The Coronavirus Aid, Relief and Economic Security (CARES) Act is intended to keep businesses and individuals afloat during this unprecedented time. While this legislation addresses many problems arising from the pandemic, there are several ways that the new bill could impact the way advisors interact with both their financial planning software and their current clients, including:
- Individuals and married couples will be eligible for a stimulus check based on their income. They will also receive an additional $500 for every child under 17.
- The 10% tax penalty on premature distributions of up to $100,000 from qualified retirement accounts has been waived for 2020 for “coronavirus-related” purposes.
- RMDs are waived for certain retirement plans and IRAs for 2020.
- For those taxpayers who do not itemize deductions (only about 10% of taxpayers itemized in 2018), they may deduct up to $300 of charitable contributions which will be an above the line deduction.
- The 60% AGI limit on gifts to public charities is increased to 100% of AGI for 2020.
CARES Act Changes in eMoney
During times of disruption, proactively engaging clients can give them the long-term perspective they need to stay invested in their plans.
eMoney is well positioned to accommodate the changes occurring with the CARES Act, including:
|RMDs are waived for certain retirement plans and IRAs for 2020.||This change applies to everyone—not just those affected financially by coronavirus illnesses. We updated our system on April 7, to reflect this change.|
|The 60% AGI limit on gifts to public charities is increased to 100% of AGI for 2020.||All carryforward rules apply as normal. We updated our system on April 21, 2020 to reflect this change.|
|The 10% penalty tax on premature withdrawals being waived in 2020.||Only for withdrawals related to coronavirus-related reasons. We already support this function. Advisors can create a transfer flow and choose “exempt from penalty tax” in the transfers area.|
|Spread the regular tax on a coronavirus related premature withdrawal over three years.||Only for withdrawals related to coronavirus-related reasons. We already support this function. Advisors can use the Tax Adjustments area to reduce the 2020 tax estimate and increase the tax estimate in 2021 and 2022.|
|$300 charitable deduction.||For taxpayers who do not itemize deductions (only about 10% of taxpayers itemized in 2018), they may deduct up to $300 of charitable contributions, which will be an above the line deduction. This applies to years beyond 2020.|
For more information on how eMoney can help you virtually connect with your clients during the COVID-19 pandemic, check out our latest webinar series, Insights and Best Practices for Planning During Times of Disruption.
And make sure to save your seat for this month’s continuing education webinar, Planning Opportunities in Today’s Changing Regulatory and Market Environments (1 Credit). In this session we’ll review recent legislation related to the SECURE Act and CARES Act, and their incorporation into eMoney’s financial planning software.