CARES Act

As most of you know the largest economic stimulus bill was signed it into law on Friday, March 27, 2020. This $2 trillion CARES Act addresses financial relief for individuals and businesses.To help you know and understand this new bill, we have read the 800-pages and here are the details that you need know right now, broken out into two categories, Individuals and Businesses (it is comprehensive, but worth the read in order for you know what is available to assist you).

Relief for Individuals:
Recovery rebates
Special rules for use of retirement funds
Temporary waiver of required minimum distribution
Partial deduction “above the line” for charitable contributions
Exclusion for certain employer payments of student loans
Pandemic Unemployment Assistance
Temporary relief for Federal Student Loan borrowers
Forbearance of Mortgage Payments for Federally Backed Loans

Relief for Businesses:
Paycheck Protection Program (PPP Loan)
Net Operating Losses
Modification of Limitation on Losses for Pass-Throughs 
 Interest Expense Limitation
Temporary Exception from Excise Tax for Alcohol Used to Produce Hand Sanitizer 
 Delay of Payment of Employer Payroll Taxes
 Employee Retention Credit
 Emergency Economic Injury Disaster Loans (EIDL)

 Families First Act   

Relief for individuals: 

Recovery rebates more popularly known as the “Stimulus Checks”. Each household will receive direct payments of:

• $1,200 for individuals, if your income is below $75,000 annually
• $2,400 for couples (filed joint return), if your income is below $150,000
• Dependent Children (under age 17) are an additional $500 each- if you have a child born in 2020, they will not be included in this check.
• Individuals with the following annual income will receive:

75,000         $1,200
80,000         $   950
85,000         $   700
90,000         $   450
95,000         $   200
100,000       $       0

Married couples will receive:
150,000       $2,400
160,000       $1,900
170,000       $1,400
180,000       $   900
190,000       $   400
200,000       $       0

Additionally:

• No refund or credit shall be made or allowed after December 31, 2020.
• Checks will be direct deposited to the bank account on file or mailed paper check to address on file. At this time, there is no way to change or update your direct deposit information or mailing address except to file your return since call centers have been closed. If your direct deposit is rejected, you will get a paper check mailed to you. If the address is incorrect or if you do not have mail forwarding, you will not receive a check but will be able to claim this as a tax credit on your 2020 tax return.
• If you have not filed your 2019 return, your 2018 return will be used to determine eligibility. Once you file your 2019 return and the amount you received is higher or lower than you would have qualified for, the difference will be reported on your 2020 tax return resulting in a refund or a payment to the IRS.
• Social Security recipients will receive a check if they do not exceed the income limit even if they have not filed a return.
• Dependents who can be claimed on someone else’s tax return and non-resident aliens are not eligible for a stimulus payment.
• The stimulus check is not considered taxable income.
• If you owe back taxes, it does not affect your eligibility, you will still receive a payment that you get to keep.
• If you made too much money in 2019 and did not qualify for the check, but lost your job in 2020, you will be able to use the stimulus as a tax credit on your 2020 return.
• Your 2020 income does not change your eligibility for this stimulus.

Special rules for use of retirement funds:

• The bill waives the 10% early withdrawal penalty for distributions up to $100,000 for coronavirus-related purposes, it must be a 2020 withdrawal retroactive to January 1. Withdrawals are still taxed, but taxes are spread over three years, but taxpayers can recontribute the withdrawn funds into their retirement accounts for three years. Eligible retirement accounts include individual retirement accounts (IRAs), 401Ks and other qualified trusts, certain deferred compensation plans, and qualified annuities.
• Increased limits on loans not treated as distributions from $50,000 to $100,000 that are made during the 180-day period which begins on March 27th.
• Delay of repayment on outstanding loans. Any loans that come due from March 27 to December 31st are extended for 1 year.

Temporary waiver of required minimum distribution rules for certain retirement plans in calendar year 2020. Check with your financial advisors to see if your plan qualifies.

Partial deduction “above the line” for charitable contributions and expanded limits. 

• A $300 deduction from your taxable income has been allowed for charitable contributions for filers taking the standard deduction.
• In addition, the bill expands the limit on charitable contributions for those that itemize.

Exclusion for certain employer payments of student loans. 

• Employers may contribute up to $5,250 by December 31st toward student loans, and the payments would be excluded from an employee’s income.

Pandemic Unemployment Assistance 

• Broadens who can qualify for unemployment benefits.
  • If you are an employee who has been furloughed or your hours have been significantly reduced, you can apply for Unemployment Benefits, even if you are a 1099 Independent Contractor.
  • If you or someone in your household has been diagnosed with COVID-19, have symptoms of it and is seeking diagnosis.
  • If you are caring for family member that has been diagnosed with COVID-19.
  • If you are a primary caregiver of a child unable to attend school.
  • If you are unable to reach your place of unemployment because of an imposed quarantine.
  • If you are quarantined or have been advised by a health care provider to self-quarantine.
  • If you have to quit your job as a direct result of COVID–19.
• States will still continue to pay unemployment to people who qualify. That amount varies state by state, as does the amount of time people are allowed to claim it. This bill adds $600 per week from the federal government on top of whatever base amount a worker receives from the state. This benefit ends July 31, 2020.
• The legislation also adds 13 weeks of unemployment insurance. People nearing the maximum number of weeks allowed by their state would get an extension. New filers would also be allowed to collect the benefits for the longer period.
• The one week waiting period has been waived.
• You are not eligible if you can either telework with pay or are receiving paid sick days or paid leave.
• This program will run from January 27, 2020 through December 31, 2020. You will be eligible for retroactive benefits and can access benefits for a maximum of 39 weeks, including any weeks for which you received regular unemployed insurance, but eligibility will end on December 31, 2020.

Temporary relief for Federal Student Loan borrowers

• All payments are suspended until September 30, 2020.
• No accrual of interest.
• Collections are suspended.

Forbearance of Mortgage Payments for Federally Backed Loans.

• Upon receipt of an oral or written request for forbearance you will receive:
  • Forbearance for up to 30 days, which can be extended for two additional 30 days periods.
• Applies to multifamily borrowers.

Relief for Businesses:

Paycheck Protection Program (PPP Loan)

• Part of the SBA Disaster Relief Program
• Coverage period is February 15, 2020 to June 30, 2020.
• Provides loans up to a maximum amount of $10 million to eligible businesses, which can be partially forgivable.
• Inclusion of sole-priority, independent contractors (1099), and eligible self-employed individuals.
  • Required documentation is necessary including payroll tax filings reported to the Internal Revenue Service, Forms 1099–MISC, and income and expenses from the sole proprietorship.
• To be eligible for this program you must have 500 employees or less or be a 501(c)(3) nonprofit organization, veteran’s organization, or tribal small business concern.
• The loan may be used to pay for only the following items.Payroll costs, costs related to group health care benefits during periods of paid sick, medical or family leave, and insurance premiums, employee salaries, commissions, or similar compensations, mortgage interest payments (but not any prepayment of or payment of principal on a mortgage obligation), rent, utilities and interest on any other debt obligations that were incurred before the Covered Period.
• The size of the loan available to a business depends on the size of a business’s payroll. Each loan is subject to a payroll-based cap of 2.5 times the average monthly payroll costs incurred during the 1-year period before the date on which the loan is made, not to exceed $10 million. Payroll costs include salaries, wages, leave payments, severance payments, payments of group health benefits and retirement benefits, and payments of compensation-related state and local taxes, but exclude, compensation in excess of $100,000 for any individual employee (on an annual basis), Social Security, Medicare and income withholding taxes and  compensation paid to residents of foreign countries.
• The interest rate for this loan is capped at (4%), but if forgiven you are not responsible for interest accrued in the 8-week covered period.
• You must certify in good faith that “the PPP Loan is necessary to support the ongoing operations of the business due to the uncertainty of current economic conditions, funds will be used to retain workers, maintain payroll or make mortgage payments, lease payments and utility payments, the company does not have a pending application for a duplicative loan under Section 7(a) of the Small Business Act, and for the period from February 15, 2020 through December 31, 2020, the company has not received any such duplicative loans under Section 7(a) of the Small Business Act”.
• This loan may be forgiven up to the principal amount, with certain supporting documentation. The amount of the PPP Loan eligible for forgiveness is the amount paid by the business during the eight-week period after the start date of the loan, on payroll costs and mortgage interest payments, lease payments and utility payments (to the extent that those arrangements were in place prior to February 15, 2020).
  • The amount eligible for forgiveness is subject to reduction, but not increased, if during the eight-week period the business employs fewer full-time employees or reduces salary or wages by more than 25% for any employee earning less than $100,000.
• The terms of the loan which are not forgiven, may differ on a case-by-case basis, however, the maximum term is a 10-years. You will not have to pay any fees on the loan, and collateral requirements and personal guarantees are waived. Loan payments will be deferred for at least six months and up to one year starting at the origination of the loan.

Net Operating Losses

• The Tax Cuts and Jobs Act (TCJA) net operating loss rules are modified. The 80% rule is lifted, and losses that occurred in 2018, 2019, and 2020 can now be carried back five years.

Modification of Limitation on Losses for Taxpayers other than Corporations

• The excess business losses rules for pass-through entities are suspended.
  • As a result of the Tax Cuts and Jobs Act, a pass-through taxpayer’s ability to deduct “excess business losses” was limited during tax years beginning after December 31, 2017, and before January 1, 2026. The CARES Act amends this limitation so that it applies only to taxable years beginning after December 31, 2020.

Interest Expense Limitation

• The interest expense limitations are increased to 50% from 30% for tax years beginning in 2019 or 2020.

Temporary Exception from Excise Tax for Alcohol Used to Produce Hand Sanitizer

• Excise tax has been removed for the year 2020, on distilled spirits used in or contained in hand sanitizer produced and distributed in a manner consistent with any guidance issued by the FDA related to the outbreak of COVID-19.

Delay of Payment of Employer Payroll Taxes

• The measure allows employers to delay the payment of their portion of 2020 payroll taxes until 2021 and 2022.

Employee Retention Credit for Employers Subject to Closure Due to COVID-19

• The provision allows eligible employers carrying on a trade or business in 2020 a refundable tax credit against Social Security taxes.
• If you receive a PPP loan you are not eligible for this credit.
• Eligible employers include employers whose operations were fully or partially suspended due to a COVID-19 government-mandated shut-down order, or employers whose gross receipts declined by greater than 50 percent when compared to the corresponding calendar quarter of the prior year.
• The refundable credit is applicable for all wages paid between March 12, 2020, and before January 1, 2021, wages covered under the Families First act are not included.
• The credit is computed on a calendar-quarter basis and equals 50 percent of qualified wages up to $10,000 paid to each employee or $5,000 in actual credit.
• For purposes of computing the credit, qualified wages paid to an employee during the relevant period may not exceed an amount that would have been paid to such an employee within the preceding 30 days.
  • Qualified wages must also factor in expenses related to an employee’s health plan. Any wages taken into account under the Employee Retention Credit for Employers Subject to Closure Due to COVID-19 cannot be taken into account for the employer credit for paid family and medical leave under section 45S of the Code.
• The credit would be available to employers whose businesses were disrupted due to virus shutdowns and those that had a decrease in gross receipts of 50 percent or more when compared to the same quarter last year.
• The credit can be claimed by employers with an average of more than 100 employees for all employees who are retained but not currently working as a result of COVID-19. For employers with an average of fewer than 100 employees, all wages paid qualify for the credit so long as they meet other requirements related to suspension of business or reduction in gross receipts.
• Any eligible employer may elect out of the credit. This credit is not available to Federal or state employers but is available to organizations exempt under section 501(c) of the Code.

Emergency Economic Injury Disaster Loans (EIDL)

• Coverage period is January 31, 2020 through on December 31, 2020.
• Eligibility:
  • Business with not more than 500 employees
  • Any individual who operates under a sole proprietorship, with or without employees, or as an independent contractor
  • In addition to small business concerns, private nonprofit organizations, and small agricultural cooperatives, an eligible entity shall be eligible
• No personal guarantee is required on advances and loans of not more than $200,000 during the covered period for all applicants.
• Must be in operation on January 31, 2020.
• You may request that the Administrator of the loan, provide an advance of no more than $10,000, to be received within 3 days after the Administrator receives the application.
• You shall not be required to repay any amounts of an advance, even if you are denied a loan.
• USE OF FUNDS
  • An advance provided may be used for the following:
    • Providing paid sick leave to employees unable to work due to the direct effect of the COVID–19;
    • Maintaining payroll to retain employees during business disruptions or substantial slowdowns;
    • Meeting increased costs to obtain materials unavailable from the applicant’s original source due to interrupted supply chains;
    • Making rent or mortgage payments; and
    • Repaying obligations that cannot be met due to revenue losses.

For a complete bill click here

Families First Act

This act requires certain employers to provide employees with paid sick leave or expanded family and medical leave for specified reasons related to COVID-19. These provisions will apply from the effective date through December 31, 2020.
Generally, the Act provides that employees of covered employers are eligible for:

• Two weeks (up to 80 hours) of paid sick leave at the employee’s regular rate of pay where the employee is unable to work because the employee is quarantined (pursuant to Federal, State, or local government order or advice of a health care provider), and/or experiencing COVID-19 symptoms and seeking a medical diagnosis; or
• Two weeks (up to 80 hours) of paid sick leave at two-thirds the employee’s regular rate of pay because the employee is unable to work because of a bona fide need to care for an individual subject to quarantine (pursuant to Federal, State, or local government order or advice of a health care provider), or to care for a child (under 18 years of age) whose school or child care provider is closed or unavailable for reasons related to COVID-19, and/or the employee is experiencing a substantially similar condition as specified by the Secretary of Health and Human Services, in consultation with the Secretaries of the Treasury and Labor; and
• Up to an additional 10 weeks of paid expanded family and medical leave at two-thirds the employee’s regular rate of pay where an employee, who has been employed for at least 30 calendar days, is unable to work due to a bona fide need for leave to care for a child whose school or child care provider is closed or unavailable for reasons related to COVID-19.

All employees of covered employers are eligible for two weeks of paid sick time for specified reasons related to COVID-19. Employees employed for at least 30 days are eligible for up to an additional 10 weeks of paid family leave to care for a child under certain circumstances related to COVID-19.

Where leave is foreseeable, an employee should provide notice of leave to the employer as is practicable. After the first workday of paid sick time, an employer may require employees to follow reasonable notice procedures in order to continue receiving paid sick time.

An employee qualifies for paid sick time if the employee is unable to work (or unable to telework) due to a need for leave because the employee:

• is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
• has been advised by a health care provider to self-quarantine related to COVID-19;
• is experiencing COVID-19 symptoms and is seeking a medical diagnosis;
• is caring for an individual subject to an order described in or self-quarantine
• is caring for a child whose school or place of care is closed (or child care provider is unavailable) for reasons related to COVID-19; or
• is experiencing any other substantially-similar condition specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury.

Under the FFCRA, an employee qualifies for expanded family leave if the employee is caring for a child whose school or place of care is closed (or child care provider is unavailable) for reasons related to COVID-19.

These are trying and worrying times to say the least. Please know we are here to help and support you in any way we can. Understanding the financial relief you are entitled to is extremely important. We hope you find our summary helpful. Feel free to share with anyone you know who might find it useful.

If you have not filed your 2018 or 2019 tax return, NOW is the time to do so. Refund checks are still being dispersed and can be a help in the coming weeks. To schedule an in person appointment, phone appointment, arrange courier service, or use our online portal, please call (407) 559-1047 and we will be happy to assist you. Stay safe, stay healthy, and we will see you soon!