Mar 29, 2020 U.S. Coronavirus Stimulus Bill – Relief for Americans In Israel
This past Friday, President Trump signed the much-anticipated stimulus bill, the CARES Act, into law. Here is a summary of the key provisions that impact individual taxpayers:
Stimulus Payments:
The government will mail out checks to taxpayers, using information from their 2019 tax return (or 2018 if 2019 was not yet filed).
The amounts are $1,200 per taxpayer, $2,400 for married, plus an additional $500 per qualifying child. For this purpose, the qualifying child has the same definition as it does for purposes of child tax credit (so it applies to children under the age of 17). Each taxpayer and child must have a social security number (ITINs are not sufficient). Additionally, it is essential to note that this is separate from the Child Tax Credit, and will not reduce the eligibility of the child tax credit refund on your2020 tax returns. If your bank account information was included on your tax return, the IRS will use that to deposit the funds. If you did not, then they will send via regular mail. Currently, no mechanism is in place to update the IRS with direct deposit information other than through filing a tax return that has this information on it.
If your only income was Social Security payments and they were below the filing threshold, the IRS will use information from Social Security to determine payments you are due.
If you did not have a filing requirement in 2018 or 2019, you would need to file for 2020 to calculate the credit with that tax return. Taxpayers that are late in filing 2018 are encouraged to do so ASAP to expedite the receipt of their stimulus payment. To do so, please be in touch with us at 02-644-4032 or contact us at [email protected].
All U.S. Citizens are eligible, except for nonresident aliens, someone claimed as a dependent on another return, and estates/trusts. US citizens who live overseas are eligible. U.S. residents with valid social security numbers and working visas are eligible as well.
The payment amount you will receive is limited based on your income and begins to slowly phase out when your adjusted gross income (AGI) hits the following points: $150,000 married filing joint, $112,500 head of household, $75,000 for single/married filing separate.
The government plans to start rolling out these payments ASAP and guarantee that they will be done by December 31, 2020. Taxpayers will receive a letter in the mail (to their last known address) with information about the payment they will receive.
Charitable Contributions:
To re-encourage charitable giving, the government added a new $300 above the line deduction for qualifying charity. This deduction is available on the 2020 tax return and going forward. It is only available to taxpayers who take the standard deduction (i.e., do not itemize their deductions).
Additionally, taxpayers who itemized their deductions can deduct charity up to 100% (currently, it is 60%) of their AGI, with the excess carrying forward for five years. This applies to the 2020 tax year.
Self-Employment Tax:
Self-employed taxpayers can defer 50% of the employer share of their SE tax due (6.2%) with their 2020 tax return– half of that until the end of 2021, and the other half until the end of 2022. The deferment applies to the portion that relates to the period beginning from when this became law (March 27) until December 31, 2020.
Early Distributions from Retirement Plans:
Up to $100,000 of early distributions (before age 59 ½) from retirement plans will be exempt from the 10 percent early withdrawal penalty if they are “Coronavirus-related.” The distributions are still subject to income tax; however, you can elect to spread the distribution over three tax years to minimize the tax ramifications. You may also choose to repay the distributions within a three year period to avoid any income tax on the distribution. The repayment will be considered a rollover contribution to the taxpayers’ retirement account. The distributions are considered “Coronavirus-related,” if you or your spouse/dependent were diagnosed, or if you suffered financial ramifications (lost your job/were quarantined/work hours reduced/had no childcare). The distribution must be made between January 1, 2020-December 31, 2020.
Waiver of RMD for 2020:
Taxpayers who would be required to withdraw a required minimum distribution from their retirement plan in 2020 can skip it.
To discuss any of the above, be in touch with us at 02-644-4032 or contact us at [email protected]