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Stimulus is coming! What does that mean to you?

Stimulus is coming! What does that mean to you?

April 02, 2020
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With the COVID-19 pandemic having a major impact on most of our lives while we all seem to live in some form of quarantine or social distancing, Congress and the President have worked together to pass the $2 trillion dollar stimulus bill. This bill, named the Coronavirus, Aid, Relief and Economic Security (CARES) Act, was signed into law by President Trump on March 27th. With the new law in place, below are some of the ways it will likely impact you and your family.
 
Required Minimum Distributions (RMD) have been waived for 2020 for defined contribution plans such as a 401(k) and for IRAs. The provision applies to 2020 RMDs and 2019 RMDs that must be taken by April 1, 2020. Since the CARES Act states that it applies to all RMDs, it is believed that the waiver includes inherited IRAs and 401(k)s as well.
 
If you have not yet reached age 59 ½ and need to access funds in your 401(k) or IRA, the CARES Act will also waive the 10% pre-mature distribution penalty for a coronavirus related distribution. This is in addition to the normal hardship distribution rules. In order for the 10% early distribution penalty to be waived, there are certain guidelines that must be met, including the distribution cannot exceed $100,000 and either the individual, their spouse, or a dependent must be diagnosed with the COVID-19 virus.
 
The CARES Act would also allow the income taxes of a withdrawal related to COVID-19 from a retirement plan account to be paid over a three-year period. The withdrawals could also be repaid back into the account over a three-year period. These repayments would be treated as a rollover and therefor would not reduce the annual contribution limits.
 
Part of the CARES Act also includes direct payments (known as Economic Impact Payments) to individuals and families based on the Adjusted Gross Income for the most recent tax return the IRS has on file. For individuals with income of up to $75,000 and married couples filing joint returns, these payments will be $1,200 for individuals and double that for married couples. These payments will be reduced by $5 for each $100 of income above the threshold. Individuals with income exceeding $99,000 and $198,000 for joint filers with no children will not be eligible to receive any payments. Parents will also receive an additional $500 per qualifying child.
 
The IRS has stressed that there are already several different scams being perpetuated regarding the Economic Impact Payments. Some of these scams are either calling, texting, or e-mailing individuals and telling them that before their payment can be processed, they need to provide their personal information. Another scam is telling individuals that people will be able to receive their payments faster if they share their personal information and pay a small fee. Neither of these scenarios are correct- the IRS has made it clear on their website that most individuals do not have to take any action in order to receive a payment. A link to the IRS website with additional information is here.
 
During this time of market and economic uncertainty, we hope that you find the summary above helpful. Please know that your team at Impel Wealth Management is here to help answer your questions about how the CARES Act can impact you and your family and friends as we keep Moving Life Forward together.