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In response to the Covid-19 epidemic, Congress has enacted the Families First Coronavirus Response Act and the Coronavirus Aid, Relief, and Economic Security ("CARES") Act. The Acts provide a host of economic assistance to individuals, businesses, nonprofits, and governmental units. Following is a summary of provisions that will have the most widespread impact. Please contact us for more details about provisions that may affect you.
Recovery rebates: The CARES Act provides for payments (“recovery rebates”) to individual taxpayers, which are treated as advance refunds of a 2020 tax credit. The credits are $1,200 ($2,400 for joint filers), plus $500 for each qualifying child. The credit is phased out for taxpayers with adjusted gross income above $150,000 (for joint filers), $112,500 (for heads of household), and $75,000 for other individuals. The credit is not available to nonresident aliens or individuals who can be claimed as a dependent by another taxpayer. Taxpayers will reduce the amount of the credit available on their 2020 tax return by the advance refund payment they receive.
Retirement plans: Taxpayers can take up to $100,000 in coronavirus-related distributions from retirement plans without being subject to the Sec. 72(t) 10% additional tax for early distributions. Eligible distributions can be taken up to Dec. 31, 2020. Coronavirus-related distributions may be repaid within three years. For these purposes, an eligible taxpayer is one who has been diagnosed with SARS-CoV-2 virus or COVID-19 disease or whose spouse or dependent has been diagnosed with SARS-CoV-2 virus or COVID-19 disease or who experiences adverse financial consequences from being quarantined, furloughed, or laid off, or who has had his or her work hours reduced, or who is unable to work due to lack of child care. Any resulting income inclusion can be taken over three years. The bill also allows loans of up to $100,000 from qualified plans, and repayment can be delayed.
Minimum Required Distributions - Required minimum distributions are suspended for 2020.
The Paycheck Protection Program (most banks) for up to 2-1/2 months of payroll and related costs to employers with fewer than 500 employees. Of this, up to two months of payroll, rents, mortgage interest, and utilities expenses will be forgiven if payroll levels are maintained.
The Economic Injury Disaster Program provides loans through SBA-approved lenders to employers with fewer than 500 employees with interest at 3.75% (2.75% for nonprofits).
Employers with fewer than 500 employees must provide their employees with paid sick leave or expanded family and medical leave for specified reasons related to COVID-19. These provisions will apply from April 1, 2020 through December 31, 2020. Payroll tax credits are available to offset the costs.