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Coronavirus (COVID-19) Legislation - Individuals



Recent legislation, such as the Families First Coronavirus

Response Act and the Coronavirus, Aid, Relief, and Economic

Security (CARES) Act has provided some financial

and tax relief for certain taxpayers. The following is a summary

of some of the provisions.


Filing and Payment Deadline

The April 15, 2020, due date for any person (individual,

trust, estate, or unincorporated business entity) who must

file a federal income tax return or has any amount of federal

income tax due, is automatically postponed to July 15,

2020. The postponed deadline is automatic, meaning no extension

is required to be filed. No interest or penalty will

accrue until July 16, 2020. You do not have to be sick or quarantined,

or have any other impact from COVID-19 to qualify

for the postponed deadline.

Estimated tax. First quarter estimated tax payments usually

due April 15 and second quarter estimated tax payments

due June 15 are postponed to July 15.

State tax returns. Most states have also extended filing

and payment deadlines, but some states have implemented

different due dates or not conformed. Be sure to confirm

with each state for the most updated information.

Contributions made by due date. Generally, contributions

made to an individual retirement arrangement (IRA)

or a health savings account (HSA) applicable for tax year

2019, must be made by April 15, 2020. Because the due date

has been postponed to July 15, you have until July 15 to

make 2019 contributions to an IRA or HSA.

2016 tax return. The postponed deadline also applies to

2016 tax returns. Any claim for refund for tax year 2016

must be filed by July 15, 2020.

Recovery Rebates (Stimulus Payment)

A one-time recovery rebate is an advance refundable credit

against your 2020 taxes and equal to $1,200 for individuals

($2,400 for joint filers), plus an additional $500 per child under

age 17 who qualifies for the Child Tax Credit.

Eligibility. All U.S. residents with adjusted gross income

(AGI) up to $75,000 ($112,500 for Head of Household, $150,000

Married Filing Jointly), who are not claimed as a dependent

of another taxpayer, and have a work-eligible Social Security

Number, are eligible for the full rebate amount. This is true

even if you have no income, or if your income comes entirely

from nontaxable means-tested benefit programs, such as SSI

benefits. The threshold amount is based on 2018 AGI (unless

a 2019 return has already been filed).

Phaseout. The rebate amount is reduced by $5 for each

$100 that your AGI exceeds the phaseout threshold. The rebate

is completely phased-out at $99,000 (Single), $136,500

(HOH), and $198,000 (MFJ).

How to receive. For most individuals, no action is required

in order to receive the recovery rebate. It will be direct deposited

if you have authorized a direct deposit or direct

debit for your most recently-filed tax return. Otherwise, a

check will be mailed to your last known address. The rebate

may be offset by past-due child support, but not any other

federal or state debt.

Go to www.irs.gov/coronavirus/economic-impact-payments

to update bank account or mailing address, or to enter payment

information for non-filers.


Retirement Plan Distributions

COVID-19-related distribution. The 10% early-withdrawal

penalty is waived for COVID-19-related distributions

up to $100,000 from qualified retirement plans or

IRAs. A COVID-19-related distribution is one made during

the 2020 calendar year to an individual who is diagnosed

with COVID-19 by a CDC-approved test, whose spouse or

dependent is diagnosed with COVID-19, or who experiences

adverse financial consequences as a result of being quarantined,

furloughed, laid off, having work hours reduced,

being unable to work due to lack of childcare due to COVID-

19, or closing or reducing hours of a business owned or

operated by the individual. Any income from an early withdrawal

can be included in income ratably over a 3-year period.

The withdrawn amount can also be recontributed over

three years without regard to annual contribution limits.

Retirement plan loans. Plan loan limits are increased

from $50,000 to $100,000 and loan repayment may be delayed

up to one year.

Required minimum distribution (RMD). RMDs are

waived for calendar year 2020. If you are currently taking

RMDs, you are not required to do so for 2020. This also includes

your first RMD, which you may have delayed from

2019 until April 1, 2020.


Charitable Contributions

New deduction. Beginning in 2020, a new above-the-line

deduction up to $300 is available for individuals who do not

itemize deductions.

Limitations. For 2020 only, the 50% AGI limit for cash donations

by individuals is suspended. If you itemize, you

may deduct cash contributions up to your AGI. Any excess

contribution amount may be carried forward.


Health Savings Account (HSA)

COVID-19 health benefits. A high-deductible health plan

(HDHP) may pay for COVID-19 health benefits before the

minimum deductible requirements are satisfied. Health

benefits provided by an HDHP may include medical care

services and items purchased related to testing and treatment.

Vaccinations, once available, are treated as preventive

care.

Over-the-counter (OTC) medicines. Beginning in 2020,

OTC medications may be purchased using HSAs, flex spending

arrangements (FSAs), and Archers MSAs. This includes

pain and allergy relief medications without a prescription.

In addition, menstrual care products have been added to

qualified medical expenses.


Unemployment

A temporary new program provides unemployment benefits

for those individuals not traditionally eligible (self-employed,

independent contractors, limited work history), who

are unable to work as a direct result of COVID-19 public

health emergency.


Student Loans

Some relief is available for federal student loan borrowers.

Most provisions apply only to Direct Loans and Federal

Family Education Loans (FFEL) that are currently owned by

the U.S. Department of Education. FFELs owned by commercial

lenders and Perkins loans owned by your educational

institution are not eligible.

Payment suspension. All payments due for eligible federal

student loans are suspended until September 30, 2020.

Each month of suspension will count toward a loan payment

for the purpose of any loan forgiveness program or

loan rehabilitation program. This means suspended payments

are considered qualifying payments for income based

repayment, Public Service Loan Forgiveness, or defaulted

loans enrolled in a rehabilitation program.

Interest waiver. During the period of payment suspension,

no interest will accrue. For eligible federal student

loans, the interest rate is 0% until September 30, 2020.

Collections. During the period of payment suspension,

wage garnishments, refund offsets, federal benefit reductions,

or any other involuntary collection activity are also

suspended.

Employer educational assistance. If your employer provides

educational assistance fringe benefits, up to $5,250

may be excluded from taxable income for employer payments

to your student loan from March 27, 2020 through December

31, 2020. The $5,250 limit applies to student loan payments

and tuition assistance payments combined. You cannot

claim a student loan interest deduction for employer paid

interest.

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