In March of 2020, Congress agreed to enact a new Act in response to the Covid-19 pandemic. The $2.2 trillion package is the largest in U.S. history and is meant to aid individuals, businesses and various organizations. The pandemic has caused normal activity to cease. Daily life as most of us know it has been upended. Most people are quarantined and are unable to engage in their normal daily activity. The Act was created to help many people navigate what may be the “new normal” for awhile. You don’t have to read the 883-page Act and try to make sense of it all (that’s what I’m here for). There are key provisions you may not know about.
REBATE & INCOME REQUIREMENTS
One of the most talked about provisions of the ACT is up to $1,200 ($2,400 if you file a joint return) rebate for taxpayers based on your Adjusted Gross Income (AGI) and tax returns. The rebate is a refundable tax credit, which means it will lower your tax liability dollar-for-dollar. If you made $75,000 or less (if you’re single) or $150,000 (joint filer) or $112,500 (head of household) based on your 2019 tax return. If you have yet to file your 2019 return, your 2018 return will be used. The rebate is phased out at $50 for every $1,000 of earned income above the limits.
What if you made significantly more in 2019 or 2018 (ex. A single person who made $80,000) and are expecting to make a lot less in 2020 (i.e. same single person expects to make $45,000 in 2020) then you will get a $1,200 refundable tax credit on your 2020 tax return, meaning you may get a tax refund when you do your 2020 taxes, assuming you don’t owe.
If you made significantly less in 2019 than 2018 and have yet to file your taxes, make sure to hurry up and do so ASAP so that the most recent return on record with the IRS will be the 2019.
If you did not file a return in 2018 and 2019 and made $12,200 ($24,400 for married couples) for 2019 and you are eligible for the rebate, you can use a Treasury Department’s online portal for Non-filers to receive your payment quickly.
DIRECT DEPOSIT PAYMENTS
If you are eligible for the rebate, one question, I’ve seen being repeatedly asked is where the money will be sent. If you received a refund on your 2018 or 2019 return and indicated that you’d like a check to be mailed to you. Whatever address you used on your return is where the rebate check will be sent to. On the other hand, if you requested a direct deposit, the rebate will be sent to the account on record that was used to send your tax refund. The Treasury
That being said, if you have since switched banks or changed accounts since you filed your return, later this month, the IRS will set up an online portal called “Get My Payment” for tax payers that filed their 2018 & 2019 taxes but didn’t set up direct deposit or need to update their information. The IRS will also send a notice in the mail about the payment with a phone number for you to contact them if you have questions.
STUDENT LOAN DEFERRALS
Anyone who has student loans knows how overly burdensome they can be, especially when it comes to repayment. One of the provisions of the C.A.R.E.S. ACT, includes the deferral of Federal student loan payments until September 30, 2020. What this means is that for six months, if you have Federal student loans and are currently making payments, you do not need to do so (especially if you’re experiencing economic hardship). During this 6-month window, no interest will accrue on your loan. Think of this as an interest-free loan for 6 months.
You do not need to do anything to take advantage of this, however, if you currently have direct payments coming out to pay your loans, you will need to stop the payments yourself and restart them in September. They will not automatically stop.
If you are currently repaying your Federal loans under one of the loan forgiveness programs and you qualify for the 100% loan forgiveness, you may want to consider stopping payments right now. The 6-month window still counts toward your forgiveness requirements so the money you can save by not making the payments can be used toward other financial goals.
There’s a lot more in the Act that I wasn’t able to address in this post so please send me a message or contact us if you have any questions about the package.
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