On March 27, the President signed the CARES Act into law. The CARES Act stands for the Coronavirus Aid, Relief, and Economic Security Act. This law intends to help people suffering from financial hardship due to the coronavirus, or COVID-19, pandemic. The law was the most substantial economic stimulus package made in the history of the United States.
At Surprenant & Beneski, PC, our experienced lawyers can help you take advantage of the changes to retirement plans and accounts and the tax benefits made available by the Act. Contact our Southeastern Massachusetts law firm today to schedule your initial consultation.
What Massachusetts Residents Need to Know About the CARES Act
The coronavirus has significantly impacted small and mid-sized business owners. The CARES Act established several ways for business owners to combat the negative financial impacts of the COVID-19 economic crisis. The Act created loan programs for small to midsize businesses. It also provides tax benefits to incentivize businesses to keep their employees on their payroll.
CARES Act Relief Payments for Individuals
The CARES Act provides individuals with stimulus payments. The IRS sent payments to individuals in April, although not everyone has received their payments yet. Each married couple who filed jointly received $2,400. Each individual received $1,200, and each qualifying child or dependent counted for $500. When a married couple’s income is over $150,000, or a single person’s income is over $75,000, the IRS reduced the amount of the stimulus check.
Tax Benefits
The CARES Act includes some significant and beneficial tax advantages. Individuals who take a standard deduction can take a tax credit for up to $300 of charitable giving per year, as of January 1, 2020. The Act also increased the limit for tax-deductible charitable contributions from 50 percent of the individual’s adjusted gross income to 100 percent of the adjusted gross income.
Additionally, the CARES Act temporarily suspends the limit for losses from pass-through entities. As of now, there is no limit on how much losses from an LLC or partnership can reduce the owner’s taxes for their non-business income.
Benefits to IRA Beneficiaries
The CARES Act will also change the regulations related to IRA beneficiaries: specifically, beneficiaries who have inherited money through a will or were beneficiaries of a trust that didn’t qualify as a designated beneficiary. These beneficiaries now have another year to withdraw the entire amount in the IRA account. In other words, they have until December 31, 2020, to withdraw the entire amount in their IRA account. IRA beneficiaries who inherited IRA accounts between 2015 and 2020 will not have six years to withdraw the funds. If you are an IRA beneficiary and you have questions regarding how these changes affect you, our law firm can help. We will review your situation and help you maximize your advantages under the CARES Act and other relevant laws.
Retirement Accounts
The CARES Act suspended minimum distribution amounts from traditional Individual Retirement Accounts (IRAs) as well as employer-sponsored retirement plans such as 401(k) plans for 2020. The CARES Act also suspended the 10 percent tax penalty for people who take early distributions from their qualifying retirement accounts when the person, spouse, or dependent has received a diagnosis of COVID-19, or they’ve experienced adverse financial consequences due to COVID-19.
In addition to extending the tax return deadline to July 15, 2020, the federal government has also extended the date for making contributions to Roth IRA and traditional IRA accounts for 2019 to July 2020. Typically, you would need to make these contributions by April 15th, but, for the first time, Congress has extended that deadline. Taking full advantage of transferring money into your IRA accounts can help you significantly over the long run. In many cases, it makes sense to max out your IRA and Roth IRA account.
The CARES Act allows a one-year-delayed repayment of outstanding retirement plan loans that are due between March 27 and December 31 of 2020. The loan’s amortization schedule should be revised to reflect the interest accrued and the delay during that period.
Those with an employer-sponsored 401(k) retirement plan can increase the maximum amount of their 401(k) loan. The limit for 401(k) loans used to be the lesser of 50 percent of the person’s vested assets, or $50,000. The limit has increased to the lesser of 100 percent of the participant’s vested assets or $100,000.
Postponement of Social Security Taxes Through the CARES Act
The CARES Act allows self-employed individuals and employers to put off paying their Social Security taxes through the end of 2020. If you are self-employed, this could help you significantly. You can stop putting off paying 6.2 percent of your wages up to an amount of $137,700 through December 31, 2020. You will have two years to re-pay these taxes. Every business and all self-employed individuals can take advantage of this deferral option, regardless of whether or not their business has been hurt by the economy.
The Benefits of Hiring a Lawyer to Advise You on The CARES Act
Many residents in Southeastern Massachusetts are wondering how they will pay their bills. If you, like many other residents, are struggling due to the COVID-19 shutdowns, speaking to an experienced lawyer could help you tremendously.
Whether you are a business owner or an individual, we can help you plan to move forward and continue with your estate planning goals. After reviewing your needs, goals, and financial situation, we will provide meaningful advice that can help you survive this current crisis while preparing for your future. At Surprenant & Beneski, PC, one of our experienced lawyers can help you determine how the CARES Act can help you and your family. Contact the experienced lawyers at Surprenant & Beneski, PC today to schedule a consultation with one of our experienced lawyers.