CARES Act

Updated March 30....

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed by the President on March 27 contains over 800 pages which include numerous tax items.

Stimulus checks are payments to taxpayers which are advanced payments of a $1,200 tax credit ($2,400 for married filing jointly) that will be trued-up and calculated based on 2020 tax returns.  The advance payment will be based on adjusted gross income reported in 2019 taxes, if they have been filed, or 2018 taxes, if they have not. Individuals who made $75,000 to $99,000 will have reduced payments. Individuals with income over $99,000 will NOT receive an advance payment or credit.  Married couples filing jointly who made $150,000 to $198,000 will receive a reduced payment. Married couples making $198,000 will NOT receive an advance payment or credit.  People will receive an additional $500 per child.  

What else the CARES act includes - Highlighted items

Payroll tax credit refunds: The bill provides for advance refunding of the payroll tax credits enacted last week in the Families First Coronavirus Response Act, P.L. 116-127. The credit for required paid sick leave and the credit for required paid family leave can be refunded in advance.

Employee retention credit: The bill creates an employee retention credit for employers that close due to the coronavirus pandemic. Eligible employers are allowed a credit against employment taxes equal to 50% of qualified wages (up to $10,000 in wages) for each employee. 

Retirement plans: Eligible taxpayers can take up to $100,000 in coronavirus-related distributions from retirement plans without being subject to the 10% additional tax for early distributions. Eligible distributions can be taken up to Dec. 31, 2020. Coronavirus-related distributions may be repaid within three years.  Any resulting income inclusion can be taken over three years. The bill also allows loans of up to $100,000 from qualified plans, and repayment can be delayed.

The bill suspends the required minimum distribution rules for 2020.

The bill delays 2020 minimum required contributions for single-employer plans until 2021.

Charitable deductions: The bill creates an above-the-line charitable deduction for 2020 (not to exceed $300). The bill also modifies the AGI limitations on charitable contributions for 2020.

Payroll tax delay: The bill delays payment of 50% of 2020 employer payroll taxes until Dec. 31, 2021; the other 50% will be due Dec. 31, 2022. For self-employment taxes, 50% will not be due until those same dates.

Net operating losses: The bill temporarily repeals the 80% income limitation for net operating loss deductions for years beginning before 2021. For losses arising in 2018, 2019, and 2020, a five-year carryback is allowed (taxpayers can elect to forgo the carryback).

Excess loss limitations: The bill repeals the Sec. 461(l) excess loss limitation. Sec. 461(l) was added to the Code by the law known as the Tax Cuts and Jobs Act, P.L. 115-97, and it disallows excess business losses of noncorporate taxpayers if the amount of the loss exceeds $250,000 ($500,000 for married taxpayers filing jointly).

Corporate alternative minimum tax (AMT): The bill modifies the AMT credit for corporations to make it a refundable credit for 2018 tax years.

Interest limitation: For tax years beginning in 2019 and 2020, Sec. 163(j) is amended to increase the adjusted taxable income percentage from 30% to 50%. Also, taxpayers can elect to use 2019 income in place of 2020 for the computation.

Qualified improvement property: The bill also makes technical corrections regarding qualified improvement property under Sec. 168 by making it 15-year property.

Loan Guarantees and Subsidies:  Includes over $300 billion for Small Business Administration (SBA) loan guarantees and subsidies and additional funding for SBA resources.




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