As an experienced CPA, Rachel Daddesio of Montgomery highlights some of the key consumer tax implications of the CARES Act.
MONTGOMERY, TX, UNITED STATES, May 29, 2020 /EINPresswire.com/ — Recently, the Federal government passed the Coronavirus Aid, Relief, and Economic Securities (CARES) to provide assistance to all Americans. While everyone seemed to pay special attention to the one-time rebate, the CARES Act includes several other components that can impact the average American. Experienced Certified Public Accountant (CPA) Rachel Daddesio of Montgomery explains a few of the most prevalent tax implications of the CARES Act.
Rachel Daddesio begins, "The most popular component of the CARES Act is the $1,200 rebate recovery check available to individuals. Taxpayers married filing jointly are eligible to receive up to $2,400." In addition to this, families with children are eligible to receive up to $500 per child. Rachel Daddesio adds "While there are no limits to the number of qualifying children, there are income limits determining who is eligible." The recovery rebate checks are lowered by five dollars for every $100 a taxpayer's income is above $75,000. For couples, the threshold is $150,000 in income. Rachel Daddesio continues "This essentially means that if you are an individual making less than $99,000 or $198,000 for married filing jointly, you will at least get something to help during this troubling time."
Another massive tax implication of the CARES Act involves retirement account distributions. Unfortunately, a sobering amount of Americans actually have emergency or rainy day funds. Because of this, many turn to their retirement accounts during troubling times. Rachel Daddesio explains, "The CARES Act makes withdrawing funds from your retirement account…a less taxing experience."
Rachel Daddesio of Montgomery points out, "The 10% early withdrawal penalty is waived for distributions up to $100,000 for what is called a coronavirus-related distribution." This is a new distribution created to reflect the pandemic's effect. To claim this distribution the taxpayer or a spouse must be either diagnosed with coronavirus or have experienced adverse financial consequences from having work hours reduced, being quarantined, laid off, or furloughed. Rachel Daddesio calls out "If you are not able to work because of no child care options, you can also qualify for a coronavirus-related distribution and the waived penalty."
Even though the penalty may be waived, taxpayers will still be responsible for the income tax due on the distribution. However, Rachel Daddesio of Montgomery interjects "The period to pay the income taxes on a coronavirus related distribution is extended to allow you to make payments over three years." Rachel Daddesio also explains "Additionally, the act waives the RMD or required minimum distribution for IRAs and certain types of defined contribution plans during 2020. This is especially helpful to retirees and others who would be required to withdraw funds from their retirement rates and potentially eat huge market losses."
One of the final consumer tax implications of the CARES Act revolves around charitable deductions. Rachel Daddesio clarifies, "Typically, you have to itemize deductions to utilize charitable donation deductions. However, this requirement is eliminated for most charitable contributions of up to $300. It's important to understand that not all donations are eligible."
Source: EIN Presswire