The Coronavirus Aid Relief and Economic Security Act (CARES Act) was a very broad reaching piece of legislation that is extremely complex. In addition, there are many details that are unclear or need to be developed. However, there are some issues important for individuals and families that are known. Here’s what you need to know.
All US residents with adjusted gross income of $75,000 or less will receive a cash payment of $1200, as well as an additional $500 per minor dependent. Those earning over $75,000 per year will receive a decreased amount based on actual income, up to an income of $99,000 per year.
Increased Unemployment Benefits
There are many temporary changes to the unemployment program. First, and most important to some, is the fact that self-employed, gig workers, and freelancers are able to receive unemployment benefits if they lose income due to the coronavirus pandemic. In addition, everyone on unemployment will receive an additional $600 per week beyond what they qualify for through their state. Unemployment benefits will also be extended an additional 13 weeks.
Unfortunately, one thing that has not changed is that if you quit your job you are not eligible for unemployment. This is true even if you felt you had to quit so you could stay home and protect your health, such as being immunocompromised.
Tax Changes for 2019 Filing
The IRS has granted an extension for the filing of 2019 returns until July, 15, 2020. This gives you some extra time to file and pay your taxes. If you donate to a charity that helps with the COVID-19 pandemic, you will receive an extra $300 credit on your taxes, even if you don’t itemize your deductions. Also, if you do itemize your expenses, the limit of 60% of gross income is waived for 2020. The corporation limit increased from 10% of taxable income to 25 percent.
Retirement Account Changes
For the duration of the pandemic, the penalty for withdrawing from a retirement account is waived. The CARES Act also doubled the possible loan amount on a retirement account. For most people, required minimum distribution amounts are waived for employer plans.
Those individuals who have federally backed mortgages and is in financial hardship directly caused by the coronavirus pandemic may request a postponement of their mortgage payments. They can be postponed for 180 days initially, and may be extended another 180 days at the borrower’s request. Federally backed loans are also protected from foreclosure.
According to the CARES Act, landlords who have federally backed mortgages are not allowed to evict their tenants, nor can they charge a late fee in addition to rent. However, only tenants in homes leveraged with federally backed loans are protected.
All student loans have had payments, interest, and penalties suspended until September 30, 2020. There are several other provisions to assist students who had their semester interrupted.
Small Business Benefits
The CARES Act provides disaster relief loans from the Small Business Association (SBA). There are also certain circumstances in which payments on loans from the SBA could be deferred or forgiven. There are many other considerations being given to small businesses, including:
- Employee retention tax credit
- Delay payment of payroll taxes
- New rules about net operating losses
- New rules about alternative minimum tax credits
- Increase on limit of interest deductions
It is important to stay informed about these matters. Every day more ideas are developed to combat the problems caused by the COVID-19 pandemic. Even as stimulus payments are starting to hit accounts, congress is working on additional assistance. If there are major developments, we’ll make sure our clients are aware of them.
And, as always, even though this crisis has closed offices around the area, we can conduct consultations and business via phone and email.