Taxpayers with a lower 2020 AGI will receive a credit
The payment is actually an advance on a tax credit claimed on the 2020 tax return. If a taxpayer’s income is lower in 2020 than in 2019, any additional credit for which they are eligible will be refunded or will reduce the tax liability when the 2020 tax return is filed. As it stands, if your 2020 income is higher than the thresholds and you received the payment, you will not need to pay back any part of the payment.
Who is eligible for the second EIP?
Generally, U.S. citizens and resident aliens who are not eligible to be claimed as a dependent on someone else’s income tax return are eligible for this second payment. Eligible individuals will automatically receive an EIP of up to $600 for individuals or $1,200 for married couples and up to $600 for each qualifying child. Generally, if you have adjusted gross income for 2019 up to $75,000 for individuals and up to $150,000 for married couples filing joint returns and surviving spouses, you will receive the full amount of the second payment. For filers with income above those amounts, the payment amount is reduced.
Under the earlier CARES Act, joint returns of couples where only one member of the couple had a Social Security number (SSN) were generally ineligible for a payment – unless they were a member of the military. But this month’s new law changes and expands that provision, and more people are now eligible. In this situation, these families will now be eligible to receive payments for the taxpayers and qualifying children of the family who have work-eligible SSNs. People in this group who don’t receive an EIP can claim this when they file their 2020 taxes under the RRC.
The credit is not taxable, consistent with other refundable tax credits.
Our government is working fast and furiously to get needed financial relief to you as soon as possible. The recently passed Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides that relief in a number of ways.
PPP and small business support New COVID-19 relief package provides much needed support for small businesses. Business expenses paid for with the proceeds of PPP loans are tax deductible, consistent with Congressional intent in the CARES Act. In addition, the loan forgiveness process is simplified for borrowers with PPP loans of $150,000 or less.
Retirement Distributions
If you are affected by the coronavirus and are under 59½, you may withdraw up to $100,000 from your retirement plan or IRA without incurring the 10% premature distribution penalty. Penalty-free distributions are those made after Jan. 1, 2020, and before Dec. 31, 2020. You qualify for this distribution if you, your spouse or a dependent have been diagnosed with COVID-19 or are experiencing adverse financial consequences as a result of being quarantined, furloughed or laid off, working reduced hours due to the virus, being unable to work due to lack of child care because of the virus, or had to close your business or reduce the amount of hours your business is open.
Retirement Plan Loans
Under the current rules, you can generally borrow up to $50,000 from your retirement plan tax-free if you agree to repay it within five years. This relief increases that amount to $100,000. If you have a current plan loan you’re repaying in 2020, you’ll be granted a one-year delay for making that repayment.
Required Minimum Distributions
When you reach a certain age, generally 70½, you are required to take a minimum distribution from your IRA or retirement plan. If you are required to take a minimum distribution in 2020, you can choose not to without incurring a penalty
Charitable Contributions
This relief allows you a deduction for being charitable. Generally, you must itemize your deductions to receive a tax benefit for charitable contributions. Beginning in 2020, you can make charitable contributions in cash of up to $300 without itemizing your deductions. This is a massive relief bill affecting millions of taxpayers.
Unemployment assistance For those who are unemployed, the pandemic unemployment insurance program will be extended by 16 weeks. Supplemental federal unemployment benefits of $300 per week will continue into April 2021 instead of ending in December. NOTE: THESE BENEFITS ARE TAXABLE
Rental assistance The current CDC eviction moratorium will be extended until Jan. 31, 2021.
Student loans Extension of student loan forbearance provisions created in CARES and extended by executive order, from the current expiration date of Jan. 31, 2021 through April 1, 2021.
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