CARES Act: Stimulus Checks, Unemployment, Student Loan, IRA/401k, HSA/FSA Changes

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In response to the coronavirus outbreak, the federal government approved a third round of economic relief. There is plenty of media coverage, but after reading multiple articles I noticed that nearly all of them miss at least one thing that another covered. Here’s my own mixtape of highlights so that you can research further if it applies to your situation.

$1,200 for each adult + $500 per child 16 or under. You may want to wait to file. Individuals under $75,000 adjusted gross income get the full amount, and married filing joint under $150,000 get the full amount. Fully phased out at $99,000/$198,000. You can find AGI on Line 8b on 2019 Form 1040 2019, Line 7 on 2018 Form 1040. Based on 2018 tax filing if you haven’t filed for 2019, and 2019 tax filing if you did file. So if got a big raise in 2019, you should delay filing. If your income went down in 2019 or you didn’t file before, you should file now. Finally, if you made a lot in 2019 and expect to make less in 2020, you may still be able to get the money eventually when filing your 2020 taxes.

There is no clawback provision on overpayments, so it doesn’t matter if you end up making more than the income limits in 2020. If you listed a bank account for direct deposit of tax refund, they will try to send your money that way (and then send you a snail mail confirmation). The target date is April 17th. Otherwise, you will likely have to wait longer for a physical check. The money is not taxable.

Unemployment benefits expanded again. The bill has expanded eligibility for unemployment benefits to self-employed and part-time workers. Eligibility also expanded to cover those unable to work due to the coronavirus outbreak. The eligible period is also extended by 13 weeks. There will also be an increased benefit amount (up to $600 per week) on top of your state benefits for up to 4 months.

401(k) and IRA early withdrawal penalties waived up to $100,000. You can now take up to $100,000 out of your IRAs and you have 3 years to put it back into your IRA again without penalty or tax. It’s kind of like a really long rollover window. However, you will owe income tax on whatever partial amount is not put back within 3 years. This is called a coronavirus-related distribution (CRD) and is limited to those affected by the coronavirus.

Instead of a hardship withdrawal, you may wish to take a 401k loan instead. The retirement plan loan limit is also raised to the smaller of $100,000 or up to the full amount vested. Anything that can permanently damage your retirement savings should all be avoided if possible, of course.

Required minimum distributions are waived for 2020. This applies to everyone, even if not affected by the coronavirus. If you don’t need to make the distribution, this can save you on taxes.

Extended student loan relief. Loan and interest payments will be deferred through September 30th without penalty for all federally owned student loans.

Expanded use of Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs). Tele-medicine services can now be used before meeting the plan deductible. You can again buy over-the-counter drugs without a prescription. Certain menstrual care products, such as tampons and pads, are also now eligible medical expenses.

Sources: NYT, Tax Foundation, NPR, Accounting Today, SHRM, SGR Law

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  1. AGI is not after standard deduction, it is before. Reference form 1040 (2019 version is line 8b)

  2. Jonathan, do you know if the IRA deadline is pushed back to the new tax filing deadline or if its still April 15?

  3. Paul Chase says

    Did you mean AGI ‘before’ subtracting the standard deduction?

  4. Chip Alexander says

    I continue to find your blog incredibly useful, and the only one i read regularly. From your good recommendation to not put watches and jewelry on my home policy (and I indeed had an expensive watch claim which I could then actually get coverage for) to this latest one telling me about changes to FSA which I had not hear ANYWHERE else, it is wonderful. Thank you!

  5. “$1,200 for each adult + $500 per child under 16.”

    My kid just turned 16 a couple of months ago…do you know what happens with him? Do we lose the $500 altogether or gain $1,500 for him instead?

    • According to this Forbes article, the child must be under age 17 at the end of the tax year. Good news for you, but kind of a bummer if you have a 17-year that’s probably eating everything in sight right now!

  6. I hopefully found an answer to my 16 year old question on another website ( )

    —— —-

    “Which dependents qualify for a rebate?

    The CARES Act uses the Child Tax Credit (CTC) eligibility standards. All qualifying children who are under age 17 who have not provided for more than half of their own expenses and lived with the taxpayer for more than six months are eligible. This means that adult dependents, such as college students aged 17 and over, and elderly dependents do not qualify for the $500 rebate. Adult dependents do not qualify for their own rebate either. “

  7. Our AGI for 2019 is about $240K and we already filed taxes. It appears like we do not qualify for stimulus check this year. But can we still get the full amount eventually when we file taxes next year? Please advise.

  8. Has anyone seen mention of what restrictions might be loosened for Dependent Care FSA accounts? Lots of people aren’t able to use those restricted funds now because their child care provider is closed and could probably put that money to use elsewhere.

    • My Dependent Care FSA provider allowed me to adjust the withheld amount for 2020 as if I had a qualifying event (job loss, marriage, etc) if we had a change to to working from home or a childcare closure. Basically it said to put down “COVID-19” as a qualifying event.

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