The CAREs Act
The Coronavirus Aid, Relief, and Economic Security Act (CAREs Act) was signed into law on March 27th. There were a lot of different things that were included in the bill, below we will go over the most important.
By now you’ve probably heard of the Stimulus payment that you may receive as part of the CAREs Act. It is a Tax Rebate from your future 2020 tax return, paid early. It is determined by your Adjusted Gross Income (AGI) on your most recently filed tax return. The amounts are as follows:
- Single – $1,200 if your AGI is < $75,000
- Married – $2,400 if your AGI is < $150,000
- Head of Household – $1,200 if your AGI < $112,500
- Plus and extra $500 per Child claimed as a dependent
Below are some common questions about the Stimulus Payment
Stimulus Payment - Common Questions
Q: What if I haven’t filed a tax return in a fews years or I don’t have to file a return, how do I make sure I get my payment?
Q: I haven’t received my payment yet. Where can I find out more about it?
Q: If I owe the IRS back taxes, can I still get my stimulus payment?
Yes. If you owe the IRS back taxes, it doesn’t affect your stimulus payment
Q: If I had a child in 2020, and didn’t receive the extra $500 per child, can I still get it?
Yes, when you file your 2020 tax return the IRS will reconcile your payment to your income and give you the additional $500 at that time.
The CAREs Act has extended unemployment benefits in many ways. Here are the highlights –
- Gives people an extra $600 per week on top of what the states already provide.
- Included in unemployment are non-employees such as independent contractors, gig-economy workers, and sole-proprietors
- It extends unemployment benefits that were getting ready to expire.
Retirement plans and 401(k) loans
There are all sorts of things regarding retirement plans included in the CAREs Act.
- Requirement Minimum Distributions (RMD) for IRAs and 401(k)s are not mandatory in 2020
- Borrowing money from your 401(k) plan – loan amount has gone up from $50,000 to $100,000
- Early withdrawal 10% penalty from retirement plans are waived in 2020 (but you will still need to pay regular income tax)
- Income Taxes on early withdrawals may be either spread over 3 years, or you may return the funds to your retirement plan to avoid the income tax entirely
Cash Charitable Deductions
Up to $300, are moved from an itemized deduction to an income tax deduction.
Net Operating Losses (NOLs)
- NOLs can once again be carried back, this time up to five (5) years.
- The 80% limit on NOLs had been removed
Paycheck Protection Program Loans
The CAREs Act included a $350 Billion program to allow loans for payroll to be granted to small businesses with fewer than $500 employees. The may be forgiven if they meet certain requirements.
For more information, click here for a link to an article we wrote about it.
Payroll Tax Credit
If you own a small business and have payroll you may be eligible for tax credit regarding employment taxes. In order to qualify you must
- Retain your employees between Mar 13th and Dec 31st
- Up to a $5,000 in payroll tax credit per eligible employee
- Must show that your business has had significant economic harm due to COVID-19
- Significant economic harm is defined as a 50% decrease in gross receipts when comparing year-on-year calendar quarters.
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