As of today (March 22, 2020), the House and Senate have passed the Families First Coronavirus Response Act (HR 6201). This Act is effective April 2, 2020. We have previously provided the key provisions of this Act. Please review the prior communication on our blog regarding this passed legislation. Click here to review.
The Senate has proposed another bill called the Coronavirus Aid, Relief, and Economic Security Act (CARES). As of now, the House and Senate have not passed this Act. However, we look for bi-partisan action to come as early as tomorrow. Once again, it is important for you to understand what is already available, and what may be available to you as individuals and business owners. Additionally, it will help you educate your employees in these uncertain times.
The following provisions have already been enacted:
- Extended Tax Filing Deadlines/ Balances Owed Deferred (this applies to Federal and Indiana tax returns) – This is final – not proposed.
- Individual Tax returns now due July 15, 2020
- 2019 Balances now due July 15, 2020
- Federal Student Loans – Interest Waiver and Payment Deferral
- Interest on loans owned by the U.S. Department of Education will be automatically waived effective March 13, 2020
- Payment will not be reduced – 100% of payment will be applied to principal
- Payments may be suspended without accruing interest.
- Must request an Administrative Forbearance directly from loan servicer
- Right now, this will be a 60-day payment suspension. This could be extended
- Interest on loans owned by the U.S. Department of Education will be automatically waived effective March 13, 2020
Proposed provisions of the CARES ACT designed to ease the immediate financial burden on individuals are as follows:
- Additional delay of Quarterly Estimated Payments
- First, Second and Third quarter payment all due Oct. 15, 2020
- Federal Student Loans
- Additional 3-month deferral of payments and accrued interest with possibility of another 3 months for a total of 6 months
- Recovery Rebates for Individuals– Maximum of $1200 per individual/Minimum of $600 per individual with an additional $500 per qualifying child
- Issued as an Advanced Refund of 2020 tax refund
- Issued as soon as possible
- Based on 2018 Tax Return.
- Eligible Taxpayer – any individual EXCEPT:
- Nonresident Alien
- Dependents of another
- Estate or trust
- Qualifying Income
- Earned Income
- Social Security Benefits
- Certain Military Compensation
- Phase Out begins at:
- Single/Head of Household – $75,000
- Joint – $150,000
- Use of Retirement Funds:
- Distributions:
- Made on or after date of enactment and before December 31, 2020
- Included in income over 3-year period if not repaid
- Not subject to 10% early withdrawal penalty
- Maximum withdrawal – $100,000
- May be re-contributed or paid back to plan over a 3-year period beginning the day after the distribution
- Loans from Qualified Plans:
- Taken within 180 days of the enactment
- Maximum amount – $100,000
- 100% of non-forfeitable accrued benefit
- Six-year payback period does not begin until January 1, 2021
- Eligible Individual:
- Individual, spouse or dependent diagnosed with virus
- Experiencing adverse financial consequences:
- Quarantined
- Furloughed or laid off
- Work hours reduced
- Unable to work due to:
- Lack of child care
- Business closing
- Business hours reduced
- Other factors to be determined
- Distributions:
As you know, the situation is rapidly changing and new information is being made available constantly. We are committed to keeping you informed. On behalf of the entire Somerset team, thank you for your continued support and loyal business as we all navigate these unique circumstances. Please feel free to reach out directly to your advisor or with any questions or concerns. As always, we are here and ready to help.
