March 30 Update

CARES Act (3/27/20 stimulus bill)

Individual Provisions

  • Individual prepaid tax credit – Rebate Check
    • refundable based on 2019 return (if already filed) or 2018 return (if 2019 not yet filed)
    • $1,200 Single/$2,400 MFJ plus $500 for each dependent under age 17
    • Phases-out between $75,000 - $99,000 Single; $150,000 - $198,000 MFJ; $112,500 - $146,500 Head of Household
    • If not qualified for prepayment, credit on 2020 tax return if qualifies
    • Currently IRS is estimating direct deposit or check will be sent in 3-4 weeks
  • Waives 10% early distribution penalty from early distributions of retirement plans
    • Maximum of $100,000 distribution from all plans
    • Tax on distribution can be spread over a three-year period
    • Funds can be recontributed to the plan within 3 years and get taxes paid refunded
  • Maximum loan limits from retirement plans increased to $100,000
  • Required Minimum Distribution (RMD) requirement waived for 2020
    • 2020 RMD will not apply, unless from a decedent IRA
    • 2020 distribution already taken can be recontributed to the plan (and will not be taxed)
  • Charitable Contributions
    • $300 above-the-line charitable deduction (can still take standard deduction)
    • The 60% of income limitation does not apply (except for donor advised funds or 501(c)(3) supporting organizations)
  • Expansion of Unemployment Benefits
    • Adds $600 per week to State unemployment amount
    • Includes self-employed workers that would not normally qualify for unemployment
  • Student Loan interest
    • Defers federal student loan repayments for 6 months, through September 30, 2020

Business Provisions

  • Refundable payroll tax credit
    • Credit of 50% of wages, up to a maximum wage of $10,00 per employee
    • Wages measured between 3/12/20 and 12/31/20
    • 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
    • Employer with under 100 employees automatically qualifies.  If over 100 employees, only furloughed or reduced hours employees qualify
  • Delayed payment of employer payroll taxes
    • Employer Social Security and Medicare taxes deposits between 3/27/20 and 12/31/20 can be deferred with:
      • 50% payable by 12/31/21
      • 50% payable by 12/31/22
  • SBA 7(a) Paycheck Protection Program loans
    • Nonguaranteed, self-certified loan for businesses impacted by COVID-19
      • Business impacted
    • Loan through an SBA certified lender, but expanding to include most FDIC lenders
    • Maximum loan available is 2.5 times prior year average payroll (including payroll and employee benefits and retirement contributions)
    • Eligible expenses paid during the qualified period of time can cause debt forgiveness
      • Eligible expenses paid during the 8 weeks immediately following the loan qualify that amount of the debt to be forgiven
      • Eligible expenses include payroll, employee benefits, rent, business loan payments, and utilities
      • Have to maintain employees on the payroll
      • Non-forgiven loan converts to a 4% maximum interest rate, maximum 10-year term
    • Cannot take other payroll tax credits if qualify and elect to have debt forgiven
  • Net Operating Loss (NOL)
    • 80% income limitation suspended for years beginning after 12/31/17
    • Allows losses in those years to be carried back 5 years
    • Can amend 2018 return if had NOL limited and get a refund of taxes
    • Applies to tax years 2018 – 2020
  • Loss limitation for noncorporate taxpayers
    • Excess business losses limitation suspended for 2018-2020
  • Interest deduction limitation
    • Interest deduction limitation of 30% increased to 50% for 2019 and 2020
  • Expansion of Bonus Depreciation
    • 100% bonus depreciation expanded for 3 categories
      • Qualified leasehold improvement property
      • Qualified restaurant property
      • Qualified retail improvement property
    • Retroactive to property placed in service after December 31, 2017
  • Corporations with remaining Alternative Minimum Tax (AMT) credits can claim any remaining credits in 2018 and 2019