The Coronavirus Aid, Relief, and Economic Security Act or the “CARES Act” includes thousands of dollars in direct payments to most Americans and huge loan packages designed to help keep small businesses and corporations afloat.
Here’s What’s In The Act
Recover Rebates: Taxpayers will receive a one-time payment, which is being treated as advance refunds of a 2020 tax credit. Under this provision, individuals will receive a tax credit of $1,200 ($2,400 for joint filers) plus $500 for each qualifying child. The credit is phased out for taxpayers with adjusted gross income above $150,000 (joint filers), $112,500 (for heads of households) and $75,000 for other individuals.
The Unemployed: The program’s $250 billion extended unemployment insurance program expands eligibility and offers workers an additional $600 per week for four months, on top of what state programs pay. It also extends UI benefits through December 31, 2020 for eligible workers.
Retirement Funds: The bill waives the 10% early withdrawal penalty for distributions up to $100,000 for coronavirus-related purposes, retroactive to January 1. In addition, the required minimum distributions (RMD) from qualified plans and IRAs are waived.
Small Business Loans: Small businesses with fewer than 500 employees will have access to $350 billion in loans (“paycheck protection loans”) through June 30, 2020 designed to prevent layoffs and business closures while workers are staying home during the outbreak. The loans will have a maximum maturity of 10 years and an interest rate not to exceed 4%. Loan proceeds may be used to cover payroll, mortgage payments, rent, utilities and any other debt service requirements. In addition, small businesses that maintain their payroll for 8 weeks after the loan is given may have a portion of the loan forgiven on a tax-free basis.
Large Corporations: $500 billion will be allotted to provide loans, loan guarantees, and other investments, overseen by a Treasury Department inspector general. These loans will not exceed five years and cannot be forgiven.
Employee Retention Credit: Eligible employers are allowed a credit against their employment taxes equal to 50% of qualified wages (up to $10,000 per employee)
Delay of Payment of Employer Payroll Taxes: The bill delays payment of 50% of the 2020 employer-portion payroll taxes until December 31, 2021, with the other 50% due by December 31, 2022.
Net Operating Loss Carrybacks: NOLs arising in a tax year beginning after December 31, 2018 and before January 1, 2021 can be carried back up to 5 years.
Please note that there are many other tax provisions in the bill that may affect your tax situation. Please call us with your questions on the above-mentioned provisions as well as others that may be of interest to you. In the upcoming days, Lucke will take the time to digest the bill and provide further guidance to our clients.