CARES ACT Provisions Important for YOU
We want to bring you some updates on the CARES ACT that was passed by Congress and signed by President Trump. Below are a few provisions that we feel are important for you:
- The new bill provides recovery rebates that can range from $600 to $1,200 for single individuals and $1,200 to $2,400 for married couples. These rebates begin to phase out for an individual when adjusted gross income for single individuals is above $75,000 and fully phased out with income over $99,000. The phase out limits for married couples begins at $150,000 and is phased out completely if income is over $198,000. Taxpayers with children under age 17 will receive an additional $500 for each child. These rebates will be based on an individual’s 2019 return if filed, or if not filed it will be based on the 2018 return.
- The bill waives the 10% penalty for early withdrawals from retirement plans if it is a coronavirus related distribution. This only waives the penalty not the tax. Also, it provides the option of recontributing the amount within a 3-year period. The act also waives the required minimum distribution rules for 2020 IRA and defined contribution plans and the deferred compensation plans.
- The Paycheck Protection Program as established under the recently passed CARES Act provides relief for small businesses that have less than 500 employees and self-employed individuals, and contractors.
- This act will provide a big relief to businesses that have been affected by COVID-19. The government is providing small businesses with forgivable loans so that they can keep their employees and be ready to ramp back up once this pandemic is over. A Business is eligible for loans at 250% of their average monthly payroll expenses. The loans can be used for payroll, health insurance, retirement benefits, mortgage payments, rent and utilities and other operating expenses.
- The amount of the loan that may be forgiven is equal to the sum of the business’s expenses for payroll and existing interest payments on mortgages, rent payments, leases and utility service agreements for an eight week period between February 15 and June 30 of 2020. However, there are stipulations that must be followed to be eligible for loan-forgiveness. These loans will be provided by banks that are approved to participate in this program through the Small Business Administration’s 7(A) lending program and additional lenders as approved by the Treasury.
- There is also a Payroll tax credit for employers that pay sick or family leave to employees affected by the Coronavirus. This is taken on the quarterly payroll tax return. The act temporarily repeals the taxable income limitation for net operating losses and allows a five-year carryback for losses incurred after 2017 and before 2021.
- If your business has been affected by COVID-19, please contact your banker or your CPA. You can also go to https://www.rubio.senate.gov/public/_cache/files/ac3081f6-14ae-4e6f-9197-172ede28badd/71AB6CB05A08E369E0D488A80B3874A5.faqs---paycheck-protection-program-faqs-for-small-businesses.pdf for frequently asked questions pertaining to this act.
- Additionally, under the CARES Act, there are additional and extended unemployment benefits If this is something that you could benefit from, we encourage you to reach out to our office or research it on your own.
We again want to remind you our main concern is for the safety and health of our staff, our clients and our community. We continue to be in the office working to get your returns done even though our doors are closed to the public. We are available by phone and email. We will be able to accept your tax information electronically, by mail, by fax, or by curbside pick-up. These methods also apply to delivery of your tax return. We have a mail slot on the door on our rounded porch where you can drop off your information after hours.
Please know we are here for you and praying that you and your families are healthy and safe.
We want to thank you for your understanding during these times.
Charlene Wehring and Team