The Coronavirus Aid, Relief, and Economic Security Act (CARES Act)

This was passed on March 27, 2020. This documents summarizes the items discussed in the CARES Act that do not relate to the Payroll Protection Program. There are two different sections documenting individual changes and business changes.

Individual

1. Tax rebates

    • Refund of credits against 2020 taxes
    • $1,200 for individual, $2,400 for joint, $500 per child (child under 17)
    • Threshold
      • based on 2018 AGI if a 2019 return has not been filed.
      • $5 reduction in amount for each $100 in excess of the thresholds below.
      • Single – $75,000 – complete phase out AGI > $99,000
      • Married Filing Joint – $150,000 – complete phase out of AGI > $198,000
      • Head of Household – $112,500 – complete phase out of AGI > 136,500
    • Eligibility requirements – cannot be any of the following
      • nonresident alien
      • claimed on another tax payers return
      • an estate or trust
    • Must have a social security number or adoption taxpayer identification number where appropriate.

2. Tax Due Dates

    • Due dates have been pushed back from April 15, 2020 to July 15,2020. No extension is required.
    • This extension does not apply for returns due on May 15th, June 15th or any other
    • If you need more time you can file and extension July 15th which would result in the normal extension due
    • This deadline extension also extends the deadline to July 15, 2020 for making contributions to individual retirement accounts, health savings account, Archer medical savings
    • April 15, 2020 estimated tax payment has been extended to July 15,
    • No dollar limit applies to the
    • Penalties, interest, additions will not begin to accrue until July 16, 2020

3. Retirement Plans

    • The 10% penalty is waived on early withdrawals of retirement plans for draws up to $100,000.
    • Distributions must be made during 2020
    • Income from distribution is subject to tax over a 3 year period.
    • Taxpayer may recontribute withdrawn amounts without regards to annual caps on contributions if made within a 3 year time period.
    • Required minimum distributions have been waived for 2020
    • If a qualified individual has a loan repayment due date after the date of the enactment of the CARES Act and before December 31, 2020, on an outstanding loan, the payment due date is delayed one year and the later payments are adjusted.
    • Individuals who qualify
      • Individual, individuals spouse or child must have been diagnosed with COVID-19 with CDC approved test.
      • Individual who experiences adverse financial consequences as a result of quarantine, business closure, layoff, or reduced hours due to COVID -19

Businesses

1. Employee Retention Credit

    • Credit is equal to 50% of qualified wages paid to employees who are not working due to the company’s business declining due to COVID-19
    • Can be claimed quarterly
    • Wages include health benefits
    • Credit limit is $10,000 per employee for all quarters.
    • Applies to wages paid after March 12, 2020 and before January 2, 2021
    • Neither the employer or the employee have to have actually had the virus.
    • Employers that have gross receipts that are less than 50% of their gross receipts in the same quarter in the prior year are also eligible.
    • Employers with < 100 employees all wages qualify.
    • Employers with > 100 employees only wages paid to non-workers qualify

2. Payroll Tax Deferral

    • Payroll taxes due from the date the CARE Act is signed through December 31, 2020 are able to be deffered.
    • 2 OASID of payroll taxes are eligible
    • 50% of self-employed personal are eligible – claimed when filing 1040
    • Half of deferral payroll taxes are due December 31, 2021, remaining balance is due December 31, 2022

3. Net Operating Losses

    • Losses resulting from 2018, 2019, or 2020 by a business can be carried back for 5 years.
    • Can amend returns back to 2013.
    • Current law only allows for farm loses to be carried back.
    • The loss limitation rules are eliminated for the purpose of carrying back the NOL.

4. Excess business loss limitation

    • This will not apply for tax years beginning 2018, 2019, 2020. This limitation will apply for years beginning after December 31, 2020.

5. Business interest limit

    • This has been increased to 50% of the taxpayers AGI for 2019 and 2020 (partnership only 2020).
    • You can amend returns to take advantage of this change.

6. Qualified Improvement Property

    • Qualified improvement property is now defined as 15 year property and now eligible for 100% bonus depreciation. This has been changed to be effective for property acquired and placed in service after September 27, 2017. Therefore returns can be amended.

7. Excise Tax Relief

    • Excise tax has been suspended through 2020 for the following items
      • Alcohol used in hand sanitizer
      • Kerosene used in Aviation fuel

8. Alternative Minimum Tax

    • Prior to CARES ACT unused minimum tax credits were limited 2018-2020 and fully deductible in 2021. The CARE Act allows the full deduction in 2019.

9. Student Loans

    • Employer can pay up to $5,250 for an employee’s education loans and this does not have to be picked up in the employees income.
    • The loan has to be for the employees education.
    • The payment can be made to the employee or the lender.
    • Payments made after date of enactment and prior to 1/1/2021 qualify.
    • The $5,250 cap applies to all benefits such as tuition, fees, books that are part of other education assistance already provided.

10. Charitable Contributions

    • The 10% income limit for Corporations has been increased to 25%
    • The deduction for contributions of food inventory has been increased from 15% to 25%

To our valued clients during the COVID-19 Virus Pandemic:

The 2020 individual tax deadline has been extended until July 15, 2020.

In the best interest of our clients and team at The Rodeheaver Group, we are asking our clients to send documents electronically or via mail, FedEx and UPS until further notice. We will be adding secure drop boxes at each of our office locations if you still prefer to drop off your documentation, but we will not be meeting with clients in our offices.

If you have any questions or concerns, please contact us at 301.334.3127 or via email at contact@rgroupcpa.com. Please visit our website at www.rgroupcpa.com for the latest updates. We also now offer payment via credit card or ACH via our website.

Please stay safe and we appreciate your business.