To relieve the financial pressure many Americans are experiencing, the federal government has started to issue $1,200 payments to certain Individual Taxpayers, and $2,400 to married couples.  These payments have been a centerpiece of the $2.2 trillion rescue package meant to provide a buffer against the coronavirus pandemic that has closed much of the U.S. economy.

The U.S. Department of the Treasury and IRS expect roughly 80 million Americans will receive their payments via direct deposit by today (Wednesday, April 15.) These payments are being automatically issued to eligible 2019 or 2018 federal tax return filers who received a refund using direct deposit.

Who is eligible to receive a payment?

U.S. residents will receive a payment of $1,200 for individual or head of household filers, and $2,400 for married filing jointly if they are not a dependent of another taxpayer and have a work-eligible Social Security number with adjusted gross income up to:

• $75,000 for individuals
• $112,500 for head of household filers and
• $150,000 for married couples filing joint returns

Taxpayers will receive a reduced payment if their AGI is between:

• $75,000 and $99,000 if their filing status was single or married filing separately
• 112,500 and $136,500 for head of household
• $150,000 and $198,000 if their filing status was married filing jointly

The amount of the reduced payment will be based upon the taxpayer’s specific adjusted gross income.  Please use calculator found on the link below that will help provide an estimated total you can expect to receive if your AGI falls somewhere in the phaseout amount:

https://www.kiplinger.com/tool/taxes/T023-S001-stimulus-check-calculator-2020/index.php

Additionally, if you have children who qualify for the child tax credit (they must be 16 years old or younger), you will receive an additional $500 for each child.

Who is not eligible to receive a payment?

Taxpayers will not qualify for an Economic Impact Payment if any of the following apply:

• Your adjusted gross income is greater than
  • $99,000 if your filing status was single or married filing separately
  • $136,500 for head of household
  • $198,000 if your filing status was married filing jointly
• You can be claimed as a dependent on someone else’s return. For example, this would include a child, student or older dependent who can be claimed on a parent’s return.
• You do not have a valid Social Security number.

Is there any action required to receive payment if you’re under the required AGI income limits?

Individuals who’ve filed their 2018- or 2019-Income Tax return:

• No action is needed in you’ve already filed your 2019 Income Tax return.
• Also, no immediate action is required if you’ve filed your 2018 Income Tax Return, but not your 2019 Income Tax Return. The IRS will use information from your 2018 tax filings to determine the Economic Impact Payment calculations.

Individuals who are not required to file a tax return:

• Recipients of Social Security retirement benefits, Social Security disability insurance (SSDI), Social Security survivor benefits and Railroad Retirement and Survivor Benefits that are under the income requirements to file Income Tax Return – no immediate action is necessary.
  • These recipients will receive their Stimulus payments as a direct deposit or by paper check, just as they would normally receive their benefits detailed above.

No Direct Deposit established with the IRS?

For those that have not previously participated in direct deposit with the IRS, physical checks will be mailed as early as April 24th at a rate of five million checks per week throughout the summer.  To allow taxpayers to track the status of their payment, the IRS will be launching an online application called “Get My Payment”. In addition to sharing the status of their payments, this FREE app will allow taxpayers who filed their tax return in 2018 or 2019 but did not provide their banking information to submit their direct deposit information to receive their payment immediately.

This is the latest available information as of today, and as more information becomes available LFA will continue to keep you updated. If you or a loved one have any questions or concerns please never hesitate to reach out.

As we try and  work our way through the pandemic, it can be very overwhelming looking for the end. One idea is to take an approach of “day to day”.

1. It’s hard to do, but try every day to do something positive
2. Number 1 priority – Keep yourself, family, and the people around you safe
   1. Try every day to do something positive
   2. Family
   3. Yourself (mental & physical)
   4. Co-worker’s & your company
   5. A Client
   6. Your community

Then break the day down –

1. Wake up – a gift
2. Make it to breakfast
3. Make it to lunch
4. Make it to dinner
5. Relax & repeat

Hang in there and try to laugh a little every day.

We know many of our clients are working through dealing with the implications of Covid-19 on their businesses and day–to-day realities of managing work at a time like this. It is easy to succumb to the stress undoubtedly brought on by the uncertainty and unpredictability that current events present us with day by day – even minute by minute. We hope you and your family are staying healthy, safe and are remembering to take the time to practice self-care in all it’s forms: physically, emotionally, spiritually and financially. 

Yesterday, the Senate passed a historic $2 trillion deal, the Coronavirus Aid, Relief and Economic Security (CARES) Act, which provides economic relief for Americans, businesses and many industries in response to the growing coronavirus pandemic.  It is a comprehensive package that includes many provisions intended to mitigate the economic downturn the country is currently facing.  The CARES Act builds upon the Families First Coronavirus Response Act which was passed two weeks ago.  Notable for our clients are several changes to the 2020 tax code.

Below are some highlights we feel might be relevant to you and your families:

Checks to Individuals:  The bill provides for direct payments of $1200 per adult or $2400 for married couples filing jointly and an additional $500 per child.  These grants start to phase out for individuals with an adjusted gross income above $75,000 ($150,000 for joint filers and $112,500 for heads of household).  These recovery rebates are being treated as advance refunds of a 2020 tax credit. This credit is one-time, but policymakers may consider additional rebates if the downturn is prolonged.  Read more here.

Unemployment Benefits: A temporary Pandemic Unemployment Assistance program extends benefits from 26 to 39 weeks in most states.  There is also a provision included for an additional $600 a week increase for the first four months.  Benefits are extended to contract workers, freelancers and other nontraditional workers who are unemployed, partially unemployed or unable to work because of Covid-19.

Small Business Interruption Loans:  The bill expands small business eligibility for business under 500 employees.  Loans can be used for payroll as well as paid sick, medical or family leave, mortgage and rent payments, utilities and other debts. There are also provisions for payroll tax delays

Special Rules for Retirement:  The bill allows for tax favored “coronavirus-related distributions from certain retirement plans of up to $100,000 (10% early withdrawal penalty does not apply).  Income attributable to those distributions would be subject to tax over three years (as opposed to one).  In addition, Required Minimum Distributions are waived for 2020. This is a major provision for those not needing the cash flow in 2020.

Charitable Contributions:  Allows for contributions up to $300 to be treated as above-the-line deductions meaning that you do not have to itemize deductions in order to claim first $300 of charitable contributions.  Limits on cash donations are also temporarily suspended for individuals and corporations.  There is no longer a 50% AGI limit for individuals and the 10% limit for corporations is increased to 255 of taxable income.

Student Loans:  Students are allowed to suspend their monthly payments through Sept 30^th 2020 without any interest accruing.

The expansive bill also provides for many other benefits such as a payroll tax credit for employers, payroll tax payment delays, corporate tax payment delays and modified net operating losses limitations.   We anticipate many of our clients will have questions and welcome your calls.  We are here to help.  Please do not hesitate to reach out with any questions or concerns.  We will continue to keep you updated.

Remember, there is nothing permanent except change. Take some time for yourself, filter out the noise, stay the course.

One of the positives of having your birthday in mid-January is it gives you the opportunity to reflect back on the prior year (after the hoopla of the Holiday Season and Best of Lists has worn off of course) while simultaneously appreciating the benefit of being a year older and more mature to plan for the year ahead. Let’s not also forget the other positive being January provides good weather for napping. I really should change my birthday to the sunny days of mid-July!

Heading into 2019, financial markets were on edge and the year ahead looked treacherous. Prognosticators were predicting doom and gloom and signs of the Big R-word (Recession) were flashing. Social and political crises were aplenty. Nevertheless, 2019 proved to be a wonderful year for investment returns. As famous Fidelity fund manager, Peter Lynch, said, “More people have lost money anticipating (market) corrections than in actual corrections.”

2020 brings not only hope and a renewed sense of purpose but also a new law pertaining to taxes and estate planning. The Setting Every Community Up for Retirement Enhancements (SECURE) Act became effective on January 1, 2020 and brings some major changes to 2020 planning and beyond. Some of the highlights:

• Age to Begin Required Minimum Distributions (RMDs) – if you turn 70 ½ after 1/1/2020, then first RMD is delayed till the year you turn 72. Under the previous rules, RMDS started in the year you turned 70 ½.
• Elimination of the “Stretch IRA” for Beneficiary of IRAs and Retirement Plans – If you are a non-spouse beneficiary of IRA/Roth IRA/Other Retirement Plan then you must deplete the entire account balance by 12/31 of the 10^th year of original participant’s passing. Exceptions are still in place for spouses, minors, disabled individuals and beneficiaries less than 10 years younger than the original participant. Under the previous rules, non-spouse beneficiaries could take distributions based over their life expectancy and “stretch” the distributions. This provision will be a major area of planning since the facts of your finances and potentially your children/grandchildren will need to be reviewed. Does a Roth Conversion make sense?
• Traditional IRA Contribution Age – no longer any age limit to make an IRA contribution as long as the account owner has earned income. Under the previous rules, the year account owner reached 70 ½ was the limit.
• Penalty-Free Withdrawals for Birth or Adoption Expenses – up to $5,000 can be withdrawn penalty-free from a retirement plan or IRA to cover birth or adoption expenses. However, the account owner still has to pay ordinary income taxes on the withdrawal. Under the previous rules, a 10% penalty on the distribution applied.
• Additional 529 Plan Eligible Expense – 529 Plan funds can always be withdrawn tax-free to pay for qualified higher education expenses, and now, up to $10,000 over your lifetime can be withdrawn to pay down student loans. Important to note in 2018, a law passed allowing up to $10,000 per year to be used towards K-12 educational expenses.
• Annuities in 401(k) Plans – more employers will offer annuities via retirement plans

While much is still to be determined on how the SECURE Act impacts each of us, one thing is certain and that is we are here to discuss it with you. Looking forward to another exciting year!

When creating a healthy diet for your family you look at many things. What does each person need? For instance, if someone is diabetic you would watch for the amount of sugar in a meal or if someone has high blood pressure the amount of sodium. What do they like or dislike eating? What goals do you have? For example, are you trying to lose weight, gain weight, or build muscle? Is the meal balanced? How does it fit into the overall nutritional balance of the day, week, month, and year? As a person ages, their nutritional needs continue to change so the plan for this year may look very different from the plan 5 or 10 years from now. Creating a healthy financial life for you and your family is very similar to creating a healthy diet.

It is important to look at the specific needs of every person.  For example, having a disability or medical condition that requires care needs to be taken into consideration when planning.  Is it a long term situation or short term? How expensive will the care or equipment be? Does the person need a full-time caretaker?  What and how much does insurance cover? Will time off work be needed and how will that affect the overall income?  These are just some aspects that can affect your overall financial plan.

What do people like to do?  Sports, hobbies, and travel are all interests that can become expensive.  Planning for these expenses and knowing how much income can be allotted to enjoying life without sacrificing financial security allows the freedom to relax and have fun while partaking in these activities.

When setting financial goals such as a specific age to retire, paying for a child’s education, or being debt-free it is important to monitor them regularly so that you can make adjustments when needed to stay on track.  Knowing where you want to be in the months and years to come will help determine the steps to be taken now and in the future to achieve your goals.

Having the proper balance in your financial life is also important.  Paying all your bills on time but being over-insured or overpaying for insurance coverage and not contributing enough to your retirement funds can hurt your overall financial health.  Cash management, employee benefits, estate planning, insurance, investments, real estate, goals, specific needs, and taxes are all important aspects of your total financial situation.  Each aspect should be considered not only on an individual basis but also from a holistic perspective to determine how each will affect the whole.

Where you are in your life journey is also important when making financial decisions.  A young adult has different needs, goals, and responsibilities than someone who is retired.  Continuing to evaluate and alter your finances as your needs change is important to creating and maintaining a healthy, stress-free financial life. 

At Lighthouse Financial Advisors we understand how important all of these financial aspects are and take a holistic approach to managing to ensure the decisions being made are in the best interest of your overall financial health.  After all, our goal is to liberate you from the complexity of finances so you can live prosperously and enjoy the journey.