How the CARES Act May Impact You

Jeff Witz, CFP®

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In an effort to support U.S. businesses and families, on March 27th President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The bill was extensive and wide reaching.

Here are the most important aspects of the Act seniors should know:

– Payments of $1,200 (single/head of household) and $2,400 (joint filers) will be sent to taxpayers within certain income limits. An additional $500 payment is available for each qualifying child. These payments will be determined based on your most recently filed tax return or Social Security benefit statement if no return was filed. The amount of the payment is reduced by 5% of the amount by which income exceeds $75,000, $112,500 (head of household), or $150,000 (joint).

– Required minimum distribution (RMD) rules are waived for 2020 distributions from IRAs, including inherited IRAs, and 2019 distributions taken in 2020 which had a required beginning date of April 1, 2020. RMDs are also waived for 2020 distributions from certain defined contribution plans including 401(k), 403(b), 457(b) and IRA based plans.

– If you’ve already taken RMDs in 2020, you may be able to roll them back to an IRA or employer-sponsored plan (if the plan permits). Rollovers are generally required to be made within 60 days of the distribution, but the IRS has extended the 60-day rollover deadline to July 15, 2020, for distributions, including RMDs, for which the 60-day rollover deadline would’ve fallen between April 1, 2020, and July 15, 2020. As a result of this extension, individuals who received an RMD between February 1, 2020, and May 15, 2020, likely have until July 15, 2020, to complete the rollover. If you took a January distribution, unfortunately it doesn’t fall within the extended rollover window. Keep in mind, distributions from IRAs are also subject to 1 rollover per 365 days and IRS rules don’t permit distributions from inherited IRAs to be rolled over.

– It may be a good time to convert assets in a traditional IRA to a Roth IRA. Since the CARES Act allows you to skip RMDs for 2020, you can convert assets from a traditional IRA to a Roth IRA this year without first satisfying the typically required RMD. With incomes down and account values down due to market volatility, the tax impact of the conversion may be minimized.

– Distributions from IRAs and qualified retirement plans received during 2020 of up to $100,000 for COVID-19 related purposes are allowed without a 10% penalty for pre-59 ½ individuals, taxable evenly over 3 years beginning with year of distribution, and may be recontributed within 3 years. Related purposes include a COVID-19 diagnosis for you, your spouse or dependent, and financial hardship as a result of business closures, reduced work hours, lay off, furlough, and lack of childcare.

– A charitable deduction of up to $300 is allowed for those who do not itemize their deductions. The adjusted gross income limitation is waived allowing you to offset more of your taxable income. These two items apply only to cash contributions and are not available for contributions to donor advised funds or other supporting organizations.
Jeff Witz, CFP® welcomes readers’ questions. He can be reached at 800-883-8555 or at
200 North LaSalle Street – Suite 2300 – Chicago, Illinois 60601
312-419-3733 – Toll Free 800-883-8555 – Fax 312-332-4908 –
Investment advisory services offered through MEDIQUS Asset Advisors, Inc. Securities offered through Ausdal Financial Partners, Inc. Member FINRA/SIPC ∙ 5187 Utica Ridge Rd ∙ Davenport, IA 52807 ∙ 563-326-2064 ∙ MEDIQUS Asset Advisors and Ausdal Financial Partners, Inc. are independently owned and operated.

Effective June 21, 2005, newly issued Internal Revenue Service regulations require that certain types of written advice include a disclaimer. To the extent the preceding message contains written advice relating to a Federal tax issue, the written advice is not intended or written to be used, and it cannot be used by the recipient or any other taxpayer, for the purposes of avoiding Federal tax penalties, and was not written to support the promotion or marketing of the transaction or matters discussed herein.
The information contained in this report is for informational purposes only. Any calculations have been made using techniques we consider reliable but are not guaranteed. Please contact your tax advisor to review this information and to consult with them regarding any questions you may have with respect to this communication.
MEDIQUS Asset Advisors, Inc. does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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