The coronavirus pandemic has resulted in many economic difficulties across the world and, more particularly, to the United States (Mogaji, 2020). The US government has offered a $2 trillion economic relief plan that will assist millions of Americans households grappling with the devastating effects of the coronavirus pandemic (Anderson et al., 2020). Undoubtedly, the Individual Retirement Account (IRA) owners are already adversely affected by the raging coronavirus pandemic. Providing tax-relief to IRAs will potentially assist them in navigating the underlying economic difficulties. The stimulus package encompasses expanded employment coverage, different retirement account rules, and, more importantly, to stimulus payments to individuals in the United States. More fundamentally, the stimulus-package tax relief will give the American hospitals $100 billion that they will use in combating COVID-19 (Jernigan, 2020). Also, the package will allow Americans to borrow $100, 000 from IRAs, which they will repay for up-to three years with absolutely no tax consequences (Anderson et al., 2020).
The stimulus package will be focused on offering tax relief to Americans who are experiencing adverse financial consequences as a result of being laid off or quarantined due to COVID-19 (Jernigan, 2020). Further, the package will be channeled to business owners whom COVID-19 has disrupted their operations. Confronting coronavirus requires that the American government remain steadfast in implementing legislation that is intended to offer economic relief to the people (World Health Organization, 2020). The stimulus-package bill will suspend, at least temporarily, the efforts to garnish tax refunds to repay underlying debts. However, the waiver will exclude all individuals who are entangled in child support. While some IRA owners will more easily qualify for Corona-related distributions (CVD), some of them will be required to wait for the guidance provided by IRS (Wenham et al., 2020). Also, a special restriction has been leveled, and elected leaders owning businesses will be prohibited from getting federal assistance through the stimulus-package relief issued by the Treasury.
The coronavirus legislation that aims to offer tax-relief has been dubbed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The coronavirus tax relief is anchored on law, and the Act has different business provisions. The Act has increased the taxable income for the Section 163(j) limit placed on the interest reduction to 50% up from 30% (Anderson et al., 2020). The Act allows taxpayers to calculate the 2020 limit using 2019 taxable income. Further, the provisions of the Act have allowed corporations to claim their refunds premised on the underlying Alternative Minimum Tax credits in 2018 and 2019. Also, the Act seeks to correct errors that exist in the Jobs Act and Tax Cuts that have always prevented qualification for 100% bonus depreciation (Atkeson, 2020). More critically, the Act suspends the imposed limit on excess business loss deductions anchored on Section 461(I) in 2018, 2019, and 2020. Equally important, the Act provides that the single-employer defined-benefit pension plans' funding obligations for 2020 will be suspended until Jan. 1, 2020.
Furthermore, the individual provisions of the Act allow the doubling of the amount that taxpayers can borrow from their retirement accounts to $100,000 (Anderson et al., 2020). Also, the Act allows removal of the AGI limit that is often imposed on charitable contributions' individual itemized deductions in 2020. More importantly, the ActAct provides for a permanent restoration of taxpayers' ability to use their health savings accounts and flexibility in the purchase of over-the-counter medicine. Additionally, the Act allows for the suspension of the minimum distributions for 2020 (Atkeson, 2020). Understandably, the CARES Act resembles some key characteristics of emergency legislation. Much focus is on whether the quick passage of the Act will bring substantial assistance to the Americans facing economic challenges due to COVID-19.
The bill will undoubtedly expand unemployment benefits, which will help in sustaining their households during the pandemic. Based on the provisions highlighted in the Act, individuals will be allowed to use their 2019 Social Security statement that demonstrates their income as reported by an employer to the IRS. The plan will not offer immediate benefits, but the people will start experiencing relief after filing the 2020 taxes. More imperatively, the legislation will provide for filing for unemployment and loans by small business owners. Worth noting is that individuals will not need to submit applications to receive payment, especially if the Internal Revenue Service (IRS) has their bank account information originating from either 2018 or 2019 tax returns (Atkeson, 2020). The stimulus package will not exclude all individuals who are currently receiving benefits from disability payments and Social Security retirement. The IRS will provide paper notice in the individuals' mails after two weeks following disbursements.
It should be noted that the coronavirus stimulus-package tax relief will cushion Americans from the potential economic difficulties that will be occasioned by the COVID-19 pandemic. The legislation will play an instrumental role in providing tax relief to small businesses and individuals. The benefits will allow the sustenance of households of those who have been laid off or have been prevented from working as a result of the pandemic. Moreover, the waiver of payments and interest on funds borrowed by federal students will undoubtedly assist them in navigating the economic challenges that have been brought by a coronavirus. Undeniably, the coronavirus outbreak will most likely bring adverse effects on the economic progress of the United States, and the enactment of the CARES Act will be integral in checkmating the potential consequences of the pandemic.
Anderson, R. M., Heesterbeek, H., Klinkenberg, D., & Hollingsworth, T. D. (2020). How will country-based mitigation measures influence the course of the COVID-19 epidemic?. The Lancet, 395(10228), 931-934.
https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(20)30567-5/Atkeson, A. (2020). What will be the economic impact of COVID-19 in the US? Rough estimates of disease scenarios (No. w26867). National Bureau of Economic Research.
https://www.nber.org/papers/w26867Jernigan, D. B. (2020). Update: public health response to the coronavirus disease 2019 outbreak-United States, February 24, 2020. MMWR. Morbidity and mortality weekly report, 69.
https://www.cdc.gov/mmwr/volumes/69/wr/mm6908e1.htm?s_cid%3Dmm6908e1Mogaji, E. (2020). Financial Vulnerability During a Pandemic: Insights for Coronavirus Disease (COVID-19). Mogaji, E, 57-63.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3564702Wenham, C., Smith, J., & Morgan, R. (2020). COVID-19: the gendered impacts of the outbreak. The Lancet, 395(10227), 846-848.
https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(20)30526-2/World Health Organization. (2020). Coronavirus disease 2019 (COVID-19): situation report, 67.
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