OAK STREET ADVISORS
  • HOME
  • SERVICES
    • Financial Planning
    • Tax Planning
    • Fiduciary Investment Management
    • Small Business Planning >
      • Business Retirement Plan Advisory
  • ABOUT US
    • WHAT IS A FEE ONLY ADVISOR?
    • FREQUENTLY ASKED QUESTIONS
    • OUR TEAM
  • BLOG
    • BLOG
  • SCHEDULE AN INTRO CALL
  • CONTACT A FINANCIAL PLANNER
  • Form ADV Part 2

News You Can Use

What’s in the COVID Relief Package for You?

3/26/2020

 
This is being written as the bill is still in progress. Edits may be required as more information becomes available. Please check back for updates and be sure to consult a financial professional before implementing any of the strategies suggested in this post.
​The Senate has passed an emergency relief bill that is expected to pass the House later this week. The package is over $2 trillion in scope, $6 trillion if you include loan provisions, and is the largest relief bill in the history of the United States. 

Relief Payments Made Directly to Taxpayers

Let’s start with the direct payment checks you have probably heard about. In general, individuals will receive payments of $1,200 and joint filers $2,400, plus $500 for each qualifying child. The definition of a qualifying child is already in the current Child Tax Credit Guidelines i.e. if you claim someone as a dependent child on your tax return in 2020 then they’ll qualify for the additional $500 per child payment.

High income taxpayers will see these amount reduced as income exceeds $150,000 for joint filers, $112,500 for head of household, and $75,000 for single filers. For every $100 over those limits the payment is reduced by $5 until you reach zero.  That means joint filers earning $198,000 or more, heads of households earning $136,500 or more and single filers earning $99,000 or more will receive nothing.

The payments will be based on the most recent tax return filed. So, if you have already filed for 2019 you are stuck with those earnings. If you have not filed for 2019, then your payment will be based on 2018 return information. If your income is higher in 2019 than 2018 DO NOT FILE YOUR TAXES UNTIL LATER. On the other hand, if your 2019 income is lower than 2018 IT IS IMPORTANT TO FILE YOUR TAXES NOW.

The payments will be direct deposited for taxpayers who elected to have direct deposit on their income tax forms. This could be a problem if the direct deposit instructions you provided in 2018 are to an account that has since been closed, or if you have divorced or separated since your 2018 tax filing. Within 15 days of the money being released, the IRS will send a letter informing you of the amount and where it was sent. If there is an issue with your payment, like it never arrived or went to a divorced spouse, the letter will include a phone number where you can call to resolve the issue, but unfortunately, the IRS is difficult to communicate with in general.

Required Minimum Distributions from IRA Accounts Suspended

​For the tax year 2020, there are no required minimum distributions (RMDS) from IRA accounts. If you have already withdrawn your RMDs for 2020, you cannot undo that. If you haven't taken your RMD yet, consider how delaying or withdrawing your RMD will affect your income tax brackets. For inherited IRA accounts required withdrawals are also eliminated for the 2020 tax year.

Corona Virus Distributions from Qualified Retirement Plans

Distributions of up to $100,000 from any IRA, 401k, 403b, or other qualified plan will not be subject to the usual 10% early withdrawal penalty for those who are infected with the COVID virus, have a family member infected by the virus, or were laid off or lost wages due to the virus. The distribution is still taxable, but the income, by default, will be spread over a 3-year period. This can help you access funds without bumping yourself into a much higher income tax bracket. It could potentially be used to advance fund Roth IRA conversions. More on that as we have time to digest all the ins and outs of the legislation.

The law also allows for repayment of any qualified plan distributions over a 3-year period as a qualified rollover contribution. So, if you need the funds now and are re-employed later, you will be able to replace the funds, offsetting any potential tax bracket increase in the future.
​
Allowable loans from qualified plans, such as a 401ks, are also increased to $100,000 or 100% of the vested account balance, whichever is lower. Repayment of any loan taken in 2020 can be delayed for up to one year.
 

Charitable Contribution Deduction

​After the recent Tax Cuts and Jobs Act (TCJA), many taxpayers found themselves using the increased standard deduction and no longer itemizing on their income tax return. That eliminated the charitable contribution deduction. One of the permanent changes the relief bill provides is a new above the line deduction for up to $300 of cash contributions to a qualified charity. This does not include contributions to donor advised funds.
*Again, this is a preliminary look at the relief bill, we will provide updates and corrections as new information becomes available

Comments are closed.

    Archives

    November 2022
    September 2022
    November 2021
    September 2021
    July 2021
    June 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    July 2020
    June 2020
    March 2020
    February 2020
    January 2020
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    September 2017
    June 2017
    May 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    September 2015
    August 2015
    June 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014

    Categories

    All
    401k
    403b
    529 Plans
    Annuities
    Behavioral Economics
    Bonds
    Budget
    Charity
    College Planning
    Credit
    Credit Cards
    Crypto Currency
    Debt
    Economics
    Estate Planning
    Federal Reserve
    Fiduciary
    Financial Planning
    Goals
    Gold
    HSA
    Income Tax
    Income Tax Planning
    Insurance
    Interest Rates
    Investing
    Investments Expenses
    IRA
    Jobs
    Life Insurance
    Real Estate
    Retirement
    Retirement Income
    Risk
    Rollover
    Roth IRA
    Savings
    Social Security
    Special Needs
    Stocks

    RSS Feed

  • HOME
  • SERVICES
    • Financial Planning
    • Tax Planning
    • Fiduciary Investment Management
    • Small Business Planning >
      • Business Retirement Plan Advisory
  • ABOUT US
    • WHAT IS A FEE ONLY ADVISOR?
    • FREQUENTLY ASKED QUESTIONS
    • OUR TEAM
  • BLOG
    • BLOG
  • SCHEDULE AN INTRO CALL
  • CONTACT A FINANCIAL PLANNER
  • Form ADV Part 2