{"id":19453,"date":"2020-04-26T17:00:50","date_gmt":"2020-04-26T22:00:50","guid":{"rendered":"https:\/\/taxprocenter.proconnect.intuit.com\/?p=19453"},"modified":"2022-04-12T12:34:09","modified_gmt":"2022-04-12T17:34:09","slug":"cares-act-tax-tips-and-planning-for-your-individual-clients","status":"publish","type":"post","link":"https:\/\/accountants.intuit.com\/taxprocenter\/tax-law-and-news\/cares-act-tax-tips-and-planning-for-your-individual-clients\/","title":{"rendered":"CARES Act: Tax tips and planning for your individual clients"},"content":{"rendered":"

This content is for the first stimulus relief package, The Coronavirus Aid, Relief and Economic Security Act (CARES Act), which was signed into law in March 2020. For information on the second stimulus relief package, the Coronavirus Response and Relief Supplemental Appropriations Act of 2021, please visit the second post here<\/a>.<\/em><\/p>\n

We all know all about the postponed federal tax filing deadline of July 15, but what kind of planning can you help your individual clients with for tax year 2020? Four key areas came about as a result of the Coronavirus Aid, Relief, and Economic Security (CARES) Act<\/a>: economic impact payments, retirement plan relief options, charitable donation incentives and relief available for students.<\/p>\n

Economic impact payments<\/b><\/p>\n

Economic impact payments are available for certain taxpayers and can be calculated based on the latest filed tax return (either 2018 or 2019 if already filed). Single filers who fall on or under the limits in the table below will receive the full amount of $1,200, and married filing joint taxpayers will receive $2,400. Parents will receive an additional $500 for each qualifying child.<\/p>\n\n\n\n\n\n\n\n
Filing status<\/span><\/th>\nPayment reduced by 5% of AGI in excess of<\/span><\/th>\nAGI level where payment is completely phased out (for taxpayers without qualifying children)<\/span><\/th>\n<\/tr>\n<\/thead>\n
Single & married filing separately<\/td>\n$75,000<\/td>\n\n

$99,000<\/p>\n<\/td>\n<\/tr>\n

Head of household<\/td>\n$112,500<\/td>\n$136,500<\/td>\n<\/tr>\n
Married filing jointly<\/td>\n$150,000<\/td>\n$198,000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n

This payment will be reconciled on the 2020 tax return to determine if a taxpayer received too little. For example, if the adjusted gross income for 2019 exceeds the phaseout threshold, but a lower adjusted income reported for 2020 results in an increased economic impact payment, the additional credit will be refunded or reduce taxes owed in spring 2021.<\/p>\n

Non-filers<\/a> can use an IRS tool to register for their payment. Taxpayers can check the status of their payment with the IRS “Get My Payment” tool<\/a>, which the IRS announced enhancements to on April 26, 2020.<\/p>\n

Tip:<\/i><\/b> Your client may want to go ahead and file for 2019, especially if income decreased from 2018, to receive a potentially higher check.<\/p>\n

Is this payment considered taxable income? What we know now is no; this will be a new refundable tax credit, similar to the earned income tax credit.<\/p>\n

Retirement plan relief options<\/b><\/p>\n

10% early withdrawal penalty suspended. <\/b>There is relief available for taxpayers younger than age 59 \u00bd seeking to use early withdrawals from retirement plans to help fund adverse financial outcomes. Up to $100,000 from qualified retirement plans can be taken out any time during the 2020 calendar year due to coronavirus-related hardships, without being subject to the traditional 10% penalty. The CARES Act refers to this withdrawal as a \u201ccoronavirus-related distribution.\u201d<\/p>\n

The distribution must be made to an individual (or the spouse or dependent of an individual) diagnosed with the SARS-CoV-2 or COVID-19 by a CDC-approved test, or an individual who incurs financial difficulty from the virus as a result of any of the<\/p>\n