The 2020 CARES Act and What You Need to Know

Vincent Scarsella Director of Research
On Friday, March 27, 2020, new legislation was signed into law that aims to provide relief to Americans and businesses negatively impacted by COVID-19 crisis. This legislation, known as the Coronavirus Aid, Relief, and Economic Security (CARES) Act, is a $2 trillion relief package that includes direct monetary payments to Americans as well as various business subsidies to counteract some of the adverse economic conditions resulting from the pandemic. We wanted to provide an overview of information regarding this enactment to those who are affected by this pandemic.

One Time Stimulus Check

The CARES Act sends a $1,200 direct payment to eligible adults earning a yearly income up to $75,000. For married couples who jointly file their taxes and are earning up to $150,000, they will receive $2,400. Parents will receive an additional $500 for each child under 17 years of age. For filers with income above those amounts, the payment amount is reduced by $5 for each $100 above the $75,000/$150,000 thresholds. Single filers with income exceeding $99,000 and $198,000 for joint filers with no children are not eligible. These amounts are calculated on 2019 AGI, or 2018 AGI for those who haven’t filed their 2019 tax return yet. For those who exceed the income limit in 2019 to qualify for the rebate but lost your job in 2020 will not receive a check. However, they can claim the rebate as credit when filing taxes next year.

How Will the IRS Know Where to Send My Payment?

The large majority of people won’t need to take any necessary action when they receive the stimulus check. The IRS will calculate and automatically send the payment to those eligible. For those who have already filed their 2019 tax returns, the IRS will use the information to calculate the amount. Similarly, for people who have not yet filed their return for 2019, the IRS will use information from their 2018 tax filing to determine the payment. The stimulus check will be directly deposited into the same banking account used for filing the return. For individuals who do not have direct deposit information, the Treasury plans to develop a web-based portal for individuals to provide their banking information.

Additional Relief to Retirement Accounts

The CARES Act additionally provides new relief provisions pertaining to retirement accounts. To name a few provisions that can assist those with retirement plans and RMDs:
Penalty-free distributions from retirement accounts
The act waives the early withdrawal penalty for “coronavirus-related distributions” up to $100,000 from qualified plans. Prior to the CARES Act, plan participants under the age 59½ were penalized to a 10% excise tax if they made withdrawals from their tax-advantaged retirement plans, such as a 401(k) or IRA.
Increase on loan amount from qualified plans
For a 180-day period following the passing of the CARES Act, qualified individuals can take out loans from their 401(k) up to $100,000. This is an increase from the previous amount of $50,000. In addition, outstanding qualified loan repayments may be suspended for 1 year.
Required Minimum Distributions suspended
The CARES Act suspends RMDs from tax-deferred retirement accounts for one year. Prior to this, beginning at age 70½ for those born before July 1, 1949 and age 72 for those born after June 30, 1949, retirees were required to withdraw a set amount from their account balance. With the suspension of RMDs, retirees are not mandated to withdraw from their accounts.
In conclusion, the above information highlights just a few points of the CARES Act as this is a very extensive legislative act. We hope you find this information useful. If you have additional questions or concerns regarding the impact of the CARES Act, we are happy to assist and provide feedback. Sgroi Financial thanks you for the continued trust and confidence you place in our team during this time.


Sgroi Financial is a full service, independent financial planning firm proudly serving the Western New York area since 1971. We offer services that will help you achieve your financial goals including retirement planning, investment management, estate planning, college planning and insurance. We help individuals, families, retirees, working adults, young adults and business owners.

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