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CARES ACT OVERVIEW for Individuals

Recovery Rebate for Individuals 

You can think of the recovery rebate as an advance payment of a 2020 tax credit you would typically receive. U.S. residents will receive a full $1,200 rebate ($2,400 married filing jointly) if: They have an adjusted gross income that is not more than $75,000 ($150,000 married filing jointly)a Social Security number, AND cannot be claimed as dependents on another taxpayer’s return.  

Eligible individuals will receive up to $500 per child. For many, no action will be required in order to receive their rebate check. The IRS will be using 2019 tax returns, if filed, or 2018 tax returns, if 2019 is not yet filed. If an individual does not typically file a tax return, the social security benefits Form 1099-SSA may be used instead.  Otherwise, you may need to file a simple tax return to receive the rebate. 

The rebate will be reduced by $5 for every $100 of an eligible individual’s adjusted gross income thresholds. Individuals are not eligible for the rebate if their income exceeds: 

  • $99,500 for single 
  • OR 146, 500 for head of household filers with one child 
  • OR $198,000 for joint filers with no children 

You will receive the payment directly into the bank account useon your 2019 or 2018 return. If direct deposit information is unavailable, the IRS will be releasing information instructing taxpayers what they need to provide to receive payment.  

Additional Notes: 

  • If the actual rebate was less than the credit calculated on the 2020 return, the taxpayer will be able to claim the balance of the credit when filing the 2020 return.  
  • However, if the advance rebate received was greater than the credit to which the taxpayer is entitled, the taxpayer won’t have to pay back the excess. That is because the 2020 credit cannot be reduced below zero (as of right now).  
  • IRS will prescribe regulations and other guidance as necessary to carry out the purposes of the credit provision.  

Updated 4/2/2020 at 10:00 AM 

Waivers Related to Retirement Plans & Funds 

For distributions up to $100,000 made on or after January 1, 2020 until December 31, 2020 (from qualified retirement accounts for COVID-19 purposes), the 10% early withdrawal penalty may be waived. Items to note: 

  • A distribution from a qualified retirement plan is normally subject to a 10% additional tax unless the distribution meets an exception.  
  • COVID-19 related distribution (defined below) is not subject to the 10% penalty up to $100,000. Income inclusion can happen over 3 years and the amount can be contributed back into the plan within 3 years.  
  • The individual, spouse, or dependent must meet one of the below requirements: 
  • Be diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention (CDC). 
  • Experience adverse financial consequences as a result of being quarantined, being furloughed, or laid off. 
  • Have work hours reduced due to such virus or disease. 
  • Is unable to work due to lack of childcare due to such virus or disease. 
  • Closure or reduced hours of a business owned or operated by the individual due. 

Updated 4/2/2020 at 12:00 PM  

Charitable Deductions 

Whether you will be itemizing or taking the standard deduction this yearall individuals are now able to receive certain deductions to their charitable contributions. The deductions available include: 

  • Deduct up to $300 of charitable cash contributions. (No itemization required)  
  • The normal 60% adjusted gross income (AGI) limitation on “qualifying contributions is suspended for taxpayers who itemize. Qualifying contributions require:  
    • (1) cash contribution to a qualifying organization (501(c)(3)), and  
    • (2) election by the taxpayer to suspend the limitation.  
  • However, a qualifying contribution does not include contributions to a donor advised fund or 509(a)(3) supporting organizations.  
  • Partners in partnerships and shareholders in s-corporations make the required election at the individual levelnot the entity level.  
  • For C-corporations, qualifying contributions go from the 10% taxable income limit to a 25% taxable income limit. 
  • Any contribution in excess of the contribution base (which is usually AGI) will be treated as a carryover.  

 Updated 4/2/2020 at 12:00 PM  

Required Minimum Distributions (RMD)s Waived for 2020

RMD requirements do not apply for calendar year 2020. This includes distributions with a required beginning date occurring in calendar year 2020 and such distribution not having been made before January 1, 2020.  

Updated 4/2/2020 at 12:00 PM   

Employer Student Loan Repayment Exclusion 

Normally, an employee’s gross income doesn’t include up to $5,250 per year of employer payments, in cash or kind, made under an educational assistance program for the employee’s education under IRC 127.   This new temporary provision now allows employers to pay up to $5,250 of an employee’s student loan debt on a tax-free basis.   Employer payments can be for the loan’s interest or principal.    

Please note there is no double benefit, these employer payments may limit the employee’s student loan interest deduction.  

Updated 4/2/2020 at 12:00 PM  

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