CARES Act (Coronavirus Aid, Relief, and Economic Security Act)

As you’ve been hearing, Congress has come to the aid of the ailing American economy and American public with a $2.2 trillion (yes, trillion) stimulus and relief bill. This aid package was passed unanimously in the Senate and is welcome relief to an economy which Is losing jobs and spiraling into a recession. Congress has also hinted that “more help is on the way”. For now, here are the key tax and business relief provisions in the bill:

Individuals

  • A $1,200 stimulus payment if single and $2,400 if married and $500 for each child under 17. These payments will be phased out for those with 2018 or 2019 adjusted gross incomes over $75K single and $150K marrieds. The check amounts and where they will be deposited or mailed will be based on your 2018 filed tax returns or possibly your 2019 returns if you filed early. If your income went up substantially in 2019 so that a reduction of the payment would result, you may want to put off filing your 2019 tax returns – you do have until July 15th, after all!
  • Allowance of $300 charitable contribution “above the line” deduction for 2020
  • Retirement plan distributions of up to $100,000 in 2020 without early distribution penalties and income spread over three years
  • A temporary waiver of required minimum distribution from IRAs and qualified plans for 2020

Businesses

Paycheck Protection Loans, administered by the SBA, for loans up to $10 million:

  • Maximum $10 million or 2.5 times average monthly payroll
  • For businesses with up to 500 employees
  • Guaranteed 100% by SBA – no personal guarantees or collateral required
  • May be forgiven for amount used to pay for payroll, rent, utilities and mortgage interest for first 8 weeks of expenditures after loan is taken out
  • Forgiveness of loan is nontaxable
  • Interest rate is up to 4% maximum
  • Amount not forgiven is deferred for 6 months to a year with the remainder to be paid over 10 years maximum

Other Provisions

  • Deferral of payment of employer payroll taxes for 2020 – 50% due December 31, 2021 and the remainder due December 31, 2022
  • A technical correction that now allows immediate bonus depreciation of Qualified Improvement Property retroactive to the enactment date of TCJA in 2017
  • Net operating losses for 2018 to 2020 are now allowed to be carried back, and for 5 years
  • Postponement of the 80% limit on utilization of net operating loss carryforwards
  • An employee retention credit equal to 50% of qualified wages up to $10,000 who have seen at least a 50% reduction in revenue for the 1st quarter of 2020 compared to the first quarter of 2019 among other qualifying conditions

There is much more in this bill, and each of the areas above deserves pages of explanations. We’ll continue to provide you updates as we get them.

In the meantime, if you would like to know how each of these important changes affects you and your business and steps that you should be taking now, please call or email us – our professionals are waiting to assist you!