CARES Act – Individual Provisions
2020 Recovery Rebates for Individuals
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides payments to taxpayers (subject to income limits) in the way of a credit under §6428 of $1,200 per individual ($2,400 for married couples filing a joint return) plus $500 per qualifying child who is under age 17 (as defined under §24(c)).
The payment is reduced by 5% of the taxpayer’s adjusted gross income in excess of $75,000 ($112,500 for head of household; $150,000 for joint filers). The payment will fully phase out when income reaches $99,000 for single filers, $146,500 for head of households with one child and $198,000 for joint filers.
Eligible taxpayers include anyone except:
- Nonresident aliens
- Any taxpayer who does not have a Social Security number (SSN) or Adoption Taxpayer Identification number (ATIN)
- Taxpayers who qualify as a dependent of another taxpayer (§151)
- Estate or trust
Individuals who have no income, as well as those whose income comes entirely from non-taxable means-tested benefit programs, such as SSI benefits also qualify for the advance payment.
Joint filers are each treated as having received one-half of the advanced payment. The eligibility for the payment is based on the taxpayers 2019 tax return, or if the taxpayer has not filed a 2019 return, eligibility is based on the 2018 return. If no returns were filed in 2018 or 2019, information from 2019 Forms 1099-SSA and 1099-RRB will be used.
The payments are not subject to offset.
For Coronavirus Tax Relief information from the IRS, click here.
Penalty-free Retirement Distributions
Certain taxpayers are permitted to withdraw up to $100,000 from a retirement plan or IRA for “coronavirus-related distributions” without incurring the 10% premature distribution penalty under §72(t). A coronavirus-related distribution includes a distribution:
- Made after Jan. 1, 2020 and before Dec. 31,
- To an individual who is diagnosed the with virus SARS-CoV-2 or COVID-19 by a test approved by the Centers for Disease Control and
- To a spouse or dependent of a person diagnosed with such virus by such a
- To persons who experience adverse financial consequences as a result of being quarantined, furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, closing or reducing hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Secretary of the Treasury.
- If the taxpayer chooses, they may, at any time during the 3-year period beginning on the day after the date such distribution from a qualified retirement plan was received, make one or more contributions in an aggregate amount not to exceed the amount of the distribution to an eligible retirement plan and treat the contribution as a rollover contribution. Distributions from an IRA are treated similarly.
- Coronavirus-related distributions are included in the taxpayer’s income, beginning with the year of distribution, ratably over a three-year period unless the taxpayer elects not to do so.
Loans from Qualified Plans
Loans from qualified plans made within 180 days beginning on the day of enactment, will not be treated as a distribution if the amount distributed does not exceed $100,000.
Taxpayers who have a current outstanding plan loan with a payment requirement on the date of enactment and ending on Dec. 31, 2020 will be granted an automatic 1-year delay for making that repayment. Any subsequent repayments with respect to any such loan shall be appropriately adjusted to reflect the 1-year delay in the due date.
Expansion of Unemployment Benefits
The size and scope of unemployment benefits is expanded under this bill. It includes relief for workers who are self-employed, as well as independent contractors. These changes are temporary.
- Provides $250 billion to expand unemployment benefits
- Makes sure self-employed and independent contractors, like Uber drivers and gig workers, can receive unemployment during the public health The bill also includes support to state and local governments and nonprofits so they can pay unemployment to their employees
- Makes benefits more generous by adding a $600/week across-the-board payment increase through the end of In addition, for those who need it, the bill provides an additional 13 weeks of benefits beyond what states typically allow
Unemployment insurance eligibility is expanded to those who are not eligible for regular compensation or extended benefits under state or federal law, or previously passed pandemic emergency unemployment compensation.
To qualify, an individual must self-certify that s/he is otherwise able and available to work but cannot for one of the following reasons:
- Diagnosis of COVID-19 or is experiencing the systems and seeking a medical diagnosis
- Member of household has COVID-19
- Individual is providing care for a family member or member of household who has been diagnosed with COVID-19
- Child or other person in household for whom the individual is the primary caregiver is unable to attend school or other facility because of COVID-19 and such attendance is necessary for that individual to attend work
- Individual is unable to reach place of employment because of mandatory quarantine
- Individual has been advised by a medical professional to self-quarantine due to COVID-19 concerns
- Individual was scheduled to start a job and doesn’t have a job or unable to reach job due to COVID-19
- Individual has become the primary source of income or major support for household due to head of household dying due to COVID-19
- Individual has quit job as a direct result of COVID-19
- Place of business is closed due to COVID-19
- Individual is self-employed, is seeking part-time employment, doesn’t have sufficient work history, or otherwise doesn’t qualify for regular unemployment or extended benefits
- This does not include individuals who can telework with pay or who are receiving paid sick leave or other leave benefits due to other provisions in COVID-19
This assistance is available beginning Jan. 27, 2020 and goes until Dec. 31, 2020 with a 39-week maximum for an individual receiving assistance.
The bill also allows for states to waive their one week waiting period for unemployment benefits and the federal government will reimburse them for that week, thus incentivizing states to provide an immediate benefit.
Paid Leave for Rehired Employees
The CARES Act amends the expanded paid leave requirements for employers in the Families First Coronavirus Response Act to include employees who are laid off and then rehired by an employer. Specifically, an employee who was laid off by their employer on March 1, 2020 or later, had worked for the employer for at least 30 of the previous 60 days before being laid off, and was then rehired by the employer will be eligible for the paid family and sick leave benefits.
