Coronavirus Aid, Relief and Economic Safety (CARES) Act

Quick facts on CARES ACT : Coronavirus

Updated March 30, 2020

Unemployment provision changes:

· Unemployment insurance provisions now include an additional $600 per week payment to each recipient for up to four months, and extend UI benefits to self-employed workers, independent contractors, and those with limited work history. The federal government will provide temporary full funding of the first week of regular unemployment for states with no waiting period and extend UI benefits for an additional 13 weeks through December 31, 2020 after state UI benefits end.

Self-employed:

· Now eligible to receive unemployment benefits (as mentioned above).

· Ability to defer the 6.2 percent tax they pay on wages that is used to fund Social Security.

Hospitality:

· Retailers, restaurateurs and hotels will be able to immediately deduct from their taxes what they spend on property improvements.

Paycheck Protection Program:

· Small businesses (fewer than 500 employees) impacted by the pandemic and economic downturn, assistance may be provided to make payroll and cover other expenses from February 15 to June 30. Notably, small businesses may take out loans up to $10 million-limited to a formula tied to payroll costs-and can cover employees making up to $100,000 per year.

· Loans may be forgiven if a firm uses the loan for payroll, interest payments on mortgages, rent, and utilities and would be reduced proportionally by any reduction in employees retained compared to the prior year and a 25 percent or greater reduction in employee compensation.

· Now Local banks are authorized to help administer these low-interest Economic Injury Disaster Loans utilizing these new SBA funds for local businesses. Eligible and interested companies should contact the SBA or an SBA Lender to inquire as to how they can apply. Preferred and Certified SBA Lenders are expediting underwriting and approvals in order to distribute the funds quickly.

Federal Student Loans:

· All payments will be deferred through September 30, 2020.

· Interest will not accrue during this time.

· Employers can pay up to $5,350 towards student loan debt for each employee without it being taxable to the employee as income.

Tax Credits:

· Businesses will receive a tax credit for keeping idled workers on their payrolls during the coronavirus pandemic, so long as the businesses meet certain criteria. They would get a refund for half of what they spend on wages, up to $5,000 per worker.

· For employers with more than 100 full-time employees, the credit is for wages paid to employees when they are not providing services because of the coronavirus. Eligible employers with 100 or fewer full-time employees could use the deduction even if they aren’t closed.

· Employer-side Social Security payroll tax payments may be delayed until January 1, 2021, with 50 percent owed on December 31, 2021 and the other half owed on December 31, 2022.

· Firms may take net operating losses (NOLs) earned in 2018, 2019, or 2020 and carry back those losses five years. The NOL limit of 80 percent of taxable income is also suspended, so firms may use NOLs they have to fully offset their taxable income.

Recovery Rebate for individual taxpayers:

· The bill provides for a $1,200 refundable tax credit for individuals ($2,400 for joint taxpayers). Additionally, taxpayers with children will receive a flat $500 for each child. The rebates would not be counted as taxable income for recipients, as the rebate is a credit against tax liability and is refundable for taxpayers with no tax liability to offset.

· The rebate phases out at $75,000 for singles, $112,500 for heads of household, and $150,000 for joint taxpayers at 5 percent per dollar of qualified income, or $50 per $1,000 earned. It phases out entirely at $99,000 for single taxpayers with no children and $198,000 for joint taxpayers with no children.

· 2019 or 2018 tax returns will be used to calculate the rebate advanced to taxpayers, but taxpayers eligible for a larger rebate based on 2020 income will receive it in the 2020 tax season. Taxpayers with higher incomes in 2020 will see the over payment associated with their rebate forgiven.

· The proposed recovery rebates will use 2019 tax returns (2018 if the taxpayer has not filed in 2019) to determine the advanced rebate amount and reconcile the rebate based on 2020 income. This means that taxpayers who receive a smaller rebate than they are eligible for based on 2020 income will receive the difference after filing a 2020 tax return, but over payments of rebates due to a higher income in 2020 will not be clawed back.

· Those who are near the income threshold for the direct payment, should consider whether to file 2019 taxes immediately.