CARES Act S3548 and You
You have no doubt been hearing about the CARES ACT that was passed by Congress and signed by the President.
a. This new bill provides recovery rebates that can range from $600 to $1,200 for single individuals and $1,200 to $2,400 for married couples. These rebates begin to phase out for an individual when adjusted gross income for single individuals is above $75,000 and fully phased out with income over $99,000. The phase out limits for married couples begins at $150,000 and is phased out completely if income is over $198,000. Taxpayers with children under age 17 will receive an additional $500 for each child. These rebates will be based on an individual’s 2019 return if filed, or if not filed it will be based on the 2018 return.
b. The bill waives the 10% penalty for early withdrawals from retirement plans if it is a distribution related to the Corona virus.This waives the penalty not the tax. It provides the option of re-contributing the amount within a 3-year period. It also waives the required minimum distribution rules for 2020 IRA and defined contribution plans and the deferred compensation plans.
c. The Paycheck Protection Program provides relief for small businesses that have less than 500 employees and self-employed individuals, and contractors.
This act will provide a big relief to businesses that have been affected by COVID-19. The government is providing small businesses with forgivable loans so that they can keep their employees and be ready to ramp back up once this pandemic is over. A Business is eligible for loans at 250% of their average monthly payroll expenses. The loans can be used for payroll, health insurance, retirement benefits, mortgage payments, rent and utilities and other operating expenses.
The amount of the loan that may be forgiven AND IS NON-TAXABLE is equal to the sum of the business’s expenses for payroll and existing interest payments on mortgages, rent payments, leases and utility service agreements for an eight week period between February 15 and June 30 of 2020. However, there are stipulations that must be followed to be eligible for loan-forgiveness. These loans will be provided by banks that are approved to participate in this program through the Small Business Administration’s 7(A) lending program and additional lenders as approved by the Treasury. IF YOU ARE A BUSINESS OWNER, TALK TO YOUR BANKER. THERE IS ONLY 350 BILLION AVAILABLE AND IF ALL BUSINESSES UNDER 500 APPLY, THE MONEY WILL GO QUICKLY. I PERSONALLY CONTACTED MY BANKER
There is also a Payroll tax credit for employers that pay sick or family leave to employees affected by the Coronavirus. This is taken on the quarterly payroll tax return. The act temporarily repeals the taxable income limitation for net operating losses and allows a five-year carryback for losses incurred after 2017 and before 2021.
We continue to monitor information as it becomes available and share as we are able. We are working and following the CDC health guidelines for your safety and ours. Although we are not meeting with clients personally, we have continued to serve our clients with the use of technology, phones and an amazingly dedicated staff.
Stay well and healthy,