What's New With Taxes: CARES Act Special Edition
April is Financial Literacy Month, and except for this year, Tax Month!
Here are a few tax-implications of the CARES Act that you should know about for 2019 and 2020. This information was taken from the following articles:
1) Filing and payment date for 2019 taxes has been postponed until July 15.
HOWEVER: Given that the stimulus checks are tied to information from the IRS, specifically your bank account for direct deposit, there are some instances when it might a good idea to file your 2019 tax return ASAP if you haven’t already done so. It might take up to 20 weeks to receive a check by mail if the IRS does not have (accurate) bank information for you. (NPR)
Here are some examples:
- If the bank account you used on your 2018 return is no longer in use.
- If your 2018 revenue was too high (AGI over $99,000) to be eligible, but your 2019 income will qualify you for the check.
- If this would be the first year you are filing as an independent (no longer considered a dependent on your parents’ return.)
Here is an interesting tidbit: If you made too much in 2018 or 2019 (the proxy the government is using for your 2020 income) to be eligible for a check, but have lost your job (due to Covid-19 or otherwise) and would qualify using your EXPECTED 2020 income, you won’t get any help now, but will get the “rebate” when you file your 2020 taxes. What if you actually end up making too much in 2020? You get to keep the $1200. Lucky you!
The administration reversed an earlier position that would have forced lower-income people on Social Security (retirees and those receiving disability) who don’t normally need to file income tax returns to file a “SIMPLE” return in order to get their stimulus checks. Now they will automatically get the check. (WaPo update to original article.)
A lingering sore point on these stimulus checks is that (young) adults over 16 who are still considered to be dependents on someone else’s tax return get no payment. Parents don’t get $500 for them either. So high school and college students who have lost their jobs get no relief.
2) Those drawing from retirement funds will NOT have to make their set minimum required draws (MDRs) this year as the stock market had its worst month/quarter since 2008 (or longer, depending on which index you are looking at.)
3) For this year and going forward, you will be allowed to deduct up to $300 of charitable deductions IN ADDITION TO taking the standard deduction. If you itemize (and donate a lot), there will effectively no longer be a limit to the deductibility of cash donations as in the past. The limit for any given year is the amount of your earned income for that year. If you give more than what you earn in any given year, you can deduct the balance the following year.
About the Author
Beth Tallman entered the working world armed with an M.B.A. in finance and thoroughly enjoyed her first career working in manufacturing and telecommunications, including a stint overseas. She took advantage of an involuntary separation to try teaching high school math, something she had always dreamed of doing. When fate stepped in once again, Beth jumped on the opportunity to combine her passion for numbers, money, and education to develop curriculum and teach personal finance at Oberlin College. Beth now spends her time writing on personal finance and financial education, conducting student workshops, and developing finance curricula and educational content. She is also the Treasurer of Ohio Jump$tart Coalition for Personal Financial Literacy.
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