CARES Act Provides Relief to Individuals and Businesses

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On Friday, March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed
into law. This $2 trillion emergency relief package is intended to assist individuals and businesses during
the ongoing coronavirus pandemic and accompanying economic crisis. Major relief provisions are
summarized here.

Unemployment provisions

The legislation provides for:
An additional $600 weekly benefit to those collecting unemployment benefits, through July 31, 2020
An additional 13 weeks of federally funded unemployment benefits, through the end of 2020, for
individuals who exhaust their state unemployment benefits
Targeted federal reimbursement of state unemployment compensation designed to eliminate state
one-week delays in providing benefits
Unemployment benefits through 2020 for many who would not otherwise qualify, including
independent contractors and part-time workers

Recovery rebates

Most individuals will receive a direct payment from the federal government. Technically a 2020
refundable income tax credit, the rebate amount will be calculated based on 2019 tax returns filed
(2018 returns in cases where a 2019 return has not been filed) and sent automatically via check or direct
deposit to qualifying individuals. To qualify for a payment, individuals generally must have a Social
Security number and must not qualify as the dependent of another individual.
The amount of the recovery rebate is $1,200 ($2,400 if married filing a joint return) plus $500 for each
qualifying child under age 17. Recovery rebates are phased out for those with adjusted gross income
(AGI) exceeding $75,000 ($150,000 if married filing a joint return, $112,500 for those filing as head of
household). For those with AGI exceeding the threshold amount, the allowable rebate is reduced by $5
for every $100 in income over the threshold.
Rebate Amounts and Phaseout Ranges
Filing Status Payment Amount Phaseout Threshold Phaseout Completed
Married Filing Jointly $2,400 $150,000 $198,000

  • 1 Child $2,900 $150,000 $208,000
  • 2 Children $3,400 $150,000 $218,000
    Head of Household $1,200 $112,500 $136,500
  • 1 Child $1,700 $112,500 $146,500
  • 2 Children $2,200 $112,500 $156,500
    All Others $1,200 $75,000 $99,000

While details are still being worked out, the IRS will be coordinating with other federal agencies to
facilitate payment determination and distribution. For example, eligible individuals collecting Social
Security benefits may not need to file a tax return in order to receive a payment.

Retirement plan provisions

Required minimum distributions (RMDs) from employer-sponsored retirement plans and IRAs will not
apply for the 2020 calendar year; this includes any 2019 RMDs that would otherwise have to be taken in
2020
The 10% early-distribution penalty tax that would normally apply to distributions made prior to age
59½ (unless an exception applies) is waived for retirement plan distributions of up to $100,000 relating
to the coronavirus; special re-contribution rules and income inclusion rules for tax purposes apply as
well
Limits on loans from employer-sponsored retirement plans are expanded, with repayment delays
provided

Student loans

The legislation provides a six-month automatic payment suspension for any student loan held by the
federal government; this six-month period ends on September 30, 2020
Under already existing rules, up to $5,250 in payments made by an employer under an education
assistance program could be excluded from an employee’s taxable income; this exclusion is expanded to
include eligible student loan repayments an employer makes on an employee’s behalf before January 1,
2021

Business relief

An employee retention tax credit is now available to employers significantly impacted by the crisis and
is applied to offset Social Security payroll taxes; the credit is equal to 50% of qualified wages up to a
certain maximum
Employers may defer paying the employer portion of Social Security payroll taxes through the end of
2020 and may pay the deferred taxes over a two-year period; self-employed individuals are able to do
the same
Net operating loss rules expanded
Deductibility of business interest expanded
Provisions relating to specified Small Business Administration (SBA) loans increase the federal
government guarantee to 100% and allow small businesses to borrow up to $10 million and defer

payments for six months to one year; self-employed individuals, independent contractors, and sole
proprietors may qualify for loans

Prior legislative relief provisions

Signed into law roughly two weeks prior to the CARES Act, the Families First Coronavirus Response Act
(FFCRA) also included relief provisions worth noting:
Requirement that health plans cover COVID-19 testing at no cost to the patient
Requirement that employers with fewer than 500 employees generally must provide paid sick leave to
employees affected by COVID-19 who meet certain criteria, and paid emergency family and medical
leave in other circumstances
Payroll tax credits allowed for required sick leave as well as family and medical leave paid

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