With recent passage of the CARES Act and its far-reaching impact, we wanted to communicate a concise, bullet-point list to all of our clients of the major components of this Act. Please review the below and contact us with questions as many aspects of the Act are determined on a case-by-case basis.
Calculations are based on either the 2019 tax return (if filed), 2018 tax return or information from the Social Security Administration if neither the 2018 nor 2019 tax returns are filed.
Generally, amounts will be $1,200 (single) or $2,400 (married filing jointly) with AGI less than $75,000 (single) or $150,000 (married filing joint), plus $500 per qualifying child under 17.
5% phase-outs of the stimulus begins at AGI of $75,000 (single), $112,500 (head of household) and $150,000 (married filing joint).
Amounts will be direct deposited if the IRS has your bank information on-file. Alternatively, paper checks will be issued to the last known address.
There will be a reconciliation between your 2019 tax return and the stimulus amount sent. Details on the reconciliation are pending.
Small Business Assistance
Delayed Deposit of Employer’s Share of Employment Taxes –
Employers can delay their share of the Social Security tax (6.2%) due between March 27, 2020 and December 31, 2020 to be paid in equal amounts on December 31, 2021 and December 31, 2022.
Self-employed taxpayers can defer paying 50% of their Social Security tax due between March 27, 2020 and December 31, 2020 to be paid in equal amounts on December 31, 2021 and December 31, 2022.
Paycheck Protection Program – Available through the Small Business Administration (SBA) and SBA 7(a) lenders. Generally, up to a maximum of 2.5 times your average monthly payroll costs. Maximum interest rate of 4% and maximum maturity of 10 years. Potential forgiveness of up to 8-weeks of amounts used for: payroll, mortgage interest, rent, and certain utilities. Applications will be accepted beginning on April 3rd.
Emergency Government Disaster Loan and Grants – Only available online through the SBA. Applies to small businesses with less than 500 employees (including the self-employed). Up to $10,000 can be advanced and not required to be paid back if used to maintain payroll.
Debt Relief – SBA could cover loan payments on 7(a), 504 and microloans for a period of up to six months, including principal, interest and fees. Also applies to new loans between March 27, 2020 and September 27, 2020 (6-month period after enactment).
Employee Retention Credit – Available to employers who continue to pay employees during specified closures and/or in periods when the business remained open yet had significantly reduced income, for up to 50% of qualified wages. Applies to employer’s 6.2% portion of Social Security tax for wages paid after March 12, 2020 and before January 1, 2021. Not available if Payroll Protection loans are received. Not available for wages paid under the Families First Coronavirus Response Act (FFCRA).
Congress Reaches Agreement On A Coronavirus Relief Package: Tax Aspects Of The CARES Act by Tony Nitti
DISCLAIMER: Since this is a newly enacted law, there are still questions yet-to-be-answered. As such, any future rules, regulations and guidance may change the overall impact of the CARES Act and such changes may or may not modify any portion of the preceding information.