Why You Should Care About the CARES Act

 In Planning Insights, Strategy Updates

The last few weeks have been very surreal as we have all watched the world, our country and our communities affected by this pandemic. As we all face the financial impact of suddenly shutting down large portions of our economy to comply with “shelter in place” orders, we find that the world around us is changing. We are witnessing innovation as businesses redesign operations and, in some cases, quickly pivot to an entirely new business model. Many schools and businesses are utilizing virtual classrooms and workloads to continue adding value during this time of social distancing.

In many attempts to add economic relief, the government has stepped in. The Federal Reserve has acted quickly to add some much needed liquidity to the financial system. And now Congress has taken a huge step as well.

On March 27, the President signed the largest economic relief package in U.S. history. The Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) attempts to rescue individuals, small businesses, borrowers, and certain sectors of the economy including airlines and health care.

The CARES Act will provide meaningful relief as detailed below:

  • If you take Required Minimum Distributions (RMDs) from your retirement accounts or inherited IRAs, you can suspend those RMDs for 2020 if you prefer not to withdraw funds in a down market or simply prefer not to pay taxes on those distributions. If you have already taken a distribution from your IRA in 2020, you may be eligible to roll the funds back under a 60 day roll back provision. Please contact us ASAP if you wish to postpone your RMD or roll any distributions back!
  • If you choose not to take an RMD this year, it may be a good year to look at a Roth conversion for planning purposes.
  • If you own a small business or run a nonprofit, you may be able to take a forgivable loan of up to 2.5 times your average monthly payroll costs. If you use the funds to pay your staff, your rent, your utilities, or the interest on your mortgage, the loan’s principal is forgiven.
  • If you earn less than $75,000 as a Single filing taxpayer or $150,000 as Married Filing Jointly taxpayers, you are eligible to receive direct payments of $1,200 per adult and $500 per qualifying child.
  • Federal estimated tax payments originally due April 15th are now due July 15th. Other federal tax deadlines remain unchanged – June 15th payments are still due on June 15th.
  • If you are having a difficult time making your mortgage payment, contact your lender and you may be eligible for a furlough of up to 360 days.

Please CLICK HERE to find a high level comprehensive overview of the act. Please take the time to read through it as you might be surprised to find a provision that could enhance your personal situation. As you will see, this act is three times the size of the 2008 “TARP” package.

This much needed liquidity will help millions of individuals and businesses. We are here to help you understand how it might impact your financial plan. Feel free to reach out to us should you have any questions.

Your Team at Main Street Research