The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was approved by the U.S. Senate and is expected to be approved by House and signed into law. This $2 trillion-dollar package was designed to provide relief to individuals, businesses, the U.S. Economy and the U.S. healthcare system among others. Below we have highlighted some of the areas that we believe most pertinent to you.
Qualified Retirement Accounts
Temporary waiver of Required Minimum Distribution
The provision waives the required minimum distribution rules for certain defined contribution plans and IRAs for the 2020 calendar year.
Changes to early withdrawals (Under age 59.5) from qualified retirement accounts
The 10% early distribution fee is waived for coronavirus related purposes on distributions up to $100,000 made on or after Jan 1st, 2020.
The income from these withdrawals would be subject to tax over three years
The taxpayer may also recontribute those funds to the retirement account within three years without regard to contribution caps.
The bill doubles the amount 401(k) participants who have been diagnosed with the virus or affected by economic losses can take in loans for the next six months from a retirement account to the lower of $100,000 or 100% of the account balance. (IRAs don’t permit loans.)
People with 401(k) loans—new or existing—can delay any repayment due in 2020 for a year. That extends the repayment deadline for these loans by a year.
AGI Limitation suspended
Provision to increases the limitations on deductions for charitable contributions by individuals who itemize, as well as corporations. For individuals, the 50-percent of adjusted gross income limitation is suspended for 2020.
Above the line deduction for charitable giving
Permits individuals to deduct up to $300 of cash contributions whether they itemize their deductions or not.
Rebates for Individuals
2020 Rebates for Individuals
All U.S. residents with adjusted gross income up to $75,000 ($150,000 married), who are not a dependent of another taxpayer and have a work eligible social security number, are eligible for the full $1,200 ($2,400 married) rebate.
An additional rebate of $500 per child is included.
Includes those with no income and individuals collecting SSI benefits.
IRS will use a taxpayers 2019 tax return if filed or the alternative of the 2018 tax return.
The rebate amount is reduced by $5 for each $100 that a taxpayer’s income exceeds the phase-out threshold. The amount is completely phased-out for single filers with incomes exceeding $99,000, $146,500 for head of household filers with one child, and $198,000 for joint filers with no children.
Student Loan Deferral
Student loan borrowers can push back payments until September 30th, 2020 without interest or late penalties.
This is not automatic; borrowers would need to ask their loan provider for help with this.
Employee Retention Tax Credit
The provision provides a refundable payroll tax credit for 50 percent of wages paid by employers to employees during the COVID-19 crisis.
The credit is available to employers whose (1) operations were fully or partially suspended, due to a COVID-19-related shutdown order, or (2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year.
For employers with greater than 100 full-time employees, qualified wages are wages paid to employees when they are not providing services due to the COVID-19-related circumstances described above.
For eligible employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order.
Delay of Payment of Employer payroll taxes
The provision allows employers and self-employed individuals to defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government with respect to their employees.
The provision requires that the deferred employment tax be paid over the following two years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022.
Pandemic Unemployment Assistance
Creates a temporary Pandemic Unemployment Assistance program through December 31, 2020 to provide payment to those not traditionally eligible for unemployment benefits (self-employed, independent contractors, those with limited work history, and others) who are unable to work as a direct result of the coronavirus public health emergency.
Emergency Increase in Unemployment Compensation Benefits
provides an additional $600 per week payment to each recipient of unemployment insurance or Pandemic Unemployment Assistance for up to four months.
Temporary Full Federal Funding of the First Week of Compensable Regular Unemployment for States with No Waiting Week
This section provides funding to pay the cost of the first week of unemployment benefits through December 31, 2020 for states that choose to pay recipients as soon as they become unemployed instead of waiting one week before the individual is eligible to receive benefits.
Pandemic Emergency Unemployment Compensation
This section provides an additional 13 weeks of unemployment benefits through December 31, 2020 to help those who remain unemployed after weeks of state unemployment benefits are no longer available.
If you have any questions about the provisions from this bill or how they affect you personally feel free to give us a call at 610-825-3540.
Below are links where you can read more about the provisions of the bill:
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