It’s Your Money: A Primer on CARES Act

YOU’RE WATCHING IT’S YOUR MONEY WITHBRAD TAFOYA FROM TOFOYA BARRETT AND ASSOCIATES. WE’RE COMING TO YOUTODAY FROM OUR HOME OFFICES IN COMPLIANCE WITH COLORADO GOVERNORJARED POLIS’ STAY-AT-HOME ORDER. WELCOME BRAD, YOU HAVE A NICE LIVINGROOM THERE.

OKAY, THANKS DEB. NICE TO SEE YOU.

NICE TO SEE YOU. YOU KNOW, JUST BECAUSE WE’RE HOME DOESN’TMEAN WE AREN’T BUSY, AND I KNOW YOU AND YOUR COLLEAGUES HAVE BEENWORKING REALLY HARD TO UNDERSTAND THE IMPLICATIONS OF THE CARES ACTTHAT PROVIDES FINANCIAL RELIEF TO INDIVIDUALS AND BUSINESSES WHO HAVESUFFERED FINANCIALLY DURING THE COVID-19 PANDEMIC. AND MOST OF USKNOW ABOUT THE ONETIME REBATE PAYMENTS AND THE PAYROLL PROTECTIONPROGRAM. BUT LET’S TALK, LET’S START ABOUT TALKING ABOUT THE REBATEPAYMENTS. WHAT HAPPENS IF I DIDN’T FILE TAXES IN 2018 OR 19 AND THEGOVERNMENT DOESN’T HAVE, OR THE GOVERNMENT DOESN’T HAVE MY DIRECTDEPOSIT?

YEAH, THAT’S A GREAT QUESTION. WE’RE HEARING A LOTRIGHT NOW, YOU KNOW, SO THERE ARE CERTAIN PEOPLE WHO WEREN’T REQUIREDTO FILE IN 2018 OR 2019, AND THEY’RE CURIOUS HOW THEY’RE GOING TO GETTHEIR CHECKS. AND SO ACTUALLY, AS OF LAST FRIDAY, THE IRS HAS A, ONTHEIR WEBSITE THEY HAVE A NEW PORTAL WHERE PEOPLE CAN GO IN AND ENTERTHEIR DEPOSIT INFORMATION.  THEY DON’T HAVE TO FILE A TAX RETURN IFTHEY’VE NEVER BEEN REQUIRED TO. AND THAT IS LIVE AS OF LAST FRIDAY.THEY CAN ENTER THAT INFORMATION. THEY ALSO HAVE A SEPARATE ENTRYPOINT FOR PEOPLE WHO HAVE FILED IN THE PAST, BUT FOR WHATEVER REASONDON’T HAVE THEIR DIRECT DEPOSIT INFORMATION WITH THE IRS.

NOW,AM I GOING TO HAVE TO PAY TAXES ON MY, MY REBATE NEXT YEAR?

WELL,THAT’S A GREAT QUESTION, DEB, AND WHAT MOST PEOPLE DON’T REALIZE ISTHAT THIS ADVANCED PAYMENT IS REALLY ACTUALLY A, A CREDIT ON THEIR2020 INCOME TAX. AND SO WHAT’S GOING TO HAPPEN IS PEOPLE ARE GONNAGET THESE CHECKS, AND THEN NEXT YEAR WHEN WE FILE THE 2020 TAXRETURNS, THERE’LL BE A RECONCILIATION PROCESS. AND WHAT THEY’LL DO ISTHEY’LL TAKE A LOOK AT THEIR 2020 INCOME AND IF THE CHECK THAT YOUGOT WAS LESS THAN WHAT YOU SHOULD HAVE RECEIVED, WELL THEN YOU’LL GETAN ADDITIONAL TAX CREDIT ON YOUR 2020 TAX RETURN AGAINST THOSE TAXESFOR THAT DIFFERENCE. ODDLY ENOUGH, AND THANKFULLY, IF THE CHECK THATYOU GOT IS MORE THAN WHAT YOU SHOULD HAVE RECEIVED BASED ON YOUR 2020INCOME, YOU DO NOT HAVE TO REPAY THAT. AND EITHER WAY IT’S NOTTAXABLE INCOME. SO THAT’S GOOD.

ALL RIGHT, WELL, YOU KNOW,I’M LUCKY I HAVE MONEY SAVED UP FOR A RAINY DAY LIKE THIS EMERGENCYWE’RE IN NOW, WHAT SHOULD I DO WITH MY REBATE? SHOULD I JUST SOCK ITAWAY OR GO BUY A NEW CAR? STIMULATE THE ECONOMY?

WELL, IMEAN, THAT’S, IN SOME WAYS THAT’S THE PURPOSE OF THIS AND I THINKIT’S GOING TO DEPEND ON EVERYBODY’S UNIQUE SITUATION. I MEAN, WITHTHESE CHECKS, THERE’S REALLY, THERE’S NO REQUIREMENTS ON WHAT YOU CANOR CAN’T DO.THE PPP LOAN FUNDS, THAT’S A WHOLE DIFFERENT STORY. ANDPEOPLE HAVE TO USE THOSE FOR QUALIFIED USES. AND IF THEY DON’T USETHOSE FROM THE QUALIFIED USES, THEY COULD BE PENALIZED. BUT BACK TOTHE REBATE CHECKS, YOU KNOW, SOME PEOPLE ARE REALLY GOING TO NEEDTHIS FOR RENT OR TO PAY THEIR MORTGAGE OR UTILITIES OR JUST ONGOINGLIVING EXPENSES.  IF YOU DON’T AND YOU HAVE A RAINY DAY FUND LIKEYOU, LIKE YOU SAID, YOU KNOW, IT MIGHT NOT BE A BAD IDEA TO ADD IT TOTHAT RAINY DAY FUND BECAUSE WE DON’T KNOW HOW LONG THIS IS GOING TOLAST AND HOW LONG YOUR FUNDS ARE GOING TO LAST. SO THAT’S AN OPTION.I’VE EVEN HAD A FEW CLIENTS AND FRIENDS THAT HAVE TOLD ME THAT, YOUKNOW, THEY DON’T NEED THIS MONEY. THEY, THEY’RE, THEY’RE SETFINANCIALLY, AND SO THEY’RE GOING TO TAKE THIS MONEY, AND LIKE YOUSAID, PUT IT BACK INTO THE COMMUNITY BY EITHER BUYING STUFF OR MAKINGDONATIONS TO CHARITIES. THERE’S A WEALTH OF FUNDS OUT THERE RIGHT NOWTHAT ARE AVAILABLE FOR PEOPLE THAT AREN’T AS WELL OFF. AND SO I KNOWA LOT OF PEOPLE ARE GOING TO DONATE THESE FUNDS AS WELL.

WELLTHAT’S A GREAT IDEA. YOU KNOW, THERE ARE A LOT OF OTHER PROVISIONSTHAT MANY PEOPLE MAY NOT KNOW ABOUT IN THIS CARES ACT AND ONE OF THEMIS CHANGES IN CHARITABLE GIVING. CAN YOU TELL US WHAT THOSE ARE?

YEAH, SO ONE OF, ONE OF THE, THE MAIN CHANGE WITH CHARITABLEGIVING IS THAT TYPICALLY WHEN SOMEBODY MAKES A DONATION, IN ORDER FORTHAT TO BE DEDUCTIBLE, THEY HAVE TO BE ITEMIZING ON THEIR TAX RETURN.AND SOME PEOPLE DON’T DO THAT BECAUSE THE STANDARD DEDUCTION ISGREATER THAN THE ITEMIZED DEDUCTION. AND SO WHAT PART OF THE CARESACT DID IS IT MADE A NEW $300 DEDUCTION ABOVE THE LINE DEDUCTION. SOEVEN IF YOU’RE NOT ITEMIZING, YOU CAN GET A DEDUCTION FOR THOSEDONATIONS IN 2020 UP TO $300.

ALL RIGHT, THAT’S GREAT. NOWWHAT ABOUT EXPANDED UNEMPLOYMENT BENEFITS FOR WORKERS? WHAT ARE THEYAND HOW IS THAT GOING TO WORK OUT?

YEAH. SO THERE’S A LOT OFINFORMATION WE COULD COVER THERE, BUT I’LL JUST GO OVER THE ESSENTIALELEMENTS REAL QUICK. AND SO WHAT THE CARES ACT DID, AND AGAIN, THISIS THE, THE MAJOR STIMULUS ACT THAT WAS SIGNED, SIGNED INTO LAWPROBABLY A COUPLE OF WEEKS AGO NOW, THREE WEEKS, I DON’T EVEN KNOWWHAT DAY IT IS, BUT, YOU KNOW, THE RECENT CARE THAT, WHAT IT DOES IS,YOU KNOW, FOR ANYBODY IN ADDITION TO THE REGULAR UNEMPLOYMENTINSURANCE THAT PEOPLE CAN FILE FOR IF THEY’RE UNEMPLOYED. INCOLORADO, THAT CAN AVERAGE, DEPENDING ON YOUR INCOME, ANYWHEREBETWEEN $25 A WEEK, UP TO $625 A WEEK. WELL, WHAT THE CARES ACT DIDIS IT INCREASED THAT BENEFIT AN ADDITIONAL $600 PER WEEK, A FLAT$600, REGARDLESS OF YOUR INCOME SITUATION. SO SOMEBODY UNEMPLOYEDBECAUSE OF THIS, BECAUSE OF THE COVID-19, THEY CAN GET THEIR REGULARUNEMPLOYMENT, WHICH AGAIN CAN BE $25 TO $625 A WEEK PLUS ANADDITIONAL $600 A WEEK.

THE OTHER THING THAT THE CARES ACTDID IS THAT IT EXTENDED THE NORMAL TIME PERIOD THAT YOU CAN FILE FORUNEMPLOYMENT FROM 26 WEEKS TO 39 WEEKS. SO AN ADDITIONAL 13 WEEKSTHERE,  SO THAT’S A GREAT ADDITION. AND FINALLY THE OTHER MAIN THINGTHAT IT DID, AND THIS IS CALLED THE PANDEMIC UNEMPLOYMENT INSURANCEPART OF THE ACT. NOW THE OTHER THING THAT THEY DID IS THEY EXPANDEDUNEMPLOYMENT INSURANCE TO FOLKS THAT TYPICALLY CANNOT APPLY FORINSURANCE. SO PEOPLE THAT ARE SELF-EMPLOYED, INDEPENDENT CONTRACTORS,SOLE PROPRIETORS, THOSE FOLKS TYPICALLY DON’T PAY INTO THEUNEMPLOYMENT INSURANCE SYSTEM AND ARE NOT ABLE TO CLAIM THOSEBENEFITS LATER. AND SO ONE OF THE THINGS THAT CARES ACT DID IS ITMADE IT SET ASIDE A POT OF MONEY FOR THOSE FOLKS AND IT’S MAKING ITSO THAT THEY CAN APPLY FOR UNEMPLOYMENT INSURANCE AS WELL. AS OFTODAY, THAT’S STILL NOT AVAILABLE. THE, YOU KNOW, THE, THE STATES ARETRYING TO GET THEIR SYSTEMS UP TO DATE, TRYING TO GET GUIDANCE ONTHESE RULES, ON HOW TO MAKE THEM HAPPEN, SO IT’S NOT AVAILABLE YET,BUT STAY TUNED. IT SHOULD BE AVAILABLE SOON.

AND WHAT HAPPENSIF I’VE APPLIED FOR UNEMPLOYMENT AND MY EMPLOYER LATER RECEIVES APAYCHECK PROTECTION LOAN TO COVER MY SALARY? I MEAN, THAT’S ONE OFTHE THINGS THAT HAS HAPPENED WITH OUR, OUR COMPANY. I HAVEN’T EVENRECEIVED MY FIRST UNEMPLOYMENT CHECK, BUT, WE NOW HAVE THE LOAN INPLACE TO COVER OUR PAYCHECKS. HOW DOES THAT WORK?

YEAH, SOAGAIN, UNEMPLOYMENT INSURANCE IS, IS ONLY AVAILABLE WHEN YOU’REUNEMPLOYED OR WHEN YOU’RE NOT BEING PAID BY YOUR EMPLOYER. AND SO ITHINK NOW, I ACTUALLY HAD A, A FRIEND THAT THAT HAPPENED TO TODAY.SHE HAD APPLIED FOR UNEMPLOYMENT INSURANCE THAT GOT THE NOTIFICATIONTHAT SHE WAS ELIGIBLE AND THEN HER COMPANY APPLIED FOR ONE OF THESEPPP LOANS. AND SO I THINK WHAT’S SHE’S GOING TO NEED TO DO IS, IS,YOU KNOW, CANCEL THAT UNEMPLOYMENT INSURANCE AND NOT ACCEPT ITBECAUSE SHE’S NOW CURRENTLY BEING PAID BY HER EMPLOYER THROUGH THEPPP LOAN. SO WHETHER SHE HAS TO GO INTO THE SYSTEM AND KIND OF UNDOALL OF THAT OR JUST IGNORE THAT, I’M NOT QUITE SURE. BUT I DEFINITELYWOULD, YOU KNOW, BE CONTACTING THE UNEMPLOYMENT INSURANCE OFFICE ANDFIGURING OUT WHAT TO DO ABOUT THAT FOR SURE.

RIGHT, RIGHT.AND WHAT ABOUT WITHDRAWING FUNDS FROM AN IRA IN A WAY AND THEREQUIREMENT OR THE PROVISION THAT YOU CAN WAIVE MINIMUM DISTRIBUTIONSRIGHT NOW? BECAUSE YOU KNOW, I DO, I, I HAVE A CHUNK OF CHANGE IN MYIRA THAT I COULD PROBABLY RELY ON, EVEN THOUGH IT DROPPED 40 PERCENTAFTER THE STOCK MARKET CRASH.

WELL, THAT’S A, THAT’S A GOODPOINT. YEAH. AND SO ONE OF THE, AGAIN, ONE OF THE PROVISIONS THAT’S ALESSER KNOWN ONE RIGHT NOW, BECAUSE WE’RE ALL FOCUSED ON THESE REBATECHECKS AND THE PPP LOANS, WHICH ARE ALL WONDERFUL, GREAT THINGS.THERE’S ALSO SOME OTHER STUFF IN THERE,TOO. AND SO, YOU KNOW, THEONES YOU’RE TALKING ABOUT, IS THE CARES ACT AGAIN, MADE IT SO THATGIVES PEOPLE THE ABILITY TO TAKE A DISTRIBUTION FROM THEIR RETIREMENTACCOUNT UP TO A $100,000 IN 2020 AS LONG AS THAT PERSON HAS EITHERBEEN DIAGNOSED WITH THE, WITH THE VIRUS, THEY HAVE A FAMILY MEMBERTHAT’S BEEN DIAGNOSED WITH THE VIRUS, OR THEY CAN, THEY’VE HAD,THEY’VE EXPERIENCED ADVERSE FINANCIAL CONSEQUENCES, AND SO ONE OFTHOSE THREE THINGS ARE THE REQUIREMENTS FOR DOING THIS. AND SO IF, IFSOMEBODY TAKES A DISTRIBUTION FROM THEIR RETIREMENT ACCOUNT, NORMALLYUNTIL YOU TURN A CERTAIN AGE, 59 AND A HALF, YOU’RE SUBJECT TO A 10PERCENT PENALTY.

SO THIS PROVISION WAIVES THAT PENALTY SOIT’S NOT SUBJECT TO THAT 10 PERCENT PENALTY. THE NEXT THING THAT ITDOES IS IT ALLOWS PEOPLE TO TAKE THAT DISTRIBUTION AND USE IT. ANDTHEN, IF THEY CONTRIBUTE THAT MONEY BACK WITHIN THREE YEARS FROM THETIME THEY TOOK IT, NO HARM, NO FOUL, IT WON’T BE TAXED. IT’LL, IT’LLBE, YOU KNOW, YOU’LL HAVE MISSED OUT ON THAT APPRECIATION, BUT IT’LLBE BACK IN YOUR RETIREMENT ACCOUNT. IF THEY’RE NOT ABLE TO PUT ITBACK WITHIN THAT THREE YEARS, THEN IT WILL BE TAXED. THE GOOD NEWSIS, IS THAT TAXABILITY THAT $100,000 OR WHATEVER THEY TAKE OUT WOULDBE SPREAD OVER THREE YEARS’ WORTH OF TAX RETURNS. SO IT’S NOT ALLTAXED IN 2020. BUT LIKE YOU SAID, MOST PEOPLE’S ACCOUNTS ARE WAY DOWNRIGHT NOW. AND SO IT, YOU KNOW, IT MAY NOT BE A GREAT IDEA TO TAPINTO YOUR RETIREMENT ACCOUNT RIGHT NOW WITH ALL THESE OTHER BENEFITSTHAT ARE AVAILABLE OUT THERE. YOU KNOW, WE’RE ADVISING PEOPLE THATTHAT MAY BE, IT’S THE LAST PLACE TO LOOK BECAUSE YOU’RE MESSING WITHYOUR RETIREMENT THEN, AND DIPPING INTO IT NOW WHEN IT’S DOWN, YOUKNOW, AT A VERY LOW AMOUNT, IT’S GOING TO HURT YOU LATER. SO YOU JUSTNEED TO BE TALKING TO YOUR FINANCIAL ADVISOR ABOUT THAT, FOR SURE.

ALL RIGHT, WELL THANK YOU SO MUCH FOR JOINING US TODAY. IREALLY APPRECIATE IT. AND IF YOU’D LIKE TO KNOW MORE ABOUT THEDETAILS OF THE CORONA VIRUS AID RELIEF AND ECONOMIC SECURITY ACT,CONTACT BRAD AT TAFOYABARRETT.COM. I’M DEBORAH URODA WITH THE LOCALNEWS NETWORK.

THANKS, DEB.

BE SAFE.

YOU, TOO.

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