UPDATE 2: The IRS expects to make about 60 million payments the week of April 13 — but payments will be to taxpayers who have their direct deposit information on file with the IRS (provided on their 2018 or 2019 tax returns or who receive SS payments by direct deposit). Taxpayers with direct deposit details on file with the IRS can be paid more quickly. Taxpayers who are not on file for direct deposit will have to wait for checks to be written. There is a huge number of checks to be written and the IRS can only write about 5 million per week, so it could take up to 20 weeks to get your check by mail.
The IRS plans to open a web portal for people to provide their direct deposit details. It would make it easier on them and faster for you if you will provide this information when you can. But the portal is not yet open.
Also the US Postal Service is experiencing a financial loss. It is not funded as most people think. It depends on postage fees, and the number of mailings has plummeted because of the shutdown. Congress is searching for emergency funding to keep it going. It is a critical business that delivers medicines and medical supplies to millions of Americans and businesses. I don’t think it will fail, but it could experience a slowdown if it has to furlough workers. That’s another reason to go direct deposit.
UPDATE 1: The US Treasury announced late Wednesday (April 1, 2020) that Social Security beneficiaries who receive SSA-1099 forms and do not file tax returns will be included under the CARES Act.
We are all hearing about the stimulus package known as the CARES Act and that it provides benefits, but most of us don’t understand how it will help us personally. It’s generally understood that the government will be sending out money to individuals sometime soon, but there’s more to it than that. This article provides information for educational purposes only. It is intended, but not guaranteed, to be correct. It is not presented as a source of legal advice and you should not rely on this article for legal advice. If you need legal advice, please consult a competent, independent attorney. — Gordon Fowler
The amount of money a person receives will depend on their individual situation and based on their Tax Returns from 2019 and 2018. If you filed in 2018 but not yet for 2019, that’s OK. But if you did not file a tax return for either year, you will not get a check — unless you file a 1040 Tax Return now. That raises uncertainty for people who earned less than the Standard Deduction ($12,200 for individual and $24,400 for married) and did not file. Also, if your only source of income is Social Security (Form SSA-1099) and you do not file tax returns, then it’s not clearly understood at this time how this works for you, but the Treasury has the authority to automatically send a check to you.
Others who are excluded: (1) children who are 17 years of age and older even if they are still living with you and you claim them as dependents. This means a lot of college students between the ages of 19 and 23 will not get any benefit. (2) Adults who are claimed as dependents are excluded. If you are caring for an elderly parent, for example, and claim them as a dependent, they will not be included. (3) Nonresident aliens are excluded. (4) Individuals who earn more than $99,000 and married couples earning more than $198,000 are excluded. All other tax paying citizens should receive money.
Individual taxpayers with adjusted gross incomes less than $75,000 will receive $1,200. Married couples with adjusted gross incomes under $150,000 will receive $2,400. The payment is reduced $5 for every $100 above the limit eventually going to zero, which is why taxpayers earning the amounts above are excluded from this part of the stimulus package.
There is also a payment of $500 for each child you claim as a dependent. So even if you are over the income limits, you should still receive $500 per child, but the IRS defines a child as someone who is under the age of 17.
For tax year 2020 no one will be required to take their Required Minimum Distribution. If you can avoid taking it, that will save on your income tax for the year and — hopefully — allow your IRA to recover some of the loss you’ve probably experienced.
If you do need to tap into your IRA, and you qualify for a coronavirus related distribution, then you can withdraw up to $100,000 even if you are under 59½ without penalty. You will have 3 years to replace the funds and if you can’t, then you can spread the income tax on the funds over 3 years. A coronavirus related distribution means: (1) you have the virus, (2) your spouse or dependent has the virus, or (3) you are experiencing financial problems caused in some way by the virus such as being quarantined, being furloughed or laid off, having your work hours reduced, being unable to work because of lack of child care, or having to close or reduce the operating hours of your business.
For 2020 each taxpayer will have a $300 credit. This is in addition to your standard deduction. Individuals will be able to deduct up to $300 and couples up to $600 from their adjusted gross income for cash donations to a qualified non-profit such as the Church or any other 501(c)(3) organization. A cash donation includes money contributed by check, credit card, electronic funds transfer, or payroll deduction.
The total charitable contribution limit for cash donations has been raised to 100% of your adjusted gross income for year 2020. For stocks and other securities held more than one year, the limit remains 30% of your adjusted gross income. Mixed gifts — cash and stocks — are limited to 50% of your adjusted gross income. If you’re not able to use the entire donation deduction this year, you can carry forward unused deductions for five years.
Taxpayers who are at least 70½ still can make gifts from their IRA to a non-profit. The limit is $100,000. The gift must be a direct transfer — the Trustee of the IRA sends the money directly to the non-profit. The gift is completely tax free. Contributions to a standard IRA are not taxed, the money grows in the IRA tax free, and it comes out tax free to the non-profit.
If you are able and willing to work but out of work because of coronavirus, then there may be extended benefits for you up to 39 weeks. In general, you qualify if: (1) you have the virus or symptoms of the virus, (2) someone in your household has the virus, (3) you are the care-giver for a family member (in your house or not) who has the virus, (4) you are the primary care-taker for a child or other person in the household who can’t attend school or another facility that is closed, and you cannot leave them and go to work, (5) you can’t go to work because of a quarantine, (6) you have been advised to self-quarantine, (7) you were employed but no longer have a job, (8) you have become the “breadwinner” because the head of the household died of the virus, (9) you had to quit your job as a direct result of the virus, (10) your place of employment closed, or (11) you meet some additional criteria established by the Secretary as this evolves.
I hope that in this most difficult time, this is helpful. Please be careful and stay safe — and may the Peace of God be with you.