CARES Act (3/27/20 stimulus bill)
Individual Provisions
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Individual prepaid tax credit – Rebate Check
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refundable based on 2019 return (if already filed) or 2018 return (if 2019 not yet filed)
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$1,200 Single/$2,400 MFJ plus $500 for each dependent under age 17
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Phases-out between $75,000 - $99,000 Single; $150,000 - $198,000 MFJ; $112,500 - $146,500 Head of Household
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If not qualified for prepayment, credit on 2020 tax return if qualifies
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Currently IRS is estimating direct deposit or check will be sent in 3-4 weeks
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Waives 10% early distribution penalty from early distributions of retirement plans
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Maximum of $100,000 distribution from all plans
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Tax on distribution can be spread over a three-year period
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Funds can be recontributed to the plan within 3 years and get taxes paid refunded
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Maximum loan limits from retirement plans increased to $100,000
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Required Minimum Distribution (RMD) requirement waived for 2020
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2020 RMD will not apply, unless from a decedent IRA
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2020 distribution already taken can be recontributed to the plan (and will not be taxed)
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Charitable Contributions
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$300 above-the-line charitable deduction (can still take standard deduction)
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The 60% of income limitation does not apply (except for donor advised funds or 501(c)(3) supporting organizations)
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Expansion of Unemployment Benefits
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Adds $600 per week to State unemployment amount
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Includes self-employed workers that would not normally qualify for unemployment
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Student Loan interest
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Defers federal student loan repayments for 6 months, through September 30, 2020
Business Provisions
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Refundable payroll tax credit
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Credit of 50% of wages, up to a maximum wage of $10,00 per employee
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Wages measured between 3/12/20 and 12/31/20
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Business qualify if operations were fully or partially suspended by government order or had a greater than 50% reduction in quarterly gross receipts year-over-year
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Employer with under 100 employees automatically qualifies. If over 100 employees, only furloughed or reduced hours employees qualify
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Delayed payment of employer payroll taxes
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Employer Social Security and Medicare taxes deposits between 3/27/20 and 12/31/20 can be deferred with:
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50% payable by 12/31/21
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50% payable by 12/31/22
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SBA 7(a) Paycheck Protection Program loans
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Nonguaranteed, self-certified loan for businesses impacted by COVID-19
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Loan through an SBA certified lender, but expanding to include most FDIC lenders
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Maximum loan available is 2.5 times prior year average payroll (including payroll and employee benefits and retirement contributions)
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Eligible expenses paid during the qualified period of time can cause debt forgiveness
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Eligible expenses paid during the 8 weeks immediately following the loan qualify that amount of the debt to be forgiven
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Eligible expenses include payroll, employee benefits, rent, business loan payments, and utilities
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Have to maintain employees on the payroll
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Non-forgiven loan converts to a 4% maximum interest rate, maximum 10-year term
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Cannot take other payroll tax credits if qualify and elect to have debt forgiven
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Net Operating Loss (NOL)
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80% income limitation suspended for years beginning after 12/31/17
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Allows losses in those years to be carried back 5 years
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Can amend 2018 return if had NOL limited and get a refund of taxes
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Applies to tax years 2018 – 2020
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Loss limitation for noncorporate taxpayers
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Excess business losses limitation suspended for 2018-2020
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Interest deduction limitation
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Interest deduction limitation of 30% increased to 50% for 2019 and 2020
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Expansion of Bonus Depreciation
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100% bonus depreciation expanded for 3 categories
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Qualified leasehold improvement property
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Qualified restaurant property
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Qualified retail improvement property
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Retroactive to property placed in service after December 31, 2017
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Corporations with remaining Alternative Minimum Tax (AMT) credits can claim any remaining credits in 2018 and 2019
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