The CARES economic impact payments for individuals are the checks from the federal government. They can be up to $1,200 for an individual. For a married couple they can be $2,400. If you have dependent children under the age of 17 can receive up to another $500 per child. NOTE: these payments are phased out at higher levels of adjusted gross income (AGI).
For details about your particular situation you can go to the IRS website: www.irs.gov. There you can access Information Release IR-2020-61. It has the FAQs and answers about economic impact payments.
IRA withdrawal… available… if…
You can also borrow $100,000 from your IRA and pay it back three years later with no tax consequences. IRA owners adversely affected by the pandemic are eligible to take tax favored distributions. To keep things simple, let’s call these distributions coronavirus distributions (CVDs). They can total as much as $100,000. You can recontribute a CVD back into your IRA within three years of the withdrawal date.
If you do the withdrawal and the later re-contribution both receive treatment as a totally tax-free rollover. There are no limitations on what you can use CVD funds for during the three-year period. If you’re tight on cash, you can use the money to pay the bills and recontribute later when your financial situation improves. You can help your adult kids out. You can pay down your HELOC or whatever your heart desires.
Small employer tax credit and relief… terms and conditions
There is a small employer tax credit and payroll tax relief. This is intention here is to cover mandatory employee paid leave in association with coronavirus. For details on this relief go to the Families First Coronavirus Response Act (FFCRA). It can also help out self-employed individuals, see the Tax Guy column.
The CARES Act grants the so-called employee retention credit. The credit amount equals 50% of eligible employee wages paid. The employer must be eligible in a 2020 calendar quarter. The credit is subject to an overall wage cap of $10,000 per eligible employee. For details, see here.
Warning: The provision does not allow double tax benefit. The 50% employee retention credit cannot be claimed for COVID-19-related required employee leave payments mandated by the FFCRA for which the aforementioned federal payroll tax credits are claimed.
And the 50% employee retention credit cannot be claimed for employee wages taken into account in claiming the pre-existing work opportunity tax credit or the pre-existing tax credit for paid family and medical leave.
Bottom line, talk to your tax advisor. There are opportunities available but there are significant terms and conditions. The CARES economic impact payments for individuals are the checks from the federal government are only part of what’s out there. But be careful, don’t set yourself up.