CARES Act: Individual Overview

Updated 4/15/2020 11:00 AM AZ time

Stimulus Checks

On Friday the CARES Act was signed into law and one of its provisions allows individuals to receive one time stimulus checks. The Treasury Department has said that they will issue these checks starting today. Starting today the IRS has an online tool to check the status of your stimulus check (Get My Payment).

There are some rules as to who receives the stimulus checks and how the Treasury Department will be determining if you qualify for a stimulus check and how much. This post goes into a few details of how this will be determined.

How much do I get?

The IRS will be looking at your 2019 tax return first and if you have yet to file, they will look at the 2018 tax return. They will not be looking back further than your 2018 tax return. For those that haven’t filed a tax return or weren’t required to file you can go here to enter your information for direct deposit.

If you have not filed your tax returns in recent years then please reach out to us so we can get your returns filed so you can qualify for the stimulus check.

There are income limitations to receiving a stimulus check (see below) but the amount you will receive is $1,200 for a Single taxpayer or $2,400 for a married filing joint taxpayer. An additional amount of $500 per dependent child age 16 and younger at the end of the year of the tax return they are looking at will be sent as well (ex. 2019 tax returns they look at age as of December 31, 2019). This excludes dependents age 17 and older from receiving any sort of stimulus check (ex. older children, college students claimed by parents, retired parents being claimed by their child, etc.). There has not been guidance released on Married Filing Separate individuals as of yet.

Income Limitations

As mentioned above, the IRS will send out a check based on your 2018 or 2019 tax return but the stimulus check will actually be reconciled against your 2020 tax return. If in 2020 you exceed the income limitations below then you will be required to pay back any amount that you received. It is unclear on if they will require paying back any amount received for a child that was 16 or younger in 2019 but is now 17 or older in 2020.

For a Single taxpayer if your Adjusted Gross Income (AGI) is $75,000 or lower then you qualify for the full stimulus amounts listed above. If your AGI is between $75,001 and $99,000 then your benefit will be reduced by $5 for every $100 earned above $75,000 (see Stimulus Calculator at the end of this article). With income above $99,000 you will not receive anything.

For a Marries taxpayer if your Adjusted Gross Income (AGI) is $150,000 or lower then you qualify for the full stimulus amounts listed above. If your AGI is between $150,001 and $198,000 then your benefit will be reduced by $5 for every $100 earned above $150,000 (see Stimulus Calculator at the end of this article). With income above $198,000 you will not receive anything.

AGI can be found on your 2018 tax return on Form 1040, page 2 line 7. It is found on your 2019 tax return on Form 1040 (or Form 1040-SR), page 1, line 8b.

How will I get the money?

The IRS will be sending you the money using the same method that was used on your most recent tax return. If you set up direct deposit then it will go to that bank account that you set up. If you had your refund mailed to you or if you owed money last year then they will mail you a check to the address of your most recent tax return.

If you have changed bank accounts, the direct deposit will fail and they will then mail you a check instead. I imagine this will delay the check slightly but no information has been provided as of yet.

If your address is not current with the IRS then please fill out and file Form 8822 to change your address with the IRS. It is a simple form where you put your name, SSN, old address and new address. If you have set up mail forwarding you should be OK but the best option would be file update your address with the IRS.

Additional Resources

Student Loans

There were a few items changed in regards to student loans with the CARES Act:

  1. No payments due until September 30, 2020. Your balance is frozen.
  2. No interest through September 30, 2020.
  3. Skipping payments through September 30, 2020 counts towards the public service loan forgiveness program.
  4. Suspension of debt collection for student loans.
  5. Employers can provide up to $5,250 of payments tax free on student loan balances to employees.

This applies to federal student loans only, and not private student loans.

Exception to Using Retirement Funds because of Coronavirus

Under the CARES Act you are now able to withdraw up to $100k as a loan from your retirement account tax and penalty free. The withdrawal is only penalty and tax free if you pay back the entire amount withdrawn within 3 years. You must meet certain conditions (see below) in order to qualify for this loan.

  • Distribution made between 1/1/2020 and 12/31/2020
  • You are diagnosed with COVID-19 using a test approved by the CDC
  • Your spouse or dependent is diagnosed with COVID-19
  • You have experienced adverse financial conditions due to being quarantined, furloughed, laid off, or reduced work hours due to COVID-19
  • You are unable to work because you need to care for a child.
  • You own a business that has closed or reduced hours due to COVID-19
  • IRS will give further reasons in the future that may qualify.

Stoppage of Required Minimum Distributions (RMDs)

No RMD is required to be taken in 2020 by anyone. This means if were required to take an RMD for the first time in 2019 (turned 70 and 1/2 in 2019) you would normally be required to take the RMD by April 15th, 2020. Under this act you would not be required to take the 2019 or 2020 distribution this year but would begin in 2021.

Additional Charitable Deduction

Whether you itemize your deductions or not, you will be able to take a charity deduction above the line for up to $300. These contributions must be made in cash and the deduction will be claimed on your 2020 tax return.