On March 27th, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Considered by lawmakers to be “Phase 3” of emergency relief relating to the Covid-19 epidemic, the bill includes the following tax-related provisions for individuals:
Recovery Rebate Checks. Single taxpayers with adjusted gross incomes (AGI) below $75,000 and joint filers with incomes below $150,000 will generally be eligible for direct payments of $1,200 and $2,400 respectively. An additional $500 will be added for each eligible child. The payments will be issued by the Treasury Department based on income amounts reported on 2018 or 2019 tax returns. Eligible taxpayers who have filed a tax return for 2018 or 2019 do not need to do anything to receive their checks. Those who have not filed either a 2018 or a 2019 should file their 2019 tax returns now. The IRS will not reduce the payments of those who have past tax or student loan debt. Only those who have past due child support payments reported by their state will have their payments reduced. The payments are an advance on 2020 tax credit which will not have to be paid back if the amount you qualify for on your 2020 return is less than the amount you received based on your 2018 or 2019 returns.
Delay of Tax Filing Deadline. The tax filing deadline is extended from April 15th to July 15, 2020.
Delay of Estimated Tax Payment Deadlines for Individuals. Individual taxpayers will have until October 15, 2020, to make estimated payments that would have been due between the date of the enactment of the bill and October 15, 2020.
Early Retirement Plan Distribution Penalty Waiver. The bill waives the ten-percent penalty for early distributions from qualified retirement plan accounts for coronavirus-related distributions. Amounts distributed may be included in income ratably over a three-year period and the amounts may be repaid.
Partial Above the Line Deduction for Charitable Contributions for Non-Itemizers. For tax years beginning 2020, there will be a new “above the line” deduction for charitable contributions of up to $300 for taxpayers who do not itemize deductions.
Modification of Charitable Contribution Limits for 2020. The bill increases the limitations on charitable contributions for the 2020 tax year and allows excess contributions to be carried forward to later tax years.
Business provisions of the CAREs Act include the allowance of delayed estimated tax payments for corporations and an allowed delay of payment of employer payroll taxes. The bill also modifies the rules for net operating losses and loss limitations for taxpayers other than corporations. Other changes include modifications of the credit for prior year minimum tax liability of corporations, the limitation on business interest, technical amendments regarding qualified improvement property, and others designed to provide relief to businesses during the pandemic.