Capital Insights: Impact of Coronavirus Aid, Relief, and Economic Security Act (CARES Act)
April 1st, 2020|
The Coronavirus Stimulus Package (CARES Act) was signed into law by President Trump on March 27, 2020 and represented a bipartisan effort to provide almost $2.2 trillion to stabilize the economy and provide broad relief to individuals, businesses and non-profits.
We, at Capital Planning Advisors, would like to highlight some key provisions of the CARES Act and encourage you to reach out to us should you have any additional questions. We are also enclosing a PDF summary of the CARES Act that was put together by the Society of Human Resource Managers (“SHRM”), that provides additional details if you would like to dig deeper into some of the specific provisions of the Act. Click here to download SHRM Analysis
Waiver of 2020 required minimum distributions (RMDs) for account holders of IRAs and certain retirement plans. Clients who have already taken RMDs in the last 60 days are eligible to return the RMD back into their retirement account (Beneficiary IRAs not eligible). The ability to have more dollars working during a hopeful stock market recovery will provide a better chance to recuperate losses, if you do not need the income. Please contact us to discuss your specific situation and any necessary action you would like us to take.
Penalty-free early withdrawals (younger than age 59 ½) of retirement funds (IRAs, 401(k), etc.) up to $100,000 (related income tax to be paid over 3 years and ability to repay withdrawal within 3 years) if you or family members have been adversely impacted by COVID-19. Federal and state withholdings are waived.
Maximum 401k loan limit now doubled to $100,000 (100% of vested balance can be used) within 401k plans that contain a loan provision and loan repayments will be delayed for one year.
New $300 above the line cash charitable deductions for those who do not itemize deductions and Adjusted Gross Income (AGI) limit for cash contributions for those who do itemize temporarily increased from 60% to 100% of AGI.
Recovery rebates of $1,200 individual/$2,400 joint filers, plus $500 per child for those with AGIs of up to $75,000 and $150,000, respectively. Phase out of credits begin at these AGI levels and phase out completely for individuals at $99,000 and for joint filers at $198,000.
There have been several changes to Unemployment Insurance available to employees who have lost their jobs or been furloughed through the Pandemic Unemployment Assistance program through December 31, 2020. Please see page 2 of the attached SHRM CARES Act summary for details.
Small Business Administration (“SBA”) will guarantee $350 billion in partially forgivable loans to small businesses (including eligible self-employed, sole proprietors, and independent contractors) and non-profits, to maintain existing workforce and help pay for other expenses like rent, mortgage, and utilities.
Delay of 50% of employer and self-employment payroll tax deposits for 2020 to be paid over the following 2.5 years by December 31, 2022 with exception of employers who have debt forgiven by the CARES Act loans provided above.
Refundable employee retention payroll tax credit for 50% of wages paid by qualifying employers who have had to fully or partially suspend operations or had a significant decline of gross receipts related to COVID-19 when compared to the same quarter in the prior year.
Reinstatement of Net-Operating Loss (NOLs) carrybacks and no 80% taxable income limit, for 2018-2020. This should allow companies to reduce prior years’ tax bills, allowing them to claim refunds of amounts previously paid to provide further liquidity to get through the COVID-19 crisis.