The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, is intended to provide relief to those most effected. Top key provisions for individuals and businesses are below:
1. Direct Payment to Taxpayers – These are advance refunds of a 2020 tax credit. Individuals will receive a tax credit of $1,200 ($2,400 for joint filers) plus $500 for each qualifying child, under age 17. The credit is phased out for taxpayers with adjusted gross income (AGI) above $150,000 (for joint filers), $112,500 (for heads of household), and $75,000 for other individuals. The credit is not available to nonresident aliens, individuals who can be claimed as a dependent by another taxpayer, and estates and trusts. Taxpayers will reduce the amount of the credit available on their 2020 tax return by the amount of the advance refund payment they receive. 2. Coronavirus-Related Distributions from IRA’s and Employer-sponsored Retirement Plans - Taxpayers can take up to $100,000 in coronavirus-related distributions from retirement plans without being subject to the Sec. 72(t) 10% additional tax for early distributions nor are they subject to mandatory withholding requirements. Eligible distributions can be taken up to Dec. 31, 2020. Coronavirus-related distributions may be repaid within three years. Any resulting income inclusion can be taken over three years. 3. Loans from Employer-sponsored Retirement Plans - The act enhances 401(k)s and 403(b)s loan rules in 3 ways. a. Maximum loan amount is increased to $100,000. b. 100% of the vested balance may be used. c. Delay of repayments for up to 1 year.
4. RMD’s Waived in 2020 – this relief applies to both retirement account owners as well as beneficiaries taking stretch distributions. 5. Relief for Student Loan Borrowers – Federal student loan payments may be suspended through September 30, 2020. During this time no interest will accrue on this debt. Voluntary payments can continue. However, individuals must take proactive measures and contact their loan provider to pause these payments. 6. Charity - The bill creates a maximum $300 above the line charitable deduction for 2020. So those of you unable to itemize be sure to keep your charitable receipts for 2020. You will be able to take up to $300 as a deduction. 7. Paycheck Protection Program - To be administered by the Small Business Administration (SBA). This provides funding to qualified small businesses and certain non-profits. Part of this program also includes the ability to have loans forgiven under certain requirements. Available to small businesses under 500 employees, including sole-proprietors, independent contractors and self- employed individuals. Maximum value of the loan is the lesser of the average monthly payroll costs incurred during the 1-year period before the loan origination date multiplied by 2.5, max $10 million. Current SBA lenders are in the best position to move quickly on this program however financial institutions who do not typically provide SBA financing will also be able to participate so we recommend you contact your lender to discuss further. 8. Employee Retention Credit – A refundable payroll tax credit for 50% of wages paid during the Covid-19 crisis if 1) operations were fully or partially suspended or 2) gross receipts dropped more than 50% compared to the same quarter in the prior year. The first $10,000 of compensation, including health insurance paid to an eligible employees may qualify. 9. Delayed Payment of Employer Payroll Taxes – Employers and self-employed individuals can defer payment of the employer share of Social Security. Deferred payments will be paid over 2 years, half due 12/31/21, the other half due 12/31/22.
This pandemic has impacted all of us and there are currently more questions then answers. Please refer back to our website as we attempt to provide links to other resources you may find helpful. If you are a business owner considering terminations during this time you might want to consider temporary layoffs, rather than terminations so you can maximize any federal assistance available.
Unemployment benefits have been relaxed for individuals unable to work as a direct result of Covid-19. In Michigan Unemployment includes the self employed and will provide for an additional $600 per week above the maximum state benefit available for up to four months. As of 03/31/20, the Unemployment Agency is still in the process of updating its application process for the self employed, please have patience and they will provide guidance in the coming days.