On Friday, March 27, the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law, providing an unprecedented level of emergency assistance for families and businesses affected by COVID-19.
There are many provisions in the Act. This article from the Journal of Accountancy provides more details, but here’s what we think most of you need to know now to put money in your pocket quickly.
Stimulus Payments:
Most adults will receive a check for $1,200, although some will get less if their income is over $75,000 for singles, $150,000 for married couples, and $112,500 for head of households. For children under the age of 16, another $500 will be received. The payments will be based on your last tax return filed; 2018 or 2019. Ultimately, the amount you get to keep could be based on your 2020 income, but here are some strategies to help maximize your payment now:
- If you haven’t filed a tax return for 2018 or 2019, file one immediately.
- If your college aged children are eligible to file returns on their own, that needs to be considered for 2019.
- If your income for 2018 is over the threshold, but 2019 is not, file your 2019 return immediately.
- If your income for 2018 is under the threshold, but 2019 is not, delay filing your 2019 return until after your stimulus check arrives.
Retirement Plans:
- Required Minimum Distributions are suspended for 2020.
- Single Member Distributions are suspended for 2020.
- Distributions of up to $100,000 can be taken under certain circumstances without the 10% early distribution penalty and can be repaid within three years.
- Loans from qualified plans of up to $100,000 are allowed, and repayment can be delayed.
Payroll Taxes:
- Employer Payroll Taxes for 2020 are delayed – $50% until December 31, 2021, and 50% until December 31, 2022.
- Payroll Tax Credit Refunds under the Families First Coronavirus Response Act can be refunded in advance – IRS is coming out with guidance.
Business Losses:
- If you incurred a Net Operating Loss in 2018 or 2019, this loss was not originally available for a carryback. Those losses, as well as 2020 losses, are available for a five-year carryback, and could generate a cash refund.
- If your business losses were limited in 2018 to $250,000, or $500,000 for Married taxpayers, that limitation was repealed, and an amended return should be filed to report the full loss and generate a cash refund.
Small Business Loans: The Act provides for a new loan program that will be administered through the SBA and your local banker, called the Paycheck Protection Program (PPP). We suggest you contact your local SBA lender quickly to let them know you may be interested in this type of financing to see you and your business through this time. This article from Economic Innovation Group provides the specifics of the program. The basics are:
- This program will provide $349 billion in loans to eligible entities.
- The loans will be forgivable depending on
- How you spend the proceeds, and
- Whether you have or plan to have reduced your staffing and whether you will increase your staffing back to your previous levels.
- The loans will require no personal guarantees.
- The proceeds are intended to help you pay:
- Employee compensation,
- Rent and utilities, and
- Interest on debt that was in existence prior to February 15, 2020.
As you can see, there is a lot here for everyone, and hopefully those who really need financial assistance at this time will receive it.
In the meantime, stay safe, be kind, and remember to support the small businesses and charities that you love. They need your patronage now more than ever so they will be around when we come through this.
Please do not hesitate to reach out to me or any member of our team. We are here for you.
President, theKFORDgroup
theKFORDgroup team is ready to assist you with your tax questions. Give us a call at (210)340-8351.