Summary Of Tax And Financial Factors Of The CARES Act
The CARES (Coronavirus Aid, Relief, and Economic Security) Act was signed into law on March 27, 2020. Some of the more pertinent tax and financial factors of the Act are as follows:
All U.S. residents with adjusted gross income up to $75,000 for single filers and $150,000 for joint filers are eligible for $1,200.00 payment (each individual) plus an additional $500 per child (under age 17). The recovery payment is reduced by $5 for every $100 over the income limit, so the payment would be fully phased out at income of $99,000 for single filers and $198,000 for joint filers.
Provides for an additional $600 per week payment to each person received unemployment insurance for up to four months.
Individuals have until July 15, 2020 to file their 2019 income tax returns and until July 15, 2020 to pay their tax liabilities. (Illinois is following the same timeline for filings).
2020 Estimated Tax Payments
First quarter – was April 15, 2020, but now July 15, 2020
Second quarter – still June 15, 2020
Third quarter – still September 15, 2020
Fourth quarter – still January 15, 2021
(Illinois: has not changed – still the same as under previous rules)
Distributions from Retirement Accounts
Waives the 10 percent early withdrawal penalties (prior to 59½ years of age) for withdrawals up to $100,000 from qualified retirement accounts. Income tax would still be owed on the distributions but may be paid over a three (3) year period. Individuals could also “recontribute” the funds to the plan within three (3) years without regard to contribution limits.
Loans from Retirement Accounts
Increases the amount that can be taken as a loan from a qualified retirement plan from $50,000 to $100,000 for 2020.
Waiver of Required Minimum Distributions for 2020
Waives the required minimum distribution requirements for retirement plans and IRAs in 2020.
May deduct up to $300 of cash contributions to charities, regardless of whether the taxpayer itemizes deductions. For individuals who itemize deductions, the 50 percent of adjust gross income limit is suspended; meaning: previously charitable deductions were limited to 50 percent of AGI, however, for 2020, this is not the case, and you can contribute any desired amount (even completely wiping out income with the contribution).
Suspends payments automatically for federal student loans through September 30, 2020, with no interest accruing or penalties during the period of suspension.
Servicers of federally backed mortgages must postpone mortgage payments at the request of the borrower, provided the borrower affirms financial hardship due to COVID-19. The postponement must be granted for up to 180 days and extended for an additional period of up to 180 days at the request of the borrower. Also, prevents servicer of federally backed mortgage loans to initiate any foreclosure proceeding for at least 60 days beginning on March 18, 2020.
Small Business Loans
Many small businesses are eligible for disaster relief loans from the SBA.
Other Tax and Accounting Provisions
(a) employee retention tax credit for employers subject to full or partial suspension of business due to COVID-19; (b) ability to delay payment of employer payroll taxes; (c) modifications for rules around net operating losses; (d) modifications for rules around corporate alternative minimum tax (AMT) credits; and (e) temporary increase in the limitation on interest deduction previously imposed by the Tax Cuts and Jobs Act.
If you would like more information, please contact Bradley S. McCann.