Congress has passed and the President has signed the Coronavirus Aid Relief and Economic Security (CARES) Act. This act will give relief to taxpayers and businesses.
Individual Relief
- Based on your last filed individual tax return, either 2018 or 2019 or your Social Security statement you will be eligible for a check in the amount of $ 1,200 if single or $ 2,400 if married filing jointly plus $500 for each child under the age of 17. The amount of the check will be phased out for income between $ 75,000 to $99,000 for single and $ 150,000 to $198,000 married jointly. Single taxpayers earning over $ 99,000 and married filing joint taxpayers earning over $ 198,000 will not be eligible for the payments. The phase out increases if you have children under 17. You will not lose the payment until your income exceeds $ 218,000.
The payments will be made as a direct deposit to the bank account on record. If you do not have a bank account recorded with the IRS or Social security you will receive a check in the mail.
If you do not receive a payment you will still be able to receive one when your 2020 income tax return is filed. A reconciliation will be done on your 2020 income tax return to determine if you received the correct amount.
- If you take money out of a qualified retirement account before the age of 59 ½ you will only have to pay the income tax on the distribution and the penalty is waived. These distributions are for individuals diagnosed with the virus, spouse or dependent who is diagnosed or taxpayers who are experiencing adverse financial consequences as a result of being quarantined, furloughed, laid off, have had working hours reduced or being unable to work due to a lack of child care. You will be able to spread the income distribution over a 3 year period beginning with 2020. The taxpayer also has the option to repay the distributions within 3 years of receiving it.
- The amount you can borrow from your retirement account has also been increased to $ 100,000 for the 180 day period beginning after the enactment of the act.
- For those required to withdraw a required minimum distribution from their retirement plan in 2020 the CARES Act temporary waives the requirement for this year only.
- Due to the increase in the standard deduction and the decrease in number of individuals itemizing deductions the CARE Act allows an individual to make up to $ 3,000 charitable contribution which will be deducted before calculating Adjusted Gross Income.
- In 2020 an employer can pay up to $ 5250 of am employee’s student loan obligation on a tax free basis.
Business Relief
- For businesses with fewer than 500 employees, including sole proprietors you can apply for SBA Section 7A loans. These loans can be used for payroll costs excluding the prorated portion of any compensation above $ 100,000 per year for any person, group health benefits costs, payment of retirement benefits, interest and rent payments. These loans or part of them may be forgiven based on payments made by the borrower during the 8 week period beginning on the date of the loan.
- If you apply thru the SBA web site you may be eligible to receive a $10,000 immediate grant. This advance can be used to maintain payroll and is not required to be repaid even if the borrower’s request for a loan is denied. The SBA will refer loan applications back to SBA approved banks to process the loan.
- During the period a business has been fully or partially closed as a result of a government mandate, the company will be eligible for a credit of the 6.2% employer Social Security payroll tax. The eligibility will be based on companies where the gross receipts have decreased by 50%.
- Employer share of Social Security tax (6.2%) due from the date of enactment through December 31, 2020 can be deferred and paid 50% in 2021 and 50% in 2022. Self-employed individuals will also be able to defer 50% of their Social Security tax.