Thank you to Kim Hartsock, CPA and Megan Randolph, CPA from Warren Averett for helping to breakdown and explain the recently passed federal relief package known as the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
While men are more likely to be physically and medically affected by COVID-19, much conversation has been had about the pandemic’s societal impact on women, who worry more about losing income due to the coronavirus’s impact on their workplace, who hold the majority of minimum wage jobs and healthcare jobs, and who hold two-thirds of the student debt in the United States.
On March 27, 2020, the president signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) into law to provide relief to businesses and individuals responding to the COVID-19 crisis. Below are a few of the provisions included in this legislation that women should be aware of.
2020 Recovery Rebates for Individuals
U.S. residents with a valid Social Security number and an adjusted gross income of $75,000 or less ($150,000 for a married couple), will receive a recovery rebate of $1,200 per person, plus an additional $500 per child.
The income requirements will be based on the taxpayer’s 2019 return (or 2018 return if 2019 is not filed). The rebate is phased-out for individuals with higher incomes and is completely phased-out for individuals making more than $99,000 or married couples making more than $198,000.
Special Rules for Use of Retirement Funds
The 10 percent penalty placed on early withdrawals from qualified retirement accounts has been waived by the CARES Act. This applies to withdrawals of less than $100,000 that were related to coronavirus that were taken on or after January 1, 2020.
In addition to waiving the penalty, taxpayers can spread the taxation of this withdrawal over three years. Another potential benefit is the option to recontribute the withdrawal within three years to the eligible retirement plan.
The CARES Act also allows for coronavirus-related loans for certain retirement plans if an individual:
- Has COVID-19
- Has a spouse or dependent who has COVID-19
- Experiences certain financial hardship because of COVID-19
Because women are more likely to assume caretaking roles and healthcare responsibilities for their families and because women worry more about loss of income due to the disease, this may present viable assistance.
Changes Related to Charitable Deductions
The CARES Act encourages charitable giving by allowing a $300 “above the line” deduction for charitable contributions (regardless of whether you itemize your deductions or not) and temporarily modifies the limitations on the deductibility of charitable deductions.
For individuals who itemize, the 50 percent of adjusted gross income limitation is suspended for 2020. For corporations, the charitable donation limitation in is increased to 25 percent of taxable income.
Exclusion for Certain Employer Payments of Student Loans
As part of the CARES Act, employers are able to provide tax-free student loan repayment benefits to employees until January 1, 2021. Employers may contribute up to $5,250 annually toward an employee’s student loans tax-free to the employees. In addition to student loan repayment assistance, employers can also exclude up to $5,250 from employee income for educational assistance (e.g., tuition, fees, books) provided by the employer.
This could be especially advantageous for women, who hold two-thirds of student debt in the U.S.
Temporary Waiver of Required Minimum Distribution Rules for Certain Retirement Plans and Accounts
To help individuals in retirement, the CARES Act waives the required minimum distribution rules for certain defined contribution plans and IRAs for calendar year 2020. This allows individuals to wait to withdraw funds instead of forcing a withdrawal during a volatile market. According to a summary from the Senate, “The bill also provided a considerable expansion to unemployment benefits.”
In addition to the many provisions for individuals, there are also opportunities for relief for businesses within the CARES Act, including Small Business Administration loans, payroll tax credits and more. Women own more than 11 million businesses within the U.S. and should closely consider how their companies’ positions align with relief provisions in the CARES Act.
Kim Hartsock is the Office Managing Member of the Atlanta office and is positioned as a leader, connector and strategist within the Firm, who offers a unique blend of strategic business advisory solutions. She leads clients’ strategic planning to higher levels of thinking and effectiveness. Kim saves clients’ time and costs by providing quality integrated, value add solutions and cultivating valuable relationships focused on innovative goals and strategies. She leads the Atlanta local office growth strategy team. Kim resides in Gwinnett County with her husband and three children.
Megan Randolph has been a dedicated member of the Warren Averett team since 2006 and is a Member in the Tax Division. She has focused the majority of her career on nonprofits and healthcare, specializing in the tax compliance and consulting needs of large nonprofits, including foundations. She has extensive experience in Form 990, Schedule H, Schedule K, nonprofit setup and retroactive reinstatement. She also specializes in serving the federal and state tax needs of large nonprofit and governmental entities, including universities, municipalities and healthcare organizations. Her experience also includes manufacturing companies, private equity investment funds and international, state and local taxation. Megan is the Firm’s service area leader of Birmingham Tax and is responsible for managing over 50 employees in this division. She also serves as the champion of the Firm’s recruiting team for the University of Montevallo.