For this blog post I thought I’d cover the historic passage of the CARES Act and how it might benefit you.
Facts On the CARES Act Stimulus Check
You do not need to file your 2019 taxes to receive a check. The government will go off of your 2018 tax returns if you haven’t filed for 2019.
The IRS will pay you via direct deposit if your direct deposit info is on file. If it isn’t, the IRS they will mail you a check. The IRS will start depositing funds via direct deposit on 9 April and begin mailing paper checks on 24 April. If your banking information has changed the IRS said on 30 March it was building a portal where people can update their information.
How Much Will You Receive
Single adults with a social security number making less than $75,000 a year will receive a one-time $1,200 check. Individuals making more than $75,000 will get roughly $50 less per $1,000 earned and individuals making more than $99,000 a year will be phased out completely.
Married couples making less than $150,000 a year will get $2,400 and couples making more than $198,000 and no dependents will be phased out completely.
If you have children under the age of 17 you will receive $500 per child. Dependents over 17 and elderly dependents will not receive checks.
How Should You Spend Your CARES ACT Check
I believe you should spend it wisely and save as much as possible. There’s no crystal ball for how long COVID-19 will cause the economy to be shutdown. Therefore, make it last as long as possible. There are some great deals going on right now but I’d encourage you to hold off and only use it on essentials.
Other Parts Of The Deal
There will be a temporary suspension of any student loan debt held by the federal government. No payments are required and no interest is accrued until the end of September.
Home borrowers with federally backed loans can request forbearance on mortgage payments up to six months.
There will be an expansion of unemployment benefits including a four month enhancement of $600 weekly. The CARES Act does include gig workers like freelancers and furloughed employees.
The 15 April deadline to file your taxes and pay taxes has been delayed until 15 July.
How Does The CARES ACT Apply To Your Retirement?
You can withdraw from your retirement plan like a 401k and IRAs penalty free in 2020. This saves you 10% but you will still be taxed on the money you withdraw.
This is a great opportunity for a Roth conversion since you can avoid the 10% penalty and lock in tax free gains. I’d recommend waiting to the end of the year to do a Roth conversation when you have a better idea of your tax situation.
I hope this information is helpful and here is the IRS site if you want to learn more https://www.irs.gov/coronavirus. I believe the economy is in recession and there’s no telling how long or how deep it will be. I’d encourage you to hold your investments and buy more if the market dips. History has shown that buying and holding in a recession works. Furthermore, if you or a friend is having a difficult time financially coping with the crisis please don’t hesitate to call or email. I’d be happy to discuss strategies and options.
Matt Maciel, MA, MBA