The Coronavirus Aid, Help and Economic Security Act (CARES) was signed on Friday March 27, 2020. This $ 2 trillion emergency aid package is designed to support individuals and businesses during the ongoing coronavirus pandemic and the accompanying economic crisis. Tobias Financial Advisors continues to strive to keep our clients informed of the latest information.
Below you will find a summary of the most important auxiliary provisions.
The legislation provides:
- Until July 31, 2020, an additional weekly benefit of $ 600 for those receiving unemployment benefits
- A further 13 weeks of state-funded unemployment benefit until the end of 2020 for people who exhaust their state unemployment benefit
- Targeted reimbursement of the state unemployment benefit by the federal government in order to avoid delays in state provision of services for one week
- Unemployment benefits until 2020 for many who would otherwise not qualify, including independent contractors and part-time workers
Most people receive a direct payment from the federal government. Technically speaking, this is a refundable tax credit for 2020. The discount amount is calculated based on the submitted tax returns for 2019 (returns for 2018 in cases where a tax return for 2019 has not been submitted) and automatically by check or direct deposit to eligible individuals sent. In general, to qualify for a payment, people must have a social security number and should not be considered dependent on another person.
The refund discount is $ 1,200 ($ 2,400 if the marriage is jointly returned) plus $ 500 for each eligible child under the age of 17. Refund discounts will expire for people with a gross adjusted income (AGI) of more than $ 75,000 ($ 150,000 if the marriage provides joint feedback), $ 112,500 for those who submit as head of household). For people with an AGI that exceeds the threshold, the allowable discount is reduced by $ 5 per $ 100 income above the threshold.
While the details are still being worked out, the IRS will coordinate with other federal agencies to facilitate payment determination and distribution. For example, beneficiaries of social security benefits may not need to file a tax return to receive payment.
- Required minimum distributions (RMDs) from employer sponsored pension plans and IRAs do not apply to the 2020 calendar year. This includes all 2019 RMDs that would otherwise have to be taken in 2020
- The 10% penalty for early distribution, which normally applies to distributions before the age of 59 (unless there is an exception), does not apply to pension plan distributions of up to $ 100,000 related to the corona virus. There are also special rules for repaying and including income for tax purposes
- Credit limits from employer-sponsored pension plans are being extended, with delays in repayment
- The legislation provides for a six-month automatic payment block on all student loans held by the federal government. This six-month period ends on September 30, 2020
- Under existing rules, payments by an employer under an educational assistance program of up to $ 5,250 could be excluded from an employee’s taxable income. This exclusion is extended to include eligible student loan repayments made by an employer on January 1, 2021 on behalf of an employee
- Employers who have been severely affected by the crisis now have an employee retention tax credit to offset social security wage taxes. The credit is 50% of the qualified wages up to a certain maximum amount
- Employers can defer payment of the employer’s share of social security wage taxes until the end of 2020 and pay deferred taxes over a two-year period. Self-employed people can do that too
- The rules for net operating losses have been expanded
- The deductibility of business interests has been expanded
- Provisions related to certain Small Business Administration (SBA) loans increase the federal government’s guarantee to 100% and allow small businesses to borrow up to $ 10 million and defer payments for six months to one year. Self-employed, independent contractors and sole proprietors can qualify for loans
Previous legal relief provisions
The Families First Coronavirus Response Act (FFCRA), which was incorporated into the law approximately two weeks before the CARES law, also contained notable provisions to facilitate:
- Requirement that health plans cover COVID-19 tests free of charge for the patient
- Requirement that employers with fewer than 500 employees generally have to grant paid sick leave to workers affected by COVID-19 who meet certain criteria and have to take paid family and sick leave in other circumstances
- Income tax credits for the required sick leave as well as for paid family and sick leave
There will likely be a steady stream of guidelines detailing many of these provisions. Please keep up to date for more information. Our advisors are here to help you understand the impact of this law on your financial institution. If you would like to discuss how this law may affect you or your company, please call us.
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