On Friday, March 27, 2020, President Trump signed into law the CARES Act, which provides relief to all Americans from the economic impact of the Coronavirus. ( CARES is short for “Coronavirus Aid, Relief, and Economic Security” Act. )
This page will be updated as information becomes available. Reading and deciphering a 500+ page bill takes some time.
This is a huge law, with wide-ranging relief across a number of venues. The full text is here, but we will summarize the key aspects that affect you (and we’ll ignore the relief for big business, as that’s not the focus of Prota Financial).
Also covered will be related government actions that are separate but supplemental to this bill. (Some actions are able to be enacted by the Executive Branch, without congressional action.)
Individuals will get many breaks, including the following:
$1,200 tax rebates to individuals, with additional $500 payments per qualifying child. The rebate begins phasing out when incomes exceed $75,000 (or $150,000 for joint filers). The phase-out process is somewhat complicated, depending on marriage status and number of children, so consult your tax professional for guidance.
The government will use 2019 tax returns to calculate the rebate, or 2018 returns if 2019 has not yet been filed. It’s not clear yet, but indications seem to be that if 2020 income is too high, that the rebate will not be clawed back. We’re currently waiting on confirmation about this.
Note that the Department of the Treasury has separately instructed the IRS to delay the deadline for filing and paying 2019 taxes to July 15th.
Under this instruction, 2019 IRA and Roth IRA contributions are also extended to July 15.
Unemployment insurance is improved, and upped to an additional $600 per week payment for up to four months. Independent contractors and self-employed workers are now covered as well.
This is a huge change to unemployment insurance that should provide a good safety net for those who have been historically left out from this benefit. Further, the funding covers an additional 13 weeks – through the end of the year.
Individuals can now tap their retirement plans (up to $100,000) without penalty, even if they are under 59 1/2 years old. However, you will stall have to pay taxes on any withdrawal of pre-tax funds. This is limited to this calendar year, and individuals mush show direct financial or economic impacts of the virus.
Required Minimum Distribution (RMD) rules affecting retirement plans have been relaxed. We are still working to understand this.
The Supplemental Nutrition Assistance Program (SNAP – also known as food stamps), will get an additional $15 billion in funding, and another half billion for food banks.
The Act establishes, and provides funding for, forgivable loans, with small businesses able to apply for SBA disaster loans, and certain components of the spending will be forgiven (basically turned from a loan into a grant).
Additional funding is provided for other grants and technical assistance. In total, the Act funds roughly $350 billion for these loans and grants. Small businesses will be able to get emergency grants up to $10,000 to cover certain immediate costs.
Loans may be as much as $10 million, and a portion of the loans may be forgiven if a firm uses the loan for payroll, interest payments on mortgages, rent, or utilities. There are many stipulations on this, so please make sure to consult a knowledgeable CPA on the details.
Employers will be able to get a 50% refundable payroll tax credit. This covers wages paid during the crisis up to $10,000 per employee. No clarity on how the duration of the crisis will be defined yet.
Firms may take net operating losses (NOLs) earned over the last 3 years and carry those losses back for 5 years. Further, the 80% cap on net operating losses has been removed.
For people in school , or who have student debt, payments for federal student loans are temporarily suspended through September 30th.
Employers can pay up to $5,250 towards an employee’s student loans tax free, so the employee will not have to declare that as income.
The Act will limit liability for volunteer health care professionals. This removes a substantial insurance risk, and should encourage more volunteering in the industry.
Insurance now must cover COVID-19 treatments, including making all coronavirus tests free to the patient.
Health-insurance coverage for diagnostic testing gets expanded, and coverage for preventative services & vaccines is now required.
Telehealth gets more funding and attention, so patients (whether related to Covid-19 or not) will have a much greater access to doctors over the phone and through video-conferencing tools like Skype or Zoom.