CARES Act Resources
The purpose of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act is to provide emergency assistance and health care response for individuals, families, and businesses affected by the 2020 coronavirus pandemic.
Individuals
Play Video
Recovery Rebates
The Recovery Rebate is a refundable tax credit for 2020 that is paid out in advance. Each individual will receive up to $1,200 ($2,400 for a married couple filing jointly) plus an additional $500 per child under age 17. If your Adjusted Gross Income for your most recent tax year on file with the IRS was over $150k for Married Filing Jointly, $112,500 for Head of Household filers, or $75k for all other filers, then your rebate will be reduced or eliminated depending on how far above that threshold your income is. If your income was above the threshold on your prior return you are not eligible for the initial payment, but if your income is below the threshold in 2020, you will be eligible to receive the credit when you file your tax return for 2020.
There is no need to apply for this benefit. The IRS will evaluate your eligibility and will make any payment to the bank account used for prior refunds or where you receive Social Security income. If they don’t have an account on file, a check will be mailed to your last known address.
Expanded Unemployment Insurance
Unemployment benefits may be increased by up to $600 per week for up to 4 months.
Federal coverage is extended to some people who don’t typically qualify, like self-employed individuals, for up to 39 weeks.
Federal coverage is available for the first week of unemployment and for up to 13 weeks after state unemployment benefits have run out.
Charitable Deductions
The CARES Act creates an above-the-line charitable deduction (not to exceed $300) for individuals who do not itemize their deductions.
The CARES Act also modifies the AGI limitations on charitable contributions for 2020, to 100% of AGI for individuals and 25% of taxable income for corporations
Student Loans
Required payments on Federal student loans are suspended though September 30, 2020. During this time, no interest will accrue on this debt. Voluntary payments are still allowed.
Student loan payments (up to $5,350) made by employers for employees in 2020 can be excluded from taxable income to employees.
business owners
Play Video
Paycheck Protection Program Loans
Almost $350 Billion was set aside for loans to small businesses with under 500 employees, including self-employed individuals. You can receive up to 2.5X your average monthly payroll from 2019, with the total loan amount capped at $10M. Proceeds for the loans used for payroll, rent, mortgage interest, or utilities in the first 8 weeks may be eligible for forgiveness, meaning you wouldn’t have to pay it back if all of the requirements are met.
Small business owners can start applying for these loans on April 3rd, and self-employed and independent contractors can start applying Friday April 10th. These funds may go fast, so talk to your local banker to learn more.
**These loans may impact your business’s eligibility to receive some of the benefits listed below, so ask your CPA what is best for your business.
EMPLOYEE RETENTION CREDIT
Businesses whose operations have been at least partially suspended by the government and have had a significant (50%) drop in revenue, may be eligible for the Employee Retention Credit.
Economic Injury Disaster Loan
Loans offered by the SBA to help needs caused by natural disasters. The loans may be used to pay fixed debts, payroll, accounts payable, and other bills that could have been paid had the disaster not occurred.
Resources:
Net Operating Losses
Net operating loss rules have been expanded, so if your business had a net operating loss from 2018, 2019, or 2020, check with your CPA to see how this may benefit you.
PAYROLL TAX DEFERRAL
The CARES Act delays payment of 50% of 2020 employer payroll taxes until Dec. 31, 2021; the other 50% will be due Dec. 31, 2022. For self-employment taxes, 50% will not be due until those same dates.
retirement accounts
Play Video
Distributions
If you meet the IRS definition of having been negatively impacted by Coronavirus from a health or financial standpoint, then there are some additional ways you can access your retirement account.
You can take a distributions of up to $100k from your IRA or qualified retirement plan and avoid the 10% penalty. Taxable income from distribution is spread over 3 years unless you elect to report it all in 2020. You can repay any portion of the distribution back to your account within 3 years and not have to pay taxes on the distribution.
Loans
If your retirement plan allows loans and has updated the plan document to include new provisions, you can now take a loan of 100% of your vested balance up to $100k. Any payments on the loan for 2020 can be delayed for up to a year.
Required Minimum Distributions
Required Minimum Distribution requirements are waived for 2020, though voluntary distributions are still allowed. If you have already taken your RMD for 2020 and would prefer not to, you may be able to roll it back in under the 60-day rollover provisions.
* The above information is a summary of the provisions and is meant for informative purposes only and is not meant to be advice. See your local tax, Banking, or financial professional to determine if any of these provisions apply to your specific situation.