INDIVIDUALS
- Provides rebates of up to $1,200 for single individuals and $2,400 for joint filers. This rebate is subject to a phase-out beginning at adjusted gross income of $75,000 and $150,000 respectively. Taxpayers with qualifying children will receive an additional $500. The rebates will be based upon 2019 returns if already filed. If 2019 has yet to be filed, then rebates will be based upon the 2018 returns. The IRS is still reviewing multiple methods of delivery.
- Provides waivers on the 10% early withdrawal penalty for distributions made from qualified retirement plans and IRAs provided these distributions were made in 2020 for COVID-19 purposes. You may replenish your plan within three years without consideration of the regular maximum contribution limit. Additionally, there is relief on the regular taxation of this withdrawal by allowing the tax to be spread over three years.
- Loosens loan thresholds and repayment terms for loans taken out from certain retirement plans. Please contact your employer to determine if your employer’s plan allows.
- Waives RMDs (required minimum distributions) from certain retirement plans including IRAs. Please contact your plan administrator to determine eligibility.
- Allows an above the line deduction of up to $300 of cash charitable contributions for those individuals claiming the standard deduction.
- Allows a relaxation of the income limit for charitable contributions for those individuals itemizing their deductions.
- Allows an employer to assist with your monthly student debt obligations tax free between March 26 and December 31, 2020 provided your employer has a qualified plan for such and is limited to $5,250.
- Suspends retroactively to January 1, 2018 the excess business loss rules and postpones the enactment date to 2021.
- Allows for Net Operating Losses arising in 2019 or 2020 to be carried back five years.
- Provides for enhanced unemployment benefits of an additional 13 weeks and $600 more per week for the first four months.
BUSINESSES
- Provides a deferral of payment option for the employer portion of payroll taxes. Caution – this is a deferral and not a release of such obligation.
- Provides an employee retention credit of up to 50% of wages paid to certain employees during the COVID-19 crisis. This credit does have multiple qualifications so please consult your payroll specialist to determine if you are eligible.
- Provides a retroactive technical correction for assets placed in service January 1, 2018 and forward deemed to be Qualified Improvement Property. This correction shortens the asset’s depreciable life from 39 years to 15 years.
- Modifies the charitable contribution limitations based on income for corporations and extends this to donation of food inventory.
- Allows employer to expand the definition of certain employee benefits to include employer’s ability to contribute up to $5,250 toward an employee’s student loan for payments made March 26 through December 31, 2020.
- Allows for Net Operating Losses arising in 2019 or 2020 to be carried back five years.
- Accelerates ability to claim certain minimum tax credits.
- Modifies the business interest expense limitation temporarily and retroactively from 30% to 50%. Additional special rules apply depending upon the business entity type.
- Provides additional funding options including the Paycheck Protection Program (referred to as PPP) under SBA 7a program guidance. The PPP does have a potential loan forgiveness portion.
For the complete legislative text, please click here.
For a section-by-section overview of the legislation, please click here.
For a summary of the provisions that will provide tax rebate checks to American families, please click here.
For a summary of the provisions that provide relief to small businesses, please click here.
Also, click here for an additional FAQ document.
Under the broad category of “Small Business Relief”, the CARES Act appropriates nearly $350 billion to various programs. For business owners, one provision that should be reviewed closely is the “Paycheck Protection Program” (PPP) for small businesses. The PPP provides short-term cash flow assistance for small businesses (fewer than 500 employees) to help these businesses and their employees deal with the immediate economic impact of the COVID-19 pandemic. Loans are made by lenders certified by the Small Business Administration (SBA) and guaranteed by the federal government, and the SBA will administer the PPP. The maximum loan amount is $10 million and can be used to pay workers, interest on mortgage obligations, rent, insurance, paid sick or medical leave, utilities, and payroll-related costs.
One of the most attractive features of these loans is that if employers maintain all employees at their pre-COVID-19 payroll, the loans of up to 8 weeks of payroll and other costs are forgiven. The PPP loans can be applied retroactive to February 15th, 2020, to help bring workers who may have already been laid off back onto payrolls.
You can read more on the specifics of this Act in the U.S. Senate Committee on Small Business & Entrepreneurship’s breakdown here: The Small Business Owner’s Guide to the CARES Act.
As the Small Business Administration (SBA) will be handling the administration of the PPP loans (and other disaster loans), so check back to www.sba.gov often for the most up to date information.