Congressional Response to Coronavirus – Individual Provisions

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Updated: April 9, 2020

Congressional Response to Coronavirus – Individual Provisions


The federal government has taken a host of actions to provide relief to people affected by the health and economic effects of COVID-19. This memo provides a guide to for you, your staff, and your clients to access this help.

The Government Affairs Team at AALU/GAMA has prepared detailed briefs discussing the specific items of key importance to the membership and your clients, including the SBA loans and sick leave requirements and resources, which can be accessed here {add link}.  

ICYMI: Tax Filing and Tax Payment Deadlines Extended: The Treasury Department extended the deadline for filing federal tax returns until July 15, 2020, in addition to delaying federal tax payments that are due on April 15, 2020 until July 15, 2020, for those impacted by the coronavirus pandemic. **See Notice 2020-18 for more details.**

  • Nothing prevents a taxpayer from filing their return when ready. 

Recovery Rebates

One-time recovery rebates will be issued: $1,200 for individuals ($2,400 couple) and $500 for each dependent child under 17.

  • No taxpayer action is required to receive the rebate.
  • The IRS will send a check to each taxpayer, unless direct deposit is available/has previously been set up with the IRS.
  • Treasury expects to begin distributing rebates within the next month, with direct deposits coming as soon as mid-April. It is expected that physical checks will take longer to arrive than direct deposits. In the coming weeks, Treasury plans to develop a web-based portal for individuals to set up direct deposit to get payments immediately.

Key Recovery Rebate Details:

  • Taxpayers that have filed a federal tax return in 2018 or 2019 are eligible to receive the benefit, in addition to Social Security beneficiaries and those receiving welfare benefits.
  • Phase-Out: The phase-out for Individuals begins at adjusted gross income (AGI) of $75,000 ($150,000/couple) and is completely phased out beyond AGI of $99,000 ($198,000/couple). For heads of household the phase out begins at AGI of $112,500 and ends at $146,500. The tax rebate amount is reduced by $5 for each $100 your income exceeds the income limits.
  • Those collecting Social Security or a disability check are eligible if they filed a tax return in 2019 or 2018, or received a form SSA-1099. Social Security beneficiaries do not need to take any action. Spouses of military members are eligible without a social security number. An adopted child can use an Adoption Tax Identification Number to be eligible.
  • Other than Social Security beneficiaries, individuals with no taxable income can file an IRS form to receive the rebate check. The IRS will be providing information soon with instructions on how to file the form on their website, irs.gov/coronavirus, including the ability to set up direct deposit.
  • Those with little or no taxable income are encouraged to use the IRS’ Free File Program which can be viewed here:https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free.
  • Children 17 and older are not eligible for the $500 credit.
  • Individuals claimed as a dependent on another taxpayer’s federal income tax return are not eligible.
  • Individuals filing Form 1040-NR, Form 1040NR-EZ, Form 1040-PR, or Form 1040-SS in 2019 are not eligible.
  • Nonresident aliens and individuals without a Social Security Number are not eligible.
  • For filers who use an Individual Taxpayer Identification Number (ITIN) on their return, the IRS has not issued guidance on eligibility.
  • The rebates are not taxable.
  • The rebates will not impact eligibility of other federal programs.
  • The rebates will not be reduced or offset to pay debts owed to other federal agencies, legally enforceable state income tax obligations, unemployment compensation debts, or other assessed federal taxes. Rebates will only be garnished if child support is owed.
  • The IRS will use the taxpayer’s 2019 federal income tax return to determine rebate amounts. If no 2019 tax return has been filed, the IRS will use the 2018 federal income tax return. If no 2018 federal income tax return has been filed, the IRS will use information on the taxpayer’s Form SSA-1099, Social Security Benefit Statement, or Form RRB-1099, Social Security Equivalent Benefit Statement for 2019 to determine the rebate amount.
  • If a taxpayer’s 2019 federal income tax return is filed on time, then he/she is eligible for the rebate, there are no additional deadlines to meet.
  • Taxpayers with incomes above the $99,000/$198,000 threshold levels on their 2018 or 2019 return, whose income falls below the threshold levels for 2020, can claim the rebate payment in the form of a tax credit when they file their 2020 federal tax return.
  • If a family had a child in 2019, but has not yet filed their 2019 federal tax return, the IRS will use their 2018 federal tax return. It is still possible to receive the $500 credit for 2019, but the family must either quickly file the 2019 return with the child’s SSN to get the rebate soon, or claim the credit on their 2020 return.
  • Checks will be sent to the address on the taxpayer’s most recent filing.
  • There is no increase in the standard deduction.

Retirement Security

  1. The 10% early withdrawal penalty for distributions from qualified retirement accounts up to $100,000 for coronavirus-related purposes until December 31, 2020 is waived.
  2. The bill allows plan sponsors to provide loan relief to individuals impacted by the coronavirus by temporarily increasing plan loan limits and delaying loan repayments.
  3. The bill waives the required minimum distribution rules for certain qualified plans and IRAs (including 403(a), 403(b), and 457(b)) for 2020.

Details:

  • Eligibility for Waiver of 10% Early Withdrawal Penalty: A coronavirus-related distribution is a one made to an individual:
    • Who is diagnosed with COVID-19,
    • Whose spouse or dependent is diagnosed with COVID-19, or
    • Who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child-care due to COVID-19, closing or reducing hours of a business owned or operated by the individual due to COVID-19, or other factors as determined by the Treasury Secretary.
  • The distributions are subject to tax over three years, and the taxpayer may recontribute the funds within three years without regard to that year’s cap on contributions.
  • Individuals meeting the same qualifications above are eligible for certain loan relief, including:
    • A temporary increase on the plan loan limit for 6-months after date of enactment (generally, up to the lesser of the present value of the nonforfeitable accrued benefit of the employee under the plan or $100,000).
    • A year delay in any plan loan repayment that comes due before December 31, 2020. Subsequent payments must be adjusted to reflect the delayed due date and any interest accrued during the delay.
  • Plan administrators are permitted to rely on an employee’s certification that they meet the eligibility requirements for a coronavirus-related distribution.
  • A withdrawal is not considered an eligible rollover distribution, and the usual 20% income tax withholding requirement does not apply. A 10% withholding applies unless the participant chooses otherwise.
  • 457(f) plans are not eligible for the waiver.
  • The increased loan limits are optional, but most plan sponsors are expected to adopt this provision.
  • Eliminates requirement that a loan cannot exceed 50% of the present value of a participant’s benefit. While this appears to allow a participant to borrow against their entire vested plan benefit, the requirement that a plan loan be adequately secured was not waived.
  • Loan due dates between enactment and December 31, 2020 are extended by one year, with interest applied to the amount due.

Unemployment Insurance: provides payments of $600 per week for up to four months to each recipient of unemployment insurance, and createspandemic unemployment insurance to provide $600 benefit for those unable to work for coronavirus-related reasons that are not eligible for traditional unemployment insurance, including the self-employed, gig-workers, independent contractors, and workers with irregular work history. The program expires December 31, 2020.

  • The payments are on top of any state umemployment benefits received during the same period, i.e the $600/week payment will be added to any state unemployment assistance.
  • If an individual exhausts state unemployment benefits and remains unemployed, they are eligible for an additional 13 weeks of assistance. An individual can receive no more than 39 weeks of payments. (26 weeks is the maximum benefit at the state level)
  • The program will be administered by the States.
  • To determine eligibility, individuals should contact the unemployment office in the state where they worked. Contact info for state unemployment offices can be found at: https://www.careeronestop.org/LocalHelp/UnemploymentBenefits/unemployment-benefits.aspx.
  • Individuals receiving paid sick leave or other paid level benefits are not eligible for payments, including sick leave benefits enacted in the CARES Act.
  • Allows states to waive the typical one-week waiting period before recipeints can receive unemployment benefits. Thirty-two states have made moves to waive their waiting periods.

Delay of Employer Payroll Taxes Payment: Self-employed individuals can defer payment of their share of the 6.2% Social Security tax over the next two years, with half required to be paid by December 31, 2021 and the other half by December 31, 2022.

  • Expands the list of allowable criteria for claiming unemployment compensation to include many reasons related to the COVID-19 public health emergency.
  • If an individual has already been unemployed for a few weeks due to COVID-19-related reasons, and exhausts the weeks of unemployment compensation available through a state’s laws, he/she will be eligible for an additional 13 weeks of benefits. These benefits will be federally-funded, but administered through the states.
  • Incentives were created to encourage states to waive the current requirement that a recipient must wait a week between applying for unemployment compensation and receiving it.
  • Online applications are accepted in most states.

Eligible for SBA Loans: independent contractors and sole proprietorships are eligible for SBA loans under the terms of the Covid-19 response legislation. More information on those programs is available here.

Student Loan Repayment

The bill defers student loan payments, principal, and interest through September 30, 2020 for all federal loans. The bill waives taxes on student loan repayment benefit programs created by employers. An employer may contribute up to $5,250 per employee each year, and such payment would be excluded from the employee’s income. The benefit expires December 31, 2020.

  • The $5,250 cap on student loan repayments applies to other educational assistance (e.g., tuition, fees, books) provided by the employer.
  • Employees may exclude employer student loan repayments made between the date of enactment and Dec. 31, 2020, but they are prohibited from deducting any employer-paid student loan interest expense excluded under this provision.
  • Students who drop out school due to coronavirus-related reasons will not be required to return portions of any federal student loans or Pell Grants, and the current academic term will not count toward lifetime eligibility for such loans..

Charitable Contributions

The bill permits deductions of up to $300 of cash contributions to churches and charitable organizations in 2020, whether the taxpayer itemizes their deductions or takes the standard deduction. The bill also suspends the 50% adjusted gross income limitation for individuals in 2020.

  • Cash contributions remain limited to the excess of adjusted gross income over the amount of all other charitable contributions, with any excess cash contributions carried forward to subsequent tax years.
  • The deduction does not apply to cash contributions to supporting organizations of churches and charities, or to donor advised funds.
  • The standard deduction has not been raised.

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