The CARES Act: Highlighted Provisions

Updated: Mar 4

In March 27, 2020, Congress passed, and the president signed into law the “Coronavirus Aid, Relief and Economic Security Act” (CARES Act). It provides a $2 trillion economic stimulus for businesses and individuals faced with the challenges of the COVID-19 pandemic. There are a wide range of provisions. The following is a brief overview of notable provisions of the CARES Act as it pertains to individuals:

Recovery Rebate

For immediate aid during this unprecedented time of economic uncertainty, the government will send up to $1,200 payments to eligible single taxpayers and $2,400 for married couples filing joint returns. They will send an additional $500 payment to taxpayers for each qualifying dependent child under age 17. Rebates are gradually phased out, at a rate of 5% of the individual’s adjusted gross income over $75,000 (for singles or marrieds filing separately), $122,500 (for head of household), and $150,000 (for joint filers).

Rebates will be paid out in the form of checks or direct deposits. Most individuals won’t have to take any action to receive a rebate. The IRS will compute the rebate based on a taxpayer’s 2019 return (or 2018 return, if no 2019 return has yet been filed). If no 2018 return has been filed, the IRS will use information for 2019 provided in Form SSA-1099, Social Security Benefit Statement, or Form RRB-1099, Social Security Equivalent Benefit Statement. Note that a taxpayer’s 2020 income will ultimately determine his or her eligibility, which will be settled when filing the 2020 return.

Coronavirus-Related Distributions

Prior to the CARES Act, early distributions taken out of a qualified retirement plan would subject the taxpayer to income tax liability plus a 10% penalty. The CARES Act provides some relief to those who must withdraw from a qualified plan or IRA during this economic downturn.

“Coronavirus-Related Distributions” are distributions of up to $100,000, made from IRAs, employer-sponsored retirement plans, or a combination of both, which are made in 2020 by an individual who has been impacted by the Coronavirus. A taxpayer qualifies if they meet one of the following:

  • Have been diagnosed with COVID-19, or

  • Have a spouse or dependent who has been diagnosed with COVID-19, or

  • Experience adverse financial consequences as a result of being quarantined, furloughed, laid off, or having work hours reduced because of the disease, or

  • Are unable to work because they lack childcare as a result of the disease, or

  • Own a business that has closed or operated under reduced hours because of the disease, or

  • Experience other factors, as determined by the Treasury Secretary.