We have seen some unprecedented events occur in the past several weeks and we here at White Raven Financial are experiencing moments of bewilderment just like everyone else. For many Americans, life has been turned sideways and questions remain about what exactly a person can do. We adapt. We search out all the new opportunities that present themselves from this new reality, using our creative minds to start mapping out a productive future.
Many of you are somewhat familiar with the new stimulus package released and other federal & state measures enacted to keep us afloat, but you may be overwhelmed with the details and would like to know what matters to you. Thus, we decided to compile a list of what rules you should be aware of and provide other resources that we hope might help your specific situation.
Please feel free to forward if you feel someone else may find our write-up beneficial.
For starters, there have been a lot of changes specifically for unemployed workers and employees:
- More workers can qualify for more benefits over an extended period.
- Government funding will be available to assist during this time.
- Unemployment insurance coverage is now earlier (by a week), longer (by 13 weeks), and greater (by $600/week). The $600/week is a federal supplement and on top of the state benefit you are eligible for.
- There are still companies that are understaffed and looking to hire. This site lists several places, mostly retail and distribution centers, that are hiring for temporary, part-time, and full-time employment.
- Telecommuting has become the norm for many of us but not everybody has that option. If you are looking for ways to earn income from home, there are legitimate job opportunities out there that may be hiring.
- Loans/withdrawals from retirement plans:
- 10% early withdrawal penalty waived on withdrawals up to $100,000 for “corona-related purposes.”
- Income attributable to such distributions would be subject to tax over three years.
- Funds may also be re-contributed within three years (not sure how that will interact with the previous point) “without regard to that year’s cap on contributions.”
Paying Taxes? Paying a Mortgage?
- Tax return deadlines (for income tax, estate tax, and gift tax returns) are delayed from April 15th to July 15th
- Payments due for those returns are delayed to July 15th as well.
- Estimated income tax payments that would have been due on April 15th are also delayed to July 15th (but the June 15th estimated tax payment is not delayed).
- Prior year retirement plan and HSA contributions have been extended to July 15th as well.
- Most (but not all) states have moved their deadlines to match this extension…
- Property tax is being delayed for those who individually pay in many counties.
- Currently WA Snohomish county is June 1st…consider checking your county.
- Homeowners facing financial hardship due to the coronavirus ‘could’ possibly suspend their mortgage payments with chances of having those payments in forbearance. Check with your financial institution for specifics.
Rent? Lease? Credit Card Debt?
- Many credit card companies are encouraging customers to phone them if they need assistance with their payments. They may also offer to waive late fees and lower interest rates. Several of the companies have assistance programs.
- Several states have enacted some relief for renters (check with your state for specifics). Your landlord may also be able to offer some assistance or be willing to negotiate.
Required Minimum Distribution (RMD) Update & Roth information:
- Required Minimum Distributions (RMDs) are waived for 2020 (including waiving the “5-year rule” on inherited IRAs). Verify that you do not need it for your living expenses though.
- It may be prudent to increase Roth conversions to use the lower bracket not being used by distributions if you have other means to pay the taxes for those conversions. Also consider having your accountant doing a cost benefit analysis.
- Many taxpayers will receive stimulus checks (or direct deposits). There is a phase out though depending on your Adjusted Gross Income (AGI). If you are a single tax filer and your 2018/2019 (depending on when you filed taxes last) AGI is less than $75,000, you will receive the full $1,200. If you earn $99,000+, you will not receive anything. For married couples filing jointly, the full check amount will be received for those who have a combined income of less than $150,000 phasing out completely for those who earn $198,000+. You can figure out how much to expect to receive with this calculator. Also note that the stimulus check you will receive will be considered “non-taxable”.
- Charitable changes:
- Above-the-line deduction (i.e. you don’t have to itemize) for up to $300 of charitable gifts (this is a permanent change).
- 50% AGI limit on cash charitable contributions suspended for 2020 (corporate 10% limit increased to 25%).
- Student Loans:
- Employers can contribute up to $5,250 annually toward an employee’s student loans and it is not included in the employee’s income (2020 only – for now, otherwise why specify “annually”).
- Principal and interest payments on all federal student loans waived through Sept. 30th of this year (and interest doesn’t accrue).
- Collection of federal student loan debt is suspended.
- FSA/HSA/MSA accounts can now be used to purchase over-the-counter (not just prescription) drugs and medicines as well as “menstrual care products.”
- For those that are still receiving a paycheck, consider gift certificates, take-out at restaurants, pay-ahead for a service for those less fortunate that have had to put their small businesses on hold.
Regards and thank you,
The Team at White Raven Financial
Advisory services offered through White Raven Financial Services, Inc. a Registered Investment Advisor in the State of Washington.