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Money Law &

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By Liz Weston

Many banks, credit card issuers and other lenders have promised to help those impacted by the coronavirus pandemic. They’re offering to defer or reduce payments and waive interest charges and rebate fees for those who have lost jobs, had their hours reduced or otherwise lost income due to the COVID-19 crisis.

The help usually isn’t automatic, however. You have to ask for it — and ask the right way.

“In many cases, you only get the help if you contact your creditor and mention that you need relief due to the coronavirus situation,” said Lauren Saunders, associate director of the National Consumer Law Center. “And that’s very frustrating because it’s very difficult to get through to your bank or lender.”

Many financial institutions are encouraging people to reach out digitally — through live chats or messaging on the companies’ sites or in their mobile apps. However you connect, there are important questions that need to be answered, including:

How to ask your bank or lender for help

You can start your research on the financial institution’s site to see what kinds of help may be available and how to apply. Generally, you’ll want to confirm the details with a human being, including the steps you must take to apply, said Saunders, who advises keeping a record of the conversation and what you were told.

You can take written notes of phone calls, including the time, date and name of the company representative, or take screenshots of electronic communications.

“Some people assume that (a hardship program) will automatically kick in if they just miss a payment, which is very dangerous to assume,” said Bruce McClary, a spokesman for the National Foundation for Credit Counseling.

Skipped payments can lead to credit score damage and collection calls, and could limit the hardship options available.

There’s one forbearance program that is automatic, but it pertains only to student loans held by the federal government. Payments on those loans are suspended until Sept. 30, and interest has been waived.

What steps do I need to take to qualify?

Exactly how does it work?

Companies take different approaches to their hardship programs. One lender may allow you to skip payments but charge you late fees; another may waive the fees but report skipped payments to the credit bureaus.

Most will continue to charge interest, and some will expect you to make a lump sum payment of the amount you skipped.

“This is not free money,” Saunders said. “It’s just putting off a debt that you’ll have to repay along with your other debts later.”

Even if your financial hardship is over, you may not be able to cough up several months’ worth of payments at once, McClary noted. “The last thing you want is to have to drop some big lump sum of money on somebody when you’re in a financially fragile state,” McClary said.

“It’s important to try to negotiate different terms,” he said. Ask if the payments can be tacked on to the end of the loan or paid off over time, McClary suggested.

Cars need exercise, too. See what yours needs on page 16.

The recent coronavirus relief legislacordingly reduces your tax liability. charity to be qualified, it must be eligible to If you have had income tax withheld, you tion, or CARES Act, made several imporThe law also changed the rules associatreceive tax-deductible donations. will not receive that back immediately. Howtant changes affecting charitable deduced with RMDs for 2020. You no ever, when you file your tax return for 2020, tions as well as Required Minlonger need to make any RMD Main advantage if you are entitled to a refund, you will reimum Distributions (RMDs). withdrawals in 2020. The advantage of the QCD is that these ceive back the income tax that was withheld.

It increased the charitable This is very helpful because contributions reduce your adjusted gross inIf you took an RMD in January 2020, contribution deduction that a of the significant drop in equity come (AGI), and accordingly reduce your you have another option: The CARES Act taxpayer is entitled to claim prices this year. (Now, that tax liability. allows those impacted by the coronavirus for cash contributions made money can remain in your acBy doing this, you may also minimize into take a loan from their retirement acto most public charities durcount, potentially allowing you come-based Medicare Part B and D premicount up to $100,000, or the vested amount ing the 2020 calendar year. to recoup some of the investums, and even avoid a 3.8% surtax applicable in their retirement account, whichever is

Prior to the CARES Act, ment losses from March and to net investment income for taxpayers fillower, without penalty, and to repay it over contributing to public charities April.) ing joint returns with AGIs above $250,000. a three-year period. The withdrawal is not was limited to 60% of individuals adjusted gross income (AGI). Now, if you itemize, the limit has been increased to THE SAVINGS GAME By Elliot Raphaelson

See ASK FOR HELP, page 16

Coronavirus relief act waives 2020 RMDs

These rules are applicable not only to individual retirement accounts but also to defined-benefit plans and 457

Also request that the account be reported “paid as agreed” to the credit bureaus to avoid a potentially large hit to your credit scores.

How long will the help last?

A hardship program may last three to six months, but you could have the option to extend the relief if you ask.

If you can’t make the payments on your federally backed mortgage because of the coronavirus pandemic, for example, you have the right to skip payments for nearly a year. The CARES Act requires lenders to give affected borrowers forbearance of up to 180 days, with the option to request an additional 180 days after that.

Lenders may not make that clear, however. Some borrowers who asked for mortgage forbearance in recent days were told they would owe a lump sum after three months, with no mention of the potential extensions.

These rules apply only to mortgages

The QCD rules apply only to traditional IRAs and not to distributions from SIMPLE IRAs, qualified employer plans, 403(b) plans or SEPS. taxable if you repay the loan within that period.

The CARES Act also added a new deyour taxable income, taxpayers who normal(RMDs) prior to the CARES Act being tax liability if you don’t itemize, and plan on duction for taxpayers who do not itemize. ly make qualified charitable distributions passed. Fortunately, the IRS allows (see making charitable contributions in 2020. For 2020, individuals who make a charita(QCDs) directly from their IRA custodians Notice 2020-23) any distribution taken beElliot Raphaelson welcomes your questions ble contribution can take a $300 ($600 for may find it to their advantage to postpone tween Feb. 1, 2020 and May 15, 2020 to be and comments at raphelliot@gmail.com. joint returns) “above the line” adjustment. charitable contributions to 2021 and make rolled over back into your retirement ac© 2020 Elliot Raphaelson. Distributed by This adjustment reduces the AGI, and aclarger charitable contributions then. For the count if it is done by July 15, 2020. Tribune Content Agency, LLC.

Regardless of distribution requirements, many taxpayers make QCDs to reduce tax 100% of AGI. If you contribute plans. What if you’ve already taken your RMD? liability. Even though minimum distribumore than your AGI, you can carry forward Because there is no need to take unnecesMany individuals have already taken tions are not required for 2020, the QCD your deduction for five years. sary RMDs this year, which would raise their required minimum distributions remains a valuable tool to minimize your