Thank you for joining us at Southwest Investments for Market Insights. Joining me today is Bart Schannep. Bart, welcome to the show.
Bart: Thank you, glad to be here.
Rick: Today, or I should say in the past, we’ve talked a little bit about how the CARES act has affected companies and the overall economy. Let’s dig into individuals.
Bart: Yes. Let’s focus on individuals. There are a lot of moving parts in a lot of the legislation talking about loans, both forgivable, non-forgivable, different taxes that may be forgivable, what industries might be focused on, that sort of thing. Let’s dig into what does it mean to the average person.
Bart: There are a lot of numbers. Let me just read over what we’re looking at. Obviously people know about the recovery checks for U.S. individuals with adjusted gross income of under 75,000 each or 150,000 in joint returns. They’re going to get money. They’re going to get money per person. They’re going to get including money for kids, covering kids.
There is a phase out where if you make too much money you start to get less of it. Sure enough, if you’re over 99,000 per person or 198 filing joint, it fades out completely, and nothing’s coming.
Rick: Typical with all taxes that we deal with, there are rules upon rules that are going with this, how many kids you have, how much income you make. I don’t think that’s terribly difficult to understand, but you just need to be watchful.
Bart: It’s also approximated. What you’ve got is the government’s doing the best guess they can. Adjusted gross income based on what they think your 2019, whether you filed or not, your 2019 taxes. If they don’t have that, they’ll look at your 2018 tax return.
Rick: That’s been a really prominent question that I have heard from a few people calling in.
Bart: How do they know?
Rick: How do I know? I lost my job.
Rick: What do we do? Our response has been, “File as quickly as you can for your taxes.”
Bart: Right, right. The other thing has to do with required minimum distributions. Now, we’ve talked before about how required minimum distributions got pushed back to age 72, but now regardless, everyone is free to not have to take a distribution in this year, 2020.
What really affects more people is the waiving of the 10 percent penalty for early withdrawals, assuming, and this is a broad base, assuming you need the money either because you contracted the virus, your spouse or a dependent contracted the virus or you experienced financial consequences because of the virus. This—
Rick: That could be maybe a hospital bill. Is that what we’re thinking?
Bart: It could have been your income went down because you were quarantined, that you were furloughed, that you were laid off, that you’ve had reduced hours, that your business closed. It starts getting pretty broad based there, that’s right.
Any money you do take out, you can spread the tax payments on it over a three-year period. That’s going to be another confusing thing that people are going to have to keep track of. What is nice is over that three-year period, if you’re able to put money back in, you can redeposit it back in.
Rick: Kind of like a rollover. Is that what we would consider it?
Bart: It’s almost like it’s against the law to have a loan against an IRA, but it’s pretty much if you can put it back over a three-year period, it’s like borrowing the money.
Rick: Got it, got it.
Bart: From businesses, defined benefit plans are able to push back into next year. These are all changes that affect the average person, that are worth noting. It is the government trying to help. My guess is it’s going to help a lot of people.
Rick: Well, I think that’s going to be, like you said, helpful for a vast majority of the people that are out there. For us, at least we now have this information to relay to not just our existing clients, but also I think it’s important for this to get out to as many people as possible because it is a lot of different rules that have come about in a very quick time period. They changed it quite a few times as it went through.
Bart: These are unprecedented times. Everyone’s trying to do the best they can.
Rick: You got it. Well, thank you so much, Bart, [music plays] for joining us and explaining some of these things. If you do have more questions, feel free to go onto our website. Our email address is on and [Inaudible] [05:25]. Give us a call. Let us help you. Thanks so much for joining us.