COVID-19 and CARES Act

As you may have heard, President Trump signed the Coronavirus Aid, Relief and Economic Security Act   (CARES Act) on Friday, March 27, 2020.  The Act did pass the much talked-about stimulus checks at $1,200 per person plus $500 per dependent under age 17.  There are income limitations depending on filing status where the stimulus money will be phased out and eliminated based on how much you make.

What you may not know is that there are several provisions in the Act that also help individuals and businesses, as well as extending unemployment benefits and unprecedented loans for small businesses.  In this email, I can’t cover them all.  Below is a summary of some of the major points that will affect the majority of people.

Here is a partial list of the provisions in the CARES Act:

• Tax credit rebates of up to $1,200 per individual and $500 per child that are phased out as follows:

  • Single – $75,000 (completely phased out at $99,000)

  • Married Filing Joint – $150,000 (completely phased out at $198,000)

  • Head of Household – $112,500 (completely phased out at $146,500)

• Deferral of 50% of an employers’ portion of Social Security (6.2%)  for 2020 (with 50% of deferred amount due by December 31, 2021, and 50% due by December 31, 2022);

• A refundable employer retention credit equal to 50% of qualified wages against quarterly employment taxes, to offset up to $10,000 of wages paid per employee in 2020;

• The reinstatement of Net Operating Loss (NOL) carrybacks for the 2018–2020 taxable years, and repeal of the 80% taxable income limitation for the 2018–2020 taxable years;

• A technical correction to the 2017 Tax Cuts and Jobs Act (TCJA) that classifies qualified improvement property as 15-year recovery period, allowing the bonus depreciation deduction to be claimed for such property retroactive as if it was included in the TCJA at the time of enactment;

• Penalty-free withdrawals of tax retirement funds of up to $100,000 (income recognized over a three-year period;

• A temporary waiver of Required Minimum Distribution (RMD) requirements in 2020;

• Increased individual and corporate charitable contribution deductions for 2020;

• The deferral of excess business loss limitations until 2021;

• Deferral of an employer’s 2020 minimum contributions to its single-employer defined benefit pension plan until January 1, 2021;

• An increase in the business interest deduction limitations from 30% to 50% of adjusted taxable income for the 2019 and 2020 taxable year;

• An exclusion from income for employer-payments made on employee student loans paid before January 1, 2021;

• The acceleration of the corporate credit for prior-year minimum tax liability, allowing 100% of the credit to be claimed in 2019 (2018 at the election of the taxpayer); and

• Small business Payroll Protection loans forgiven under the Act will be tax free

We will be putting out more information and providing webinars on these subjects in the coming days, weeks and months as it unfolds.  We encourage you to reach out to our office if we can be of help in any way.