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Financial Markets Update and the "CARES" Act

Financial markets remain volatile and we expect that will continue.  Last week saw some relief from selling pressure and stock prices have bounced significantly from the lows of the previous week.  However, while the magnitude of the rally was substantial, it takes a larger percentage gain to get back to where we were after large losses.   Patience will be required and we expect news flow to continue to fuel more up and down days in the next month or two.  We are examining opportunities for our portfolios and will continue to assess and make necessary changes.  

In addition, we wanted to advise of some pertinent information regarding the extension of deadlines and some other government action being initiated in response to the Coronavirus outbreak.

Federal Tax Filing Deadline - The federal tax filing deadline has been extended to July 15th, 2020, a three month extension.  This is also the due date for any tax payments owed to the IRS.  While state tax filing deadlines are determined at the state level, we expect most will follow the federal guidelines.  Please check with your state of residence to check on this.  The deadline for making 2019 IRA contributions is also extended to July 15th.

Hardship Withdrawals from Retirement Plans - The "CARES" Act, otherwise known as the stimulus bill, was signed into law on March 27th.   It is a far-reaching act aimed at providing and economic boost and actions to help small business support their employees during this difficult time.  It also contains temporary changes to rules regarding withdrawals from retirement plans in certain conditions.

The 10% early withdrawal penalty tax under Internal Revenue Code Section 72(t) on early withdrawals up to $100,000 from a retirement plan or IRA for an individual is waived under the following conditions:

  • a person is diagnosed with COVID-19
  • a person whose spouse or dependent is diagnosed with COVID-19
  • a person who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care due to COVID-19, closing or reducing hours of a business owned or operated by the individual due to COVID-19
  • other factors as determined by the Treasury Secretary

The legislation also permits those individuals to pay tax on the income from the distribution ratably over a three-year period and allows individuals to repay that amount into the plan over the next three years (presumably filing for a tax deduction on the taxes they will have paid as a result of the premature distribution). Those repayments would not be subject to the retirement plan contribution limits.

Temporary Waiver of Required Minimum Distribution Rules - The "CARES" Act also waives Required Minimum Distribution (RMD) requirements for calendar year 2020 most retirement and IRA plans, allowing individuals to keep funds in their plans this year.  If you want to discuss your 2020 RMD and eliminating or altering the amount you take, give us a call. 

Florida Residents - Florida Property Tax Extension - Property tax is normally due by March 31 in the year following the year the taxes are assessed. The Florida Department of Revenue extended the final due date for citizens and businesses to pay property taxes in all Florida Counties from March 31 to April 15, 2020.  Payments that are remitted by April 15, 2020, for the 2019 tax year will be considered paid on time. 

If you have any questions about your accounts, your financial plan, or anything concerning the “CARES" Act, please call 941-778-1900.