CARES Act and Stimulus Payments

On March 27, 2020, the Coronavirus Aid, Relief & Economic Relief Act was passed to provide additional support for business and individuals affected by COVID-19. Individual provisions included Economic Impact Payments (also referred to as stimulus payments or rebate checks), expanded unemployment benefits, eased retirement plan rules and other individual provisions. Business provisions included the Paycheck Protection Program, Economic Injury Disaster Loans, employee retention credit for employers and various other provisions for business relief.

INDIVIDUAL PROVISIONS:

  • Cash payments of up to $1,200 per adult and $500 per qualifying child based on your 2019 adjusted gross income (AGI) or, if you have not yet filed 2019 taxes, your 2018 AGI:
Single Married
AGI   Your Check AGI  Your Check 
Up to $75,000 $1,200 Up to $150,000  $2,400
$80,000 ;$ 950  $160,000  $1,900
$85,000  $ 700 $170,000   $1,400
$90,000   $ 450 $180,000  $ 900 
$95,000   $ 200 $190,000  $ 400 
$99,000 or more  $ 0  $198,000 or more  $0 

    • As AGI increases, rebates are decreased by $5 per additional $100 of income (see chart above for examples)
    • Children under age 17 qualify for the additional $500 and are similarly phased out
    • Rebates are to be made by direct deposit in 2-3 weeks if provided on filed returns; otherwise, checks will be mailed (could take 4-5 months).
    • Social security recipients (retirees and disabled individuals) not needing to file a return, will receive payment the way they get their social security payment.
    • Rebate checks are NOT taxable.
    • If you do not get a check but qualify later, rebate probable when filing 2020 taxes.
    • If eligible for a larger check than received, rebate probable when filing 2020 taxes
    • No clawbacks if receive check now, but AGI is over the threshold in the future.
    • Amounts will be reduced for child support due, but not for past taxes owed.

    Click here to determine if you are eligible for an economic impact payment or for further information regarding receiving your payment.

  • Enhances and expands unemployment insurance benefits as follows:
    • Extends unemployment benefits by 13 weeks to those who remain unemployed after state benefits are exhausted (through December 31, 2020)
    • Provides an additional $600 per week for up to 4 months for each unemployment insurance recipient (through July 31, 2020).
    • Provides funding for first week of unemployment benefits, removing the waiting period in some states (through December 31, 2020).
    • Eligible persons include the self-employed, part-time, gig workers, those with limited work history, and those who had previously exhausted their benefits.
    • Covered individuals must be able and available to work, but are unemployed or partially unemployed due to specified circumstances relating to COVID-19.

  • Eases retirement plan rules as follows:
    • Doubles amounts individuals can borrow from qualified retirement plans to $100,000 (though September 23, 2020), waives early withdrawal penalties and allows either payback or inclusion in income over 3 years.
    • Extends 2019 IRA and Roth contribution deadlines to July 15, 2020.
    • Suspends RMDs (required minimum distributions) from IRAs for 2020. If already taken, possible to be undone within 60 days; other restrictions apply.
  • Employer payment of up to $5,250 toward employee’s student loans in 2020 is not taxable income to employee.

  • Above-the-line deduction allowed for up to $300 in charitable contributions in 2020 to those who use the standard deduction.

BUSINESS PROVISIONS:

  • Paycheck Protection Program (PPP)
    • Businesses with maximum 500 employees are eligible for up to $10 million in loans for payroll and related expenses.
    • Loan based on 2.5 times average monthly payroll costs (less than $100,000 per employee in one year.
    • Recipients are eligible for loan forgiveness for payroll costs, insurance premiums, mortgage interest, rent, or utility payments for 8 weeks (beginning on date of loan origination).
    • Loan amounts not forgiven after one year continue as a loan for up to 2 years at a maximum 1% interest rate.
    • Those eligible includes sole proprietors, independent contractors, and self-employed (using any wage, commission, net earnings from self-employment).
    • 500 employee rule is applied on a physical location basis for accommodation and food services industries.
    • Certification required includes: necessity to support ongoing operations, proceeds be used to retain workers, and no other loan of duplicative purpose.

  • Economic Injury Disaster Loan (EIDL)
    • Small businesses with no more than 500 employees, sole proprietors, and independent contractors are eligible for up to $2 million loan.
    • Eligibility includes: no requirement for applying for credit elsewhere, no personal guarantees for loans under $200,000, must have been in business for 1 year.
    • Loan up to 30 years at 3.75% interest.
    • Includes emergency grant of up to $10,000 within 3 days after applying for loan.
    • SBA can approve loan based on credit score; tax returns are not required.
      Employee retention credit for employers.
  • Employee retention credit for employers
    • Employers with no more than 100 employees receive larger credit.
    • Refundable payroll tax credit for 50% of wages paid 3/13/20 through 12/31/20.
    • Eligible if operations fully or partially suspended due to COVID-19 or more than 50% reduction in gross receipts compared to the same quarter in the previous year.
    • Maximum credit is the first $10,000 of compensation per employee paid 3/13/20 through 12/31/20
    • Excludes those who obtained a PPP loan.

  • Employer payroll tax holiday
    • Defer payment of employer portion of SS payroll tax (6.2%) or 50% of self-employment tax through 12/31/20.
    • Half must be repaid by 12/31/21 and half by 12/31/22.
    • Excludes those who obtained debt forgiveness under a PPP loan.

  • Other business relief
    • Relaxing limitations for NOLs for 2018 through 2020.
    • Modification of excess business loss rules for 2018 through 2020.
    • Refunds for AMT credits can be elected to be taken in 2018 and 2019.
    • Modifying interest deductions allowed to 50% for 2019 and 2020.
    • Technical amendment for qualified improvement property (QIP) - fixing retail glitch.

    • Due to the complexity and depth of the Act, there will be many issues which will require further rulings over the coming weeks and months. Clarifications and modifications are occurring often.

Tax Acts 2020

About Judy Murray, CPA