The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law March 27. The largest economic aid bill in US history, the ACT allocates $2 trillion in an attempt to lessen the economic damage from the COVID-19 pandemic, including $1.5 trillion in spending and tax cuts, along with $500 billion in loans.
The Act will directly help individuals, businesses, non-profits, state and local governments, and healthcare institutions suffering coronavirus impacts in the US. The goal is to help families while encouraging businesses to retain their employees during the crisis.
Below is a summary of some CARES Act consumer and business benefits that we think are most notable. There are more benefits available, and some benefits have additional restrictions. If you’re interested in learning more about the Act, or how it affects you or your business, please contact us.
Important CARE Act Benefits for Individuals and Families
Direct government payments – payments of up to $1,200 per person or $2,400 per married couple, plus an additional $500 per child. Note that these payments phase out for adjusted gross income of $99,000 or more, double for couples.
Enhanced unemployment insurance – those who are or will be receiving state unemployment insurance payments will receive $600 extra per week. Unemployment benefits will also be extended for 13 weeks.
Free coronavirus testing – no one will have to pay.
Charitable deductions – to encourage charitable giving, taxpayers will be able to deduct up to $300 from their taxable income.
Student loan payment deferral – those who have federal student loans (owned by the Department of Education) can request to defer payments – with no penalty – until September 30, 2020.
Mortgage forbearance – those impacted by coronavirus may ask their federally backed (Freddie Mac or Fannie Mae) lender if they can stop making payments for 6 months, which can be extended later to 12 months. The CARES Act also stops foreclosure proceedings.
Retirement fund penalties waived – the 10% early withdrawal penalty is waived for distributions used for coronavirus-related purposes. The distributions are still taxable, but taxes can be paid over a three-year period.
Retirement RMDs suspended – for those of you who are already retired, any required minimum retirement fund distributions are suspended
Important CARE Act Benefits for Businesses
Paycheck Protection Program – $349 billion in (forgivable) loans allocated to support small business essential expenses. Click here to read our separate PPP summary, including a list of eligible businesses.
Payroll tax credit – any business that can demonstrate a 50% reduction in sales, compared to the same quarter in 2019, will receive a 50% refundable payroll tax credit up to $10,000.
Employment tax deferral – employers and self-employed individuals can defer Social Security tax payments. Half will be due at the end of 2021, and the other half due at the end of 2022
Operating loss reporting – the details are complex, but some of the ways that businesses can report losses have been adjusted to become more flexible.
Larger company loans and guarantees – The Act allocates money for larger company lending, as well as lending to specific industries like airlines. These programs require companies to maintain at least 90% of employment levels.
Healthcare relief – the healthcare industry will receive $130 billion in funds to reimburse hospitals for coronavirus expenses, encourage vaccines, and support the healthcare supply chain.
Government relief – states and local governments will receive $150 billion to use for disaster relief, transit, and educational institutions.
Keep in the mind that CARES won’t be the last COVID-19-based legislation Congress will enact. We should expect additional funding requirements to be addressed in future legislation.
Have Questions? Call the Experienced Tax Attorneys at Wiggam & Geer
We are here to answer any questions or concerns you might have regarding these new IRS updates.
Contact the experienced financial attorneys at Wiggam & Geer at 404-609-1300 or online for all your individual and business tax questions.