Covid-19 Virus — Rebate Checks and Other Relief in the CARES Act

By Joe Nichols March 31, 2020

As I write this on the last day of March, 2020, there are 6 confirmed cases of the Covid-19 virus in Franklin County; 17 confirmed cases in Clinton County; 13 in St. Lawrence County and four cases in Essex County.  AS the Malone Telegram reported the Franklin County Emergency Operations Center has indicated “Everyone should assume COVID-19 is in their community and stay home, avoid contact with others and practice recommended sanitary procedures and social distancing.”   According to all sources the numbers of confirmed cases are certain to rise in the days and weeks ahead.

Some of the provisions of the new CARES Act, just enacted by the Federal Government, may help you and your family weather the economic consequences of this pandemic.

REBATE CHECKS:

Rebate checks are advanced payments of a new refundable tax credit (Code §6428). These rebate checks for individuals with adjusted gross income (AGI) below set amounts are being paid through the IRS. Eligibility is determined by AGI on 2019 if returns for 2019 have been filed, or on 2018 returns if the 2019 returns have not been filed. Different AGI thresholds apply to joint filers, heads of households, and other filers (singles and married persons filing separately). There is a phase-out range in which individuals can receive a partial payment. There is an added amount for each child; an individual who is another taxpayer’s dependent does not receive a rebate check.

The CARES Act contains measures to provide rebates to U.S. residents with adjusted gross income of up to $75,000 ($150,000 for joint returns) that are not dependents of other U.S. taxpayers. Such persons are eligible to receive $1,200 ($2,400 in the case of eligible individuals filing a joint return), which amounts are reduced by $5 for every $100 that a taxpayer’s income exceeds the thresholds—thus, persons with income exceeding $99,000 ($198,000 for joint filers) will not be entitled to any rebates. In addition, eligible individuals are entitled to an additional $500 rebate for each child of such individual.

Rebates are to be issued as rapidly as possible, and may be disbursed electronically to accounts authorized by a payee on or after January 1, 2018, for the delivery of a refund of taxes. Rebates will be issued based on 2019 tax returns (or 2018 tax returns) filed by such individuals. No action will be required by eligible recipients to receive their rebate.

YOUR RETIREMENT ACCOUNTS:

According to the National Law Journal, “Tax-Favored Withdrawals. Eligible retirement plans are permitted to allow certain distributions during 2020 in an amount of up to $100,000 (in the aggregate from all plans maintained by the employer or any ERISA affiliate of the employer) to participants without such participants incurring the 10% penalty tax for early withdrawal. A distribution is eligible for this exception to the 10% penalty tax if the distribution is made during the 2020 calendar year to an individual (i) who is diagnosed with the virus SARS-CoV-2 or COVID-19 by a test approved by the CDC; (ii) whose spouse or dependent is diagnosed with such virus; or (iii) who experiences adverse financial consequences as a result of being quarantined, laid-off, furloughed, working reduced hours or is unable to work due to lack of childcare (a “Qualified Individual”).”

A coronavirus distribution, is taxable, but the tax is stretched out over a  three-year period beginning with the taxable year in which the distribution is made unless the Qualified Individual elects to include it income earlier (or makes a tax-free repayment of the distribution) and such distribution is not subject to 20% withholding that applies to eligible rollover distributions. Plans may, but are not required, to permit such distributions and may need to be amended to permit in-service withdrawals.

Please be safe out there.

Like all law offices, Governor Cuomo has directed us not to work from our office.  I am very proud to say that our entire staff is working diligently from our homes and are in constant contact with our clients, new and old, in regard to their files.  If you do have any questions or if you have a legal need, please don’t hesitate to get in touch with us at 518-483-1440, or at jnichols@pnglawfirm.com