01 Apr CARES Act Signed into Law on March 27, 2020
CARES Act Signed into Law on March 27, 2020
The Coronavirus Aid, Relief, and Economic Security Act or the CARES Act (the “Act”) was signed into law on Friday, March 27, 2020. The highlights of the Act are as follows:
- Waiver of the early 10% penalty for early withdrawal of retirement funds up to $100,000 for a coronavirus related distribution. Withdrawals are still taxed, but income can be spread over 3 years or can be rolled back into the retirement fund within 3 years.
- Paycheck Protection Program for loans to help businesses with their payroll, rent, mortgage interest and utilities. Applications are now available.
- Temporary waiver of required minimum distributions in 2020 for certain retirement plans.
- Extended unemployment insurance program and expanded eligibility.
- Qualified plan loans are increased from $50,000 to $100,000 for qualified individuals.
- Delay for employers to pay their portion of 2020 payroll taxes. An eligible employer can take a credit against applicable employment taxes for each calendar quarter an amount equal to 50 percent of the qualified wages with respect to each employee of such employer for such calendar quarter.
- One-time direct deposit of up to $1,200 for single and $2,400 for married couples, plus an additional $500 per child. Amounts will be reduced out for those singles and married couples whose income is over $75,000 and $150,000, respectively.
- Ability to take charitable contributions “above the line”.
- Delaying of certain deadlines, most notably income tax returns are due July 15 instead of April 15.
- Loan assistance to severely distressed sectors of the United States such as air carriers.
- Student loan required payments are suspended for 3 months and no interest will be incurred for the suspended period.
- Loans to small businesses.
- Delay of estimated tax payments for corporations.
- Modifications for net operating losses. The 80% rule is eliminated.
- Interest expense limitation is increased to 50% from 30%.
- Many provisions on testing, supplies of personal and protective equipment for health care workers and testing supplies.
ADVICE: This far reaching Act will be clarified by regulations. In the meantime, consult with your CPA and/or banker to determine if you qualify for any loans to help with payroll in this uncertain time. Meanwhile, stay safe and abide by the Safer at Homes Orders. The sooner we stop the spread, the sooner we can protect those vulnerable and return to our lives.
WORD OF THE WEEK: A “coronavirus related distribution” for purposes of plan loans and early withdrawals from retirement plans is any distribution from an eligible retirement plan made on or after March 27, 2020 and before December 31, 2020 to an individual who is (1) diagnosed with the virus, (2) whose spouse or dependent is diagnosed with the virus or (3) who experiences adverse financial consequences as a result of (a) being quarantined, laid off, furloughed, or work hours reduced due to the virus, (b) being unable to work because of lack of child care, or other factors to be determined by the regulations.
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