March 27, 2020

President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27, 2020 in response to the economic impact of the COVID-19 pandemic. This analysis is part of a series of articles on the stimulus package. View other articles in the series on our Coronavirus Resource Page.

It is expected that the administrative agency responsible for implementing each section of the CARES Act will adopt administrative rules providing clarity on the various provisions. We will continue to provide updates as details become available.

 

With respect to direct payments – or "rebates" as they are referred to in the CARES Act – U.S. Congress has provided for the following:

Taxpayers will receive up to $1,200 for individuals and up to $2,400 for couples filing joint tax returns. The payments will be in the form of an advance refundable tax credit.

In addition to the amounts above, the payments will include $500 per child under the age of 17.

These amounts will be phased out for adjusted gross income between:

  • $75,000 to $99,000 for individual taxpayers
  • $150,000 to $198,000 for couples filing joint tax returns
  • $112,500 to $146,500 for heads of household

The payments are available even if a taxpayer has no income.

Taxpayers do not have to take any affirmative action to obtain the payment. The IRS will use a taxpayer's 2019 tax return. If the 2019 return has not been filed, the IRS will use the 2018 return.

With respect to withdrawals from qualified benefit plans, the CARES Act waives the early withdrawal penalty for distributions of up to $100,000. Those distributions will be subject to income tax apportioned over three years.

With respect to loans from qualified employer plans, the CARES Act increases the limit from $50,000 to $100,000.

If you have questions about the CARES Act and direct payments to taxpayers, please contact your Much attorney.

This article contains material of general interest and should not be construed as legal advice or a legal opinion on any specific facts or circumstances. Under applicable rules of professional conduct, this content may be regarded as attorney advertising.