COVID-19 Stimulus: How it may affect you.Submitted by Baker Wealth Management on April 1st, 2020
In your investing lifetime, you may only see a situation like the current novel coronavirus (COVID-19) a few times. This is a circumstance where complete candor is necessary. The truth is that we can’t yet gauge the full economic impact, however, by the time we can, the volatility may have passed. Therefore, let’s look at some interesting financial updates inside of the US Treasury as well as the Coronavirus Relief Bill (and how it may affect you).
- FEDERAL TAX FILING and PAYMENT - 90-day delay: The Internal Revenue Service has postponed the 2019 federal income tax filing and payment deadline until July 15, 2020. Those who owe payment up to $1,000,000 as individuals or $10,000,000 as a corporation may claim the 90-day delay in payment without interest or penalties. (IRS.gov, March 18,2020)
- STIMULUS PAYMENTS: Single adults with an adjusted gross income of less than $75,000 (less than $150,000 for married couples) will receive $1,200 per adult. For every qualifying child (16 or under) the payment will be an additional $500. Above those income figures, the payment decreases until it stops altogether for single people earning $99,000 or married people who have no children and earn $198,000. According to the Senate Finance Committee, a family with two children will no longer be eligible for any payments if its income surpassed $218,000. You can find your adjusted gross income on Line 8b of the 2019 1040 federal tax return. (nytimes.com, March 28, 2020)
- STUDENT LOANS: Until Sept. 30, there will be automatic payment suspensions for any student loan held by the federal government. Per the stimulus package, it says that interest ‘shall not accrue’ on the loan during the suspension period. It is worth noting that Older Federal Family Educational Loans (F.F.E.L.) that the U.S. Department of Education does not own are not eligible, nor are Perkins loans, loans from state agencies, or loans from private lenders like Discover, Sallie Mae and Wells Fargo. The holders of all those kinds of loans may be offering their own assistance programs. (nytimes.com, March 28, 2020)
- RETIREMENT ACCOUNTS: For the calendar year 2020, no one will have to take a required minimum distribution from any individual retirement accounts or workplace retirement savings plans (like a 401k). If you should need to withdraw from a retirement plan early, you can withdraw up to $100,000 this year without the usual 10% penalty, if it’s because of the outbreak. You will also be able to spread out any income taxes that you owe over three years from the date you took the distribution. And if you want, you can put the money back into the account before those three years are up, even though the rules may normally keep you from making a contribution that large. This exception applies only to coronavirus-related withdrawals. You qualify if you tested positive, a spouse or dependent did, or you experienced a variety of other negative economic consequences related to the pandemic. If you need to borrow from your 401(k), you can take out twice the usual amount. For 180 days after the bill passes, with certification that you’ve been affected by the pandemic, you’ll be able to take out a loan of up to $100,000. If you have a loan and were supposed to finish repaying it before December 31, you get an extra year. (nytimes.com, March 28, 2020)
- CHARITABLE CONTRIBUTIONS: A new deduction is available – and not just for 2020 – for up to $300 in annual charitable contributions. It’s available only to people who don’t itemize their deductions. To qualify, you have to give cash to a qualified charity. If you have substantial wealth and would like to give more to charity, donors can deduct 100% of their gift against their 2020 adjusted gross income. This is only for cash gifts that go to a public charity. (nytimes.com, March 28, 2020)
The velocity of information coming out is voluminous – and we are working diligently to decipher it. As always, we are paying close attention to news and upcoming reports. If we read anything that changes our overall outlook for the economy or the financial markets, we’ll be in touch. While many of us are collectively pausing face-to-face contact, there are plenty of other ways of staying connected. Our office is open, we are available for online virtual or telephone meetings, and we want to hear from you. In the meantime, be kind to yourself and let us know how we can help, in any way.
We are wishing you and your family’s peace and good health.