Slidedeck and Presentation - CARES ACT

Please click here for a replay of our April 3, 2020 presentation.

Slidedeck from the presentation

Extended 1040 & Estimated Payment Due Dates

The IRS (and nearly all states) have provided an extension of time to file and pay 2019 taxes until July 15. In addition, the due dates for ALL IRA and HSA contributions has been extended to July 15. (SEP IRA and Solo 401(k) contributions can be made up until Oct 15).

The 1st Quarter estimated tax deadline has also been moved to July 15th. This means that the 2nd Quarter estimated tax payment deadline of June 15 comes BEFORE 1st quarter this year!

New $300 Charitable Contribution

Taxpayers that are not already itemizing deductions are now eligible to deduct up to $300 in charity to reduce their taxable income.

As a side note, taxpayers that can itemize are allowed to deduct charitable contributions up to 100% of their adjusted gross income in 2020.

One time "Recovery Rebates" for individuals and families

Individuals who had up to $75,000 in adjusted gross income in 2019 will receive a one-time payment of $1,200, while married couples with AGI up to $150,000 will get $2,400. Additionally, taxpayers will receive an additional $500 for each qualified child. Payments phase out at $100,000 for singles and $200,000 for couples without children.

Rebates will be based on either 2018 or 2019 income (depending on if the 2019 return has been filed). If you income was significantly lower in one of these years you may wish to delay (or speed up!) the filing of your 2019 return. Alternatively, some taxpayers will receive the rebate when they file their 2020 return in early 2021.

The IRS recently released answers to commonly asked questions. See for more detail.

Coronavirus Retirement Account Distributions

Taxpayers are temporarily no longer subject the 10% early withdrawal penalty on distributions from retirement accounts and have the option to spread income taxation over three years, and the ability to re-contribute back to those same accounts over the three year period.

Additionally, required minimum distributions (RMDs) are suspended in 2020 for a wide variety of retirement account (for both account owners as well as beneficiaries) as well as the ability to return current-year distributions on non-beneficiary acounts.

Student Loan Relief

Student Loan Payments are deferred until September 30, 2020. No interest will accrue at this time and these months will still count towards student loan forgiveness programs.

Unemployment Benefits

Both W2 workers as well as self-employed individuals (who are generally ineligible for unemployment compensation benefits), and other individuals who are ineligible for ‘regular’ unemployment, extended unemployment or pandemic unemployment insurance, or run out of such insurance, will be eligible for up to 39 weeks of benefits.

The first week of unemployment will now be covered and states will have the ability to increase unemployment benefits up to $600 per week for up to four months.

Small Business Relief (Paycheck Protection Program & Forgivable Loans)

Another significant potential benefit included for ‘small’ business owners is the Paycheck Protection Program, a (partially) forgivable loan program offered through the Small Business Administration (SBA). Such loans must be applied for by June 30, 2020, and can have a maximum maturity of 10 years. They may be provided via existing approved SBA lenders, as well as lenders who are otherwise certified by the SBA to offer such loans.

Under the Paycheck Protection Program, lenders will generally be able to issue SBA 7(a) small business loans up to the lesser of $10 million, or 2.5 times the average monthly payroll costs over the previous year. In order to qualify for loan forgiveness the business must maintain the same number of employees during the period Feb 15 – Jun 30 as it did previously. this forgiveness of debt is not considered taxable income for the business.

Small Business Relief (Employee Retention Credit)

Businesses that experience a significant drop in income will be eligible for the payroll tax credit. “Significant” in this case means revenue dropping by 50% or more due to operations of the company being fully or partially suspended during a quarter either as a result of a governmental authority or in which revenue in 2020 has less than 50% of the revenue from the same quarter in 2019.

Small Business Relief (Deferral of Payment of Payroll Taxes)

With the exception of employers who have debt forgiven by the CARES Act for certain loans provided by the Small Business Administration, employers are eligible to defer payroll taxes from the date of enactment, through the end of the year, until the end of 2021 and 2022.

More specifically, 50% of the payroll taxes that would otherwise be due during this period may be deferred until December 31, 2021. The remaining 50% is due on December 31, 2022.

Small Business Relief (Economic Disaster Loans)

The CARES Act now permits businesses to take an Economic Injury Disaster Loan (EIDL) for up to $2 million. The EIDL is now available in all 50 states and can be used by any small business that has fewer than 500 employees. Self-employed individuals and non-profits are also eligible for this program.

Under a normal SBA loan, there is stringent qualification and testing that must take place to complete the loan. The red tape is significantly easier to cut through with the EIDLs. Qualification can be based solely on sufficient credit and/or some way to prove that you have the ability to repay the loan. Further documentation may be required, but whatever is required should be limited.

For self-employed individuals, you’ll need a copy of your Schedule C or proof of income and expenses as well as potentially 1099-MISCs.

The CARES Act allows for a $10,000 emergency grant to be issued for anyone who applies for an EIDL. The $10,000 emergency grant is given to business owners within three days of their application, and they’re allowed to keep that money regardless to whether they ultimately qualify for an EIDL or not. The application is simple and should only take about 15 minutes. A sample application is available here (opens in new tab).

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