There is finally some good news to report. Our representatives in Washington have been somewhat busy and we have three government programs to share with you, our valued clients.
- Coronavirus Stimulus Bill
- Economic Injury Disaster Loan Program
- SECURE Act (Setting Every Community Up for Retirement Enhancement)
With the onset of the coronavirus here in the United States, the Senate has passed a Stimulus Package that still needs to be debated and passed in the House of Representatives. Most people believe that the House will pass the package as-is for submission to the President to sign. We are all hoping that is the case. Here are highlights from that bill which will hopefully get passed/signed today or this weekend:
- People affected by the coronavirus crisis will get access to up to $100,000 of their retirement savings without the normal 10% penalty that is assessed on distributions prior to age 59 ½. Income taxes will still be due on the withdrawals, however, the income tax can be paid over three years.
- For all retirees, the bill will suspend the 2020 minimum required distributions (RMD’s) for retirement accounts. This will allow beaten down accounts to be able to eventually rebound without requiring money to come out of the account. RMD’s are required by the IRS for everyone older than 70 ½ and now 72 based on the SECURE Act provisions that are outlined at the end of this summary.
- The package will provide one-time direct payments to Americans of $1,200 per adult making up to $75,000 a year, and $2,400 to married couples making up to $150,000, with $500 payments per child. After a $75,000 threshold for individuals, the benefit would be reduced by $5 for each $100 the taxpayer makes. A similar $150,000 threshold applies to couples, and a $112,500 threshold for heads of households.
- For those who are getting laid off, the bill allocates $250 billion to extend unemployment insurance to more workers, and lengthen the duration to 39 weeks, up from the normal 26 weeks. $600 extra a week would be provided for four months.
- The bill will additionally provide $349 billion in loans to small businesses — and money spent on rent, payroll and utilities becomes grants that don’t need to be paid back.
- Not part of the bill but related to it, the IRS has pushed back the tax filing AND tax payment deadline to July 15th. Most states should follow this guideline as well, Georgia has already announced so.
- In moving back the filing date, IRA and retirement plan contribution deadlines are also pushed back to July 15th for 2019 contributions.
- The normal extension date of October 15th is still available for individuals as well if someone would like to extend their return. The July 15th payment date will apply for the extensions.
There are a myriad of other items in this stimulus package, we have tried to highlight the most important ones for the majority of our clients.
Economic Injury Disaster Loan Program
The virus has created a deemed National Emergency coupled with a similar declaration from the Governor of Georgia. These declarations have activated the Economic Injury Disaster Loan Program through the SBA (Small Business Administration). These loans are available to businesses impacted by the fallout from the pandemic and must be allocated to specific “disaster related” purposes including payroll, rent/debt payments and other operating needs. Redwood can refer you to a CPA that can help you negotiate this process, there are all kinds of required paperwork/documentation to prepare. More information can be found at the following link, https://disasterloan.sba.gov/ela/Information/Index
Back in December 2019, Washington passed the Setting Every Community Up for Retirement Enhancement (SECURE) Act. This bill has broad implications which will impact a variety of accounts and rules that were long overdue for revision, here are some key provisions of the SECURE Act:
- Increases the required minimum distribution (RMD) age for retirement accounts to 72 (up from 70½).
- Allows parents to withdraw up to $10,000 from 529 plans to repay student loans.
- Under the act, you can continue to contribute to your traditional IRA past age 70½ if you are still working. That means the rules for traditional IRAs will align more closely with 401(k) plans and Roth IRAs.
- Now, for IRAs inherited from original owners who have passed away on or after January 1, 2020, the new law requires many beneficiaries to withdraw assets from an inherited IRA or 401(k) plan within 10 years following the death of the account holder. This does not apply to surviving spouses. Annual withdrawals are NOT required, only that the account be emptied by the end of the 10th year, this will allow for year to year tax planning and tax minimization strategies.
- The new law provides a start-up retirement plan credit for smaller employers of $250 per non-highly compensated employees eligible to participate in a workplace retirement plan at work (minimum credit of $500 and maximum credit of $5,000).
These are the high-level summaries of the changes that will impact most of our clients, for further clarification or details, please speak with your Redwood adviser.
We tried to keep this as brief as possible, for any further explanation or information, please reach out to your Redwood adviser, we are here to help everyone during this crisis. We look forward to helping all of you during these difficult times.