, an additional $600 per week of benefits on top of what you would normally qualify for. After July 31st unemployment will go back to the standard amount of money.
Of course any of this could change or be extended if the government decides to pass another relief bill. If that does happen I will update this article.
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