The team at CPS Investment Advisors is here to help. If you have questions or concerns, please don’t hesitate to reach out to us. We are fully operational and available during normal business hours while applying social distancing best practices for everyone’s safety. Our tax department is still processing returns, so if you’re one of the lucky few due a refund, don’t wait, go ahead and file!

Last Wednesday, (March 25^th, 2020), the U.S. Senate passed a $2 trillion coronavirus stimulus bill known as the CARES Act or Coronavirus Aid, Relief and Economic Security Act and the U.S. House of Representatives approved the landmark bill today (March 27^th, 2020). The CARES Act is legislatively known as U.S. Senate Bill 3548 (S. 3548) / U.S. House of Representatives Bill 748 (H.R. 748). Considering the bill is over 600 pages in length, we will be working diligently to understand the new laws and deliver the information to clients as soon as possible. Even though the full impacts of COVID-19 are still unknown, individuals, businesses, and investors can rest a little easier knowing help is here.

Below are some of the relief items contained in the bill that you can expect to see once the logistics of the new laws are in place:

CARES Act Overview

1. Income for American Households: The bill includes language that will provide a one-time direct deposit of $1,200 per individual, $2,400 per couple and $500 per eligible child into the same account used for tax refunds/payments. If there’s no account on file, a check will be issued. The credit is phased-out for taxpayers with Adjusted Gross Income (AGI) above $75,000 for single filers, $112,500 for heads of household and $150,000 for joint filers. Deposits are expected to occur within a few weeks from the bill being passed. For tax purposes, this ‘income’ will be treated as an advanced refund of your 2020 Tax Credit.
2. Small Businesses: The bill includes an SBA-backed loan program to help small businesses pay expenses with potential for those loans to be forgiven. Forgiveness will only be considered for proceeds used to keep employees on payroll, to include certain non-profit organizations. Additional loan forgiveness may be available for 8 weeks of cash flow, rent and utilities at 100% up to 2.5x average monthly payroll.
3. Assistance to large businesses (job creators): The bill includes language that will provide loans, loan guarantees, grants and investment authority totaling $529 billion. This money will be used by the U.S. Treasury and the Federal Reserve Bank for all sectors, with additional focus on helping airlines, logistical companies, and businesses critical to national security.
4. Increased Access to Health Care & Direct Funding to combat COVID-19: The Bill contains $340 billion in additional budget allocated to local governments, hospitals, research of new treatments and vaccines, and other entities directly involved in combating the pandemic.
5. Early Access to Retirement Plans: If you, your spouse or a dependent are diagnosed with COVID-19 or if you’ve experienced adverse financial hardships as a result of the Pandemic you may qualify to withdraw (borrow) up to $100,000 or 100% of your account value, whichever is less, from your retirement accounts penalty free so long as you pay it back within 3 years. Note that income taxes will still be due, over the next 3 years, on hardship withdraws. Before withdrawing funds from your retirement account, call your financial advisor or tax professional to discuss ramifications or alternatives.
6. Required Minimum Distributions (RMDs) waived for 2020: The bill also gives owners of IRA’s and beneficiaries of inherited IRA’s (BDA’s), otherwise required to take a minimum distribution, the option to not take their RMD for 2020. The amount of RMD, under normal circumstances, is based off the account balance at the end of the prior year and considering we are down from near-record highs of December 31, 2019, this is a huge relief. If you have already taken an RMD for 2020 and it is within 60 days of the distribution, you can roll those funds back to the account. The limit of one 60-day rollover per a 12-month period will apply. BDA’s are not eligible for 60-day rollovers if a distribution has occurred per IRS Regulations.

Overall, the bill contains very timely measures to ensure America continues to thrive through the uncertainty of COVID-19. There will be more details available once the bill has been thoroughly reviewed by legal and tax professionals and lending institutions establish their guidelines for processing the CARES Act benefits. We will continue to update you on the options available to best navigate the current environment as the details become clearer.

While the logistics of the CARES Act are still being figured out, the following items are already in place to help combat the pandemic and stabilize the economy.

2019 Federal Tax Filing & Payments Extended to July 15^th, 2020

According to IR-2020-58, an Internal Revenue Service’s News Release, the new 2019 Tax Filing & Payment deadlines have been extended to July 15^th, 2020 regardless of the amount owed and without interest or penalties. The extension applies to all taxpayers, including individuals, trusts and estates, corporations and other non-corporate tax filers, including those who pay self-employment tax. As it stands now, the IRS is still processing tax returns and is estimating a 21-day processing time. So, if you’re due a refund, don’t wait, contact your CPS Investment Advisors Tax Professional and get filed! For tax payers who pay quarterly, please note that there has not been any guidance or information released extending the 2^nd Quarter payment deadlines.

2019 IRA & HSA Contributions ALSO Extended to July 15^th, 2020

Under normal circumstances, contributions can be made to an Individual Retirement Account (IRA) for the prior year “by the due date for filing your return for that year” per IRS Publication 590-A. Due to the extension of the filing deadline to July 15^th, 2020, IRA contributions for 2019 are also extended to that date. The same goes for your Health Savings Account (HSA) contributions, per IRS Publication 969. The IRS officially confirmed these contribution extensions in the Q&A section of IRS Notice 2020-18.

As a reminder here are the 2019 & 2020 contribution limits for HSAs and IRAs.

• 2019 HSA contribution limit is $3,500 for an individual and $7,000 for a family.
• 2020 HSA contribution limit is $3,550 for an individual and $7,100 for a family.

Note that HSAs are only available to those who are part of a High Deductible plan. Prior year funding can only be made if you were an eligible participant during the prior plan year. Check with your advisor or health plan administrator to determine your eligibility.  

• 2019 IRA contribution limit is $6,000, plus $1,000 for anyone over 50.
• 2020 IRA contribution limit is $6,000, plus $1,000 for anyone over 50.

Note that IRA deductions have phaseout rules for participants of employer sponsored plans; be sure to check with your advisor or tax professional to find out more.

Relief to Employees and Small to Mid-Size Businesses

On March 18^th, 2020 President Trump signed into law the Families First Coronavirus Response Act. This act is designed to “combat and defeat COVID-19 by giving American businesses with fewer than 500 employees funds to provide employees with paid leave, either for the employee’s own health needs or to care for family members.” With refundable payroll tax credits, employers will be quickly and fully reimbursed dollar-for-dollar for paid leave (up to 80 hours) given to employees related to Coronavirus. “Businesses with fewer than 50 employees are eligible for an exemption from the requirements to provide leave to care for a child whose school is closed, or childcare is unavailable in cases where the viability of the business is threatened.” IR-2020-57. The IRS has released a draft of Form 7200 (Advance Payment of Employer Credits Due to COVID-19), which employers may use to request an advance payment of the tax credits for qualified leave wages or qualified retention wages. Employers that file Form 941, Form 943, Form 944 , or Form CT-1 may use the form. Before filing Form 7200 , employers should first reduce their employment tax deposits to account for the credits. Then, employers can use Form 7200 to request the amount of the credit that exceeds their reduced deposits. Employers will need to reconcile any advanced credits and reduced deposits on their 2020 employment tax return. The form can be filed at any time before the end of the month following the quarter in which qualified wages were paid. If necessary, the form can be filed several times during each quarter. The completed form should be faxed to 855-248-0552. The draft form can be accessed at www.irs.gov/pub/irs-dft/f7200–dft.pdf  Keep in mind, that these credits may be offset and unavailable by any participation in the Paycheck Protection Program.

Bridge Loans Available to Florida Small Businesses

On March 16^th Florida Governor Ron DeSantis made funds available with the Florida Small Business Emergency Bridge Loan Program for small businesses (2 – 100 employees) impacted by COVID-19. The loan program will provide up to $50,000 in short-term, interest-free funds to small businesses economically impacted by COVID-19. Visit http://floridasbdc.org/disaster/ for more information on this and other programs available to small businesses.

RIRA Conversion Opportunity

Due to the sharp decline in the equity markets, now may be an opportune time to do a Roth Individual Retirement Account (RIRA) conversion. The 3 primary benefits to converting from a traditional IRA to a RIRA are:

• Growth of your investments inside the RIRA and distributions from the RIRA are tax free so long as you’ve held the converted assets in the RIRA for at least 5 years and you are at least 59 ½ years of age.
• Gives access to ROTH IRAs for high wage earners who are phased out from contributing to a RIRA.
• There are no limits to the amount you are allowed to convert.

Due to the taxable nature of converting a RIRA, please consult with your Financial Advisor or Tax Professional to see if this opportunity is right for you.

Steady as you grow!

Michael A Riskin | CPA/PFS, CFP®, MST
Vice President | Treasurer | Partner