How the CARES Act Benefits You

June 16, 2020


The Coronavirus Aid, Relief, and Economic Security Act, or what you probably know as the CARES Act, was passed in late March to provide economic assistance to Americans during the apex (hopefully!) of the pandemic. Though the country is beginning to gradually reopen, many of the provisions of the CARES Act apply until the end of the year.  Let’s talk about some of the elements that are most relevant to you.


New Deadlines

Who doesn’t love extensions?


2019 Tax Filings: The federal filing deadline for 2019 federal taxes has been pushed to July 15, 2020.  By waiting to file, you can postpone any tax payments that may be owed to the IRS.  If, on the other hand, you are expecting a tax refund, fear not; you will still receive the full amount you are owed soon after you file.

Federal estimated taxes for 2020 have also been delayed until July 15, 2020 for your first payment- that means April 15th and June 15th for most estimated payers.  Be sure to check your own state guidelines, though, as you may need to make a payment for June for your estimated taxes.

2019 IRA Contributions: The deadline for 2019 contributions to your IRA, Roth IRA, or other qualified retirement account has also been moved to July 15, 2020.  This gives you extra time to reach the 2019 IRA contribution limits if you have eligible compensation and have not yet reached the maximum.


Rule Changes for Retirement Accounts

Even if these changes may not seem applicable to your current situation, keep them in mind just in case—these days, it’s hard to know what the future will hold.


Required Minimum Distributions: 2020 IRA required minimum distributions (RMDs)

have been waived for the remainder of the calendar year.  They will resume in 2021.  If you have yet to take your 2020 RMD and don’t need the money, you should take advantage of this change and keep your money invested.  This waiver also applies to required distributions on inherited IRAs.

If you have already taken an RMD in 2020 but do not need the funds, you may be able to roll them back into your IRA.  The IRS has extended the 60-day rollover deadline to July 15, 2020, for distributions for which the deadline would’ve fallen between April 1, 2020, and July 15, 2020.  In other words, if you took an RMD between February 1st and May 15th of this year, you likely have until July 15th to complete a rollover of the entire amount back into your IRA.  Why would you do this?  By returning the funds to your IRA, you will avoid the ordinary income tax that would have been paid on those funds.  If you already withheld some federal taxes on the withdrawal, you may receive a refund next year.

Qualified Retirement Plan Distributions: Typically, a distribution from a retirement plan taken prior to age 59 ½ creates a taxable event and is subject to a 10% early withdrawal penalty.  However, if you meet the requirements, the CARES Act allows you to withdraw up to $100,000 without the 10% penalty until the end of 2020.  The withdrawal is still taxable, but the income tax may be spread over the next three years.  This new provision also allows you to, within three years, re-contribute the amount of the distribution back into your retirement account, regardless of yearly contribution limits- making it a tax-free loan to yourself.

To take advantage of the change, one of the following conditions must apply to you: (1) you have been diagnosed with COVID-19, (2) you are caring for your spouse or a dependent who has been diagnosed with COVID-19, (3) you have been financially impacted by stay-at-home mandates as a result of furlough, reduced work hours, layoff, or inability to work due to loss of child-care, or (4) you own a nonessential business that was forced to close.

Keep in mind that tapping retirement funds early is a move that should only be used as a last resort, but it is important to know the option exists.

401K and other Qualified Retirement Plan Loans: The CARES Act has increased the maximum qualified retirement plan loan.  Prior to the CARES Act, you could borrow the lesser of 50% of your account balance or $50,000.  Now, you can borrow up to the lesser of $100,000 or 100% of your account balance.  Repayments of these loans will be delayed for one year, then you would repay the loan with regular payments back into your 401K or another qualified plan.  Note that employers are not required to increase this loan limit, so if you want to borrow against an employer-sponsored retirement plan, make sure you contact your employer or the plan administrator to confirm that the limit has been raised.


Cash Rebates

By now you’ve heard all about the $1,200 stimulus checks. If you got one, great!  If you didn’t get one, here are three reasons why:

  1. You made too much money last year. If you are an individual with an income of over $99,000 or a married couple with a combined reported income over $198,000, you do not qualify for the cash payment.
  2. The IRS doesn’t know where to send it. To know where to send the stimulus check, the IRS uses information from either your 2018 or 2019 (if you’ve filed it) tax filing.  Changes to your banking information or your address since the last time you filed your taxes could explain why you haven’t received a check, assuming you meet all other requirements.  If this applies to you, there are a few different ways to update your address with the IRS.  Visit to find the best option for you.
  3. You are claimed as a dependent. If you are wondering why your college-age child didn’t receive a check, did you claim them as a dependent?  If your child is over the age of 17 and they have been claimed as a dependent on a recent tax filing, they do not qualify for a stimulus check.

Just a few more things to note about the cash payments:

  • Full Rebate: If you are an individual with an income under $75,000, you should expect to receive the full $1,200 rebate. If you are a married couple with a combined income under $150,000, you should expect to receive the full $2,400 rebate (a $1,200 check sent to each of you).  But there are phase-outs, reducing the payment if your income is between $75,000/$150,000 and $99,000/$198,000.
  • Child Bonus: For each child under the age of 17, parents who meet the income requirements receive an extra $500. This bonus is subject to the same phase-out as the base rebate.


Charitable Contributions

There has never been a better time to donate to organizations and causes that you support, and the CARES Act adds an extra benefit for doing so.  Depending on your situation, the CARES Act increases the amount of charitable giving that you can deduct from your income on your 2020 taxes.


Do you itemize your deductions?  If so, you can now deduct the value of your charitable contributions up to 100% of your adjusted gross income (it used to be 60%).

What if you don’t itemize?  The CARES Act allows for a new above the line charitable contribution deduction of up to $300, available for those who do not itemize. This great temporary feature of the CARES Act allows many people to help those in need and also get a tax benefit!

To utilize these deductions, all contributions must be made in cash in 2020 to a public charity or foundation as described in section 170(b)(1)(A) of the Internal Revenue Code.  Contributions made to a supporting organization or donor-advised fund do not qualify.


For Business Owners

If you own a small business, there are two loan programs expanded by the CARES Act that you need to know about.

  • SBA Economic Injury Disaster Loans (EIDL) – These are low-interest loans of up to $2 million that can be used to pay for expenses that could have been met had the pandemic not occurred. If you apply for an EIDL, you can now also request an emergency advance of up to $10,000 which does not need to be repaid.
  • Paycheck Protection Program (PPP) – While this program has gotten a lot of negative press at its start, it is still available and becoming easier to navigate. This program provides low-interest loans to small businesses that maintain their payroll during this emergency.  PPP is retroactive to February 15, 2020, and loans are available through June 30, 2020.  Even more valuable, The PPP loan may be forgivable if the funds are used to maintain employees.

The CARES Act is designed to help most people in some way, regardless of where you are in your financial journey.  The first step is to be aware of its many elements, and the next is to speak with your financial advisor and accounting professional to understand how the bill’s provisions can benefit you specifically.