May 15, 2020 3 min read

The CARES Act was passed into law to help deal with the financial fallout from COVID-19. Today, we will discuss some of the issues that have arisen from this law.

Most people over 17 were scheduled to receive a check for $1,200, money that is non-taxable. Eligibility is based on either your 2018 or 2019 income tax return, whichever was received last. Some people have received less than this amount.

There could be several reasons for this. First, there was an income test. If you earned more than $75,000 for a single tax filer, or $150,000 married filing jointly, your payment would decrease. The more you earned, the more the reduction in payment. Single people who earned $99,000-plus received nothing; the same for married couples above $198,000. If people were divorced or separated, each individual received his or her share.

If you had children 17 or younger, the legal parent received $500 for each of them. You also must have been able to claim the child as your dependent on your tax return. The children must be either U.S. citizens, permanent residents or qualifying resident aliens.

Some people did not receive stimulus money because they were delinquent with past-due child support. Some other creditors may have filed past-due claims against you. If this should happen, the Internal Revenue Service will send you a notice explaining what happened.

Some individuals have received checks they should not have. Last week, the IRS sent out notices that if funds were sent to a person now deceased, the estate that received checks must return the money. Right now, their position is if you received the check before you died, your family can keep it, if it arrived after death, it must be returned. Some people received checks weeks ago and others still have not received them.

This becomes very confusing. It would be clearer if there were one date established, like maybe the date the bill became law?

If you received a paper check and still have it, the IRS wants you to write void in the endorsement section on the check and include a short note explaining why you are sending it back. If you received a direct deposit, they want you to immediately submit a personal check or money order. You should write on your check, 2020EIP, and the deceased person’s Social Security number.

For all Pennsylvania residents, the money should be returned to Philadelphia Refund Inquiry Unit, 2970 Market St, DP 3-LO8-151, Philadelphia, PA 19104.

Another part of the CARES Act allows required minimum distributions from your qualified retirement accounts to be skipped in 2020. This includes RMDs on inherited Individual Retirement Accounts.

Taxes will have to go way up to pay for all of these government programs. You may want to consider Roth conversions this year. That is when you take some of your qualified money and pay taxes on it now. If you are over age 59½ and have a Roth for at least five years, you do not pay taxes on the gains. With market values lower and probably never a lower tax rate than today, it may make sense to consider this option.

No one really knows how quickly the economy will recover to where it was in early February. Make smart decisions now to better position your family for whatever happens.

Gary Boatman is a Monessen-based certified financial planner and the author of “Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility.”

To submit columns on financial planning or investing, email Rick Shrum at rshrum@observer-reporter.com.