TAX SERVICES CRC 3020412 03/20 1
Coronavirus Aid, Relief, and Economic Security Act (CARES Act)
Key Provisions for Individuals and Businesses
The $2 trillion stimulus bill signed into law on March 27th, 2020 aims to address economic and industry impacts of the COVID-19 pandemic from a variety of perspectives, including tax relief, grants and loan assistance, healthcare and education provisions, and more. Below are some of the key provisions to the Coronavirus Aid, Relief, and Economic Security (CARES) Act for both individuals and businesses1:
1Note that the below does not represent a comprehensive, exhaustive list of all CARES Act provisions. Additionally, some provisions below may have eligibility criteria and conditions not described here in full. Click here for the full text of the bill. Please consult your Financial Advisor, and Tax and Legal Advisors, to understand the potential CARES Act impact to your particular financial and tax situation, respectively.
Individuals: Key CARES Act Provisions
o waives the 10% penalty tax on early distributions made from qualified retirement plans and individual retirement accounts (IRAs),
o allows individuals to include the taxable portion of the distribution in his or her taxable income over a 3 year period,
o allows such distributions to be recontributed to a qualified retirement plan or IRA as
rollover contributions within 3 years after the date of distribution,
o permits in-service distributions from qualified retirement plans, even if such amounts are not otherwise eligible for distribution under the federal tax rules, and
o exempts the distribution from mandatory 20% federal income withholding applicable to eligible rollover distributions from qualified retirement plans (and exempts such distributions from the 402(f) notice requirement and direct rollover requirement)
Qualifying coronavirus-related distributions are distributions of up to $100,000 in the aggregate that are made from qualified retirement plans and IRAs on or after January 1 2020, and before December 31, 2020, to an individual (1) who is diagnosed with the virus SARS-CoV-2 or with the coronavirus disease 2019 (COVID-19), (2) whose spouse or qualifying dependent is diagnosed with such virus or disease, or (3) who as a result such virus or disease experiences adverse financial consequences due to quarantine, furlough, layoff, reduced work hours, inability to work as a result of childcare issues, business closure or reduced business hours of a business owned or operated by the individual (and any other factor as determined by Treasury)
‒ Waives Required Minimum Distributions (RMDs) for IRAs and defined contribution plans (including 401(k), 403(b), and governmental 457(b) plans) for calendar year 2020, including RMDs for 2019 that must be taken on or before April 1, 2020, by individuals who turned age 70 ½ in 2019, but only to the extent such RMD was not distributed before January 1, 2020
o Temporarily increases plan loan dollar limits for qualifying individuals to the lesser of (1) $100,000 or (2) greater of $10,000 or 100% of the present value of the participant’s vested benefit. Only applies to loans taken within 180 days of enactment, and
o Provides qualifying individuals a one-year delay for plan loan repayments that are due in 2020 (but due on or after the date of enactment).
A qualifying individual for purposes of this qualified retirement plan loan relief is an individual who would qualify for a coronavirus-related distribution (as described above)
Businesses: Key CARES Act Provisions
qualified employee wages (up to $10,000 of wages for each employee).
Tax laws are complex and subject to change. Morgan Stanley Smith Barney LLC (“Morgan Stanley”), its affiliates and Morgan Stanley Financial Advisors and Private Wealth Advisors do not provide tax or legal advice and are not “fiduciaries” (under ERISA, the Internal Revenue Code or otherwise) with respect to the services or activities described herein except as otherwise provided in writing by Morgan Stanley and/or as described at www.morganstanley.com/disclosures/dol. Individuals are encouraged to consult their tax and legal advisors (a) before establishing a retirement plan or account, and (b) regarding any potential tax, ERISA and related consequences of any investments made under such plan or account.
This material has been prepared for informational purposes only. It is not an offer to buy or sell or a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. This material does not provide individually tailored investment advice and has been prepared without regard to the individual financial circumstances and objectives of persons who receive it.
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