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What does the CARES Act mean for You?

March 31, 2020

Over the last few weeks, the Treasury Department, the Internal Revenue Service (IRS), Congress and State of Maine all came forward with new plans in response to the Coronavirus (COVID-19) outbreak and its major impact on our economy. The below items showcase these new changes and are there to help you better understand what's to come and how they affect you.

2019 Tax Filing Relief

In response to the COVID-19 outbreak, certain states and the IRS issued special Federal income tax filing and payment relief. Maine's Governor announced last Thursday the income tax return filing deadline will be extended to July 15th for Maine income tax filers. If you would like to see relief measurements for states other than Maine, click here.

The IRS posted to its website Frequently Asked Questions (FAQs) related to the relief and will be updated periodically to help you gauge your situation in this changing environment.

2019 IRA & HSA Contribution Deadline Extended

The FAQs also go over Individual Retirement Accounts and how they’re adjusted. Question 17 refers to IRA’s, which asks if the relief provides extra time to contribute for 2019. The answer is yes, and it specifically states the IRA contribution deadline is normally the tax filing due date. However, since the tax filing due date was extended until July 15, 2020, the deadline for 2019 Self Employed (SEP) IRA, Roth IRA, & Traditional IRA contributions have also been extended to July 15, 2020.

Coronavirus Aid, Relief, and Economic Security (CARES) Act

The CARES Act or Stimulus Bill was signed into law on March 27th. 2 Trillion U.S. dollars were put into an act to move markets higher (double the stimulus bill used in 2008). The package includes a combination of money being sent directly to households and companies, such as cash payments to many Americans, loans for small businesses that become grants if firms use them to maintain payroll, a significant increase in unemployment insurance payments and needed support for health care systems and state/local governments. Lastly, there is a fund to allow loans for hard-hit industries, e.g. airlines. Click on the calculator link below to see how the stimulus check will benefit you:

Are You Eligible for the Stimulus Check?

Everything You Need to Know About the Stimulus Package

Required Minimum Distribution (RMD) Waived for 2020

Several relief provisions touch upon various retirement accounts in the almost 900-page stimulus package. The one that will impact most retirees is the waiver of RMDs for 2020, including contribution plans such as 401(k), profit sharing, 403(b), 457(b) and individual retirement accounts (IRA). This will be a huge benefit because 2020 RMDs would generally be based on the substantially higher account values at December 31, 2019. Here is how: the Dow closed at 28,462 on December 31, 2019. As of March 26, the Dow was hovering around 22,000. If not for this relief, IRA owners would be forced to withdraw and pay tax on a much higher percentage of their IRA balance. Eliminating the RMD for 2020 can help to reduce 2020 tax bills. However, this won’t help those who need the funds and must take withdrawals anyway.

Markets and What's to come?

The massive stimulus package should provide a relatively quick injection into the economy. However, we do think economic data and equities could still be challenged in the coming months. People and businesses will hopefully have the liquidity to pay bills and rent, and get through the coming weeks, but consumer spending is still at a virtual standstill. While no one knows when the stock market will bottom, this fiscal stimulus may provide for a quick recovery. Though it likely won't be enough to prevent a sharp economic decline in the second quarter, it should help to support an eventual recovery once the COVID-19 virus has been brought under control. Until we get more positive news around the virus itself, we think markets will remain volatile. It is important to remember back to the financial crisis and what the stimulus did in 2009 and beyond. It can be a driving factor for a recovery, which may be sharp.

If you have further questions about how this may impact you or any of your retirement accounts, please don't hesitate to reach out to our office.

Disclosures and Important Information

The views stated in this piece are not necessarily the opinion of the IIS Financial Services and Cetera Advisors and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.

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