The CARES Act ($2 Trillion+ Stimulus Package) Is Signed Into Law
What Does That Mean For Me? We've Got The Details.
President Trump signed the “Coronavirus Aid, Relief, and Economic Security Act” (CARES) on the afternoon of March 27, 2020 following a voice vote earlier in the day from the House of Representatives and unanimous vote by the U.S. Senate on March 25.
The CARES Act is 880 pages and an estimated $2 Trillion + price tag ($2,000,000,000,000) and include extraordinary public health spending for the COVID-19 pandemic, immediate cash relief for individual citizens, a broad lending program for small business, and, targeted relief for hard hit industries.
In the context of the clients we serve, the most notable provisions we’ll cover are related to direct payments.
Here’s as a succinct summary of items that may have implications for you (some more than others):
- Refundable income tax credit against 2020 income of up to $2,400 for married couples filing a joint return. All other filers begin with a refund of up to $1,200. The credit amount then increases by up to $500 for each child a taxpayer has under the age of 17.
- Adjusted Gross Income (AGI) threshold amounts:
- Married Filing Joint, $150,000
- Head of Household, $112,500
- All others, $75,000
- Payment reduced by $50 for every $1,000 over threshold amounts.
- Individuals must have a work eligible Social Security Number (and not be claimed as a dependent), but they do not need to have had a reportable income in 2019 and can also be eligible for other income-benefit programs as well.
Coronavirus Related Distributions
- Coronavirus related distributions are distributions of up to $100,000, made from IRAs, employer sponsored retirement plans, or a combination of both, which are made in 2020 by an individual who has been impacted by the Coronavirus.
- Distributions are exempt from the 10% penalty, not subject to mandatory withholding requirements, are eligible to be repaid over 3 years, and the income may be spread over 3 years.
- Required minimum distributions (RMDs) are waived in 2020, and taxpayers who have already taken their RMDs for 2020 have the option of returning them, if they so desire.
- 2020 is ignored for the purposes of the 5-year rule that applies to non-designated beneficiaries (e.g. charities, estates, non-see-through trusts) who inherit a retirement account from decedents who die prior to reaching their required beginning date.
- New $300 above the line deduction for “qualified charitable contributions,” and the AGI limit for cash charitable contributions has been temporarily repealed.
- Student loan payments deferred until September 30, 2020, and employers can exclude student loan repayments from compensation.
Unemployment Compensation Benefits
- “Regular” unemployment compensation is increased to $600 a week, and the benefit period is extended by 13 weeks.
- Unemployment benefit will be available the first week of unemployment, waiving the normal one-week waiting period.
Small Business Benefits
- Certain small businesses can qualify for small business loans up to a maximum of the lesser of $10 Million, or 2.5x the average payroll costs to cover payroll, rent, utilities, mortgage interest, group insurance premiums, etc.
- Such loans (which have a maximum interest rate of 4%) are eligibile for full or partial forgiveness. Eligible amounts must be spent during the first 8 weeks after the loan is made if spent on payroll, costs, rent, utilities, and group health insurance premiums, BUT businesses MUST maintain the same number of employees (subject to certain timeframes).
- Payroll tax credit for qualifying businesses not receiving a covered loan (point made above).
- Employers are eligible to defer payroll taxes from the date of enactment, through the end of the year, until the end of 2021 and 2022.
As you can see, there is a lot to review and digest with the recently signed CARES Act.
Hopefully, these summary points will give you guidance on what’s included and how it may affect you in the coming weeks and months.
We’ll continue to go through the 880 pages and communicate more in the future. Please look for a ‘Frequently Asked Questions’ (FAQs) communication from us in a few days.
Thank you for reading.
Here’s to everyone’s good health.
Your Client First Team,