Corona Virus Aid, Relief & Economy Security Act (CARES Act)

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IRC 6428 REBATE
 Economic Injury Disaster Loan APP     SBA Guidance
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides payments to taxpayers (subject to income limits) in the way of a credit under §6428 of $1,200 per individual ($2,400 for married couples filing a joint return) plus $500 per qualifying child who is under age 17 (as defined under §24(c)).
The payment is reduced by 5% of the taxpayer’s adjusted gross income in excess of $75,000 ($112,500 for head of household; $150,000 for joint filers). The payment will fully phase out when income reaches $99,000 for single filers, $146,500 for head of households with one child and $198,000 for joint filers.

2020 Recovery rebates for individuals (section 2201):


  • Tax credits are provided for individuals in the amount of $1,200 for single returns and $2,400 for joint returns
    • plus $500 for each child (under age 17 and qualifying for the child credit);
  • Credits are reduced by 5% of the excess of adjusted gross income (AGI) over these thresholds:
    • $75,000 for a single return;
    • $150,000 for a joint return; and
    • $112,500 for a head of household return:
      • Thus, the credits would be fully phased out for income higher than the following amounts:
  • $99,000 for a single person with no qualifying child;
  • $198,000 for a couple filing a joint return with no qualifying children;
  • $218,000 for a couple filing a joint return with two qualifying children;
  • $146,500 for a single parent with one qualifying child:
    • (in all cases, the level of income before the phaseout is complete increases by $10,000 per child).
      • For limitation purposes, AGI is based on the 2019 tax return, if filed. If not, then AGI on the 2018 return would be the limit.
  • There is no income floor or phase-in - all whose income does not exceed the thresholds will receive the same amount. Non-tax filers generally need not file a tax return to claim a rebate.
  • The credits are not available to anyone who can be claimed as a dependent on another's return.
  • If a tax return has not yet been filed for 2019, the 2018 tax return will be the point of reference. If no tax return was filed for either year, rebates can still be sent based on information on Social Security benefit statements.
  • The rebates are fully available to residents of U.S. Territories, including Puerto Rico.
  • The IRS will send out the payments electronically if any tax refund was sent in such a manner for the 2018 or 2019 tax return - also there will be a notice by mail to the last known address that the payment has been made electronically. If not, a paper check will be sent.
  • Also, the act calls for a public awareness campaign to inform people about the rebates.
  • No credit allowed if correct ID numbers (Social Security numbers) were not on tax returns, except in cases of spouses of active military personnel.
  • IRS and Social Security Administration are appropriated extra funds to carry out the rebates.
Individuals who have no income, as well as those whose income comes entirely from non-taxable means tested benefit programs, such as SSI benefits also qualify for the advance payment.
Joint filers are each treated as having received one-half of the advanced payment. The eligibility for the payment is based on the taxpayers 2019 tax return, or if the taxpayer has not filed a 2019 return, eligibility is based on the 2018 return. If no returns were filed in 2018 or 2019, information from 2019 Forms 1099-SSA and 1099-RRB will be used. 
More importantly,  payments are not subject to offset from past due tax obligations.

What About Retirement Accounts?

Individuals with retirement accounts, including IRAs, can take early withdrawals of up to $100,000 from those accounts without having to pay the 10% early-withdrawal penalty. Those who withdraw such funds can recontribute them to the plan over three years or can keep the money and pay the tax on the withdrawals over a three-year period. Individuals aged 70 1/2 or older do not have to worry about taking required minimum distributions from retirement plans in 2020, or to pay the taxes on those distributions. 

Student Loans

 Payments by employers on student loans of employees are not subject to tax in 2020, up to $5,250 per employee. This cap also includes other educational assistance paid by the employer.

 For those In Repayment: The CARES Act 

  • Suspends all payment due on federal student loans for 6 months.
  • Interest shall not accrue on these during this forbearance.
  • For the purpose of loan forgiveness, loans will be deemed paid during the forbearance.
  • Prohibits negative credit reporting or involuntary debt collection during forbearance period


Employers



Employee Retention Credit for Employers Subject to Full or Partial Closure Due to COVID-19 (section 2301):



  • Eligible employers (including certain tax-exempt organizations) can receive a refundable tax credit against payroll taxes for 50% of wages paid to certain employees during the COVID-19 crisis.
    • Wages subject to the credit for any employee cannot exceed $10,000, including health benefits.
    • The credit cannot exceed the employer's amount of Social Security (OASDI) taxes paid by the employer, reduced by any credits allowed for paid sick leave and paid FMLA leave (enacted in earlier coronavirus legislation).
    • Eligible employers are those:
      • carrying on a trade or business and that suffer a full or partial suspension of operations due to orders from a government authority to limit commerce, travel, or group meetings due to COVID-19; or that suffer a decline in quarterly gross receipts of more than 50%, measured against the same period in the prior year.
      • For employers with 100 or fewer full-time employees, all employee wages are eligible for the credit, regardless of whether an employee is furloughed or has hours reduced.
      • For employers with more than 100 full-time employees, wages eligible for the credit are those paid to employees when they are not working due to COVID-19-related circumstances.
      • The credit is not available to employers receiving Small Business Interruption Loans.
      • The credit is provided for wages paid or incurred from March 13 through December 31, 2020
Employers and self-employed individuals are allowed to defer payment of the employer share of the Social Security taxes of employees (this is one-half of the self-employment taxes of a self-employed individual) that arise between the effective date of the act and the end of 2020. The deferred tax can be paid over the following two years, with half required to be paid by December 31, 2021, and the other half due by December 31, 2022.
  • Employers who take advantage of SBA 7(a) loans designated for payroll are not eligible.

Unemployed

Self-employed individuals, independent contractors, and other individuals who are unable to work as a direct result of COVID-19 public health emergency, and would not qualify for regular unemployment benefits under state law may be eligible to receive "Pandemic Unemployment Assistance. The unemployment assistance is available to individuals who are unemployed, partially unemployed, or unable to work for the weeks impacted as a result of COVID-19 between Jan. 27 - December 31, 2020. These benefits will be administered by the states, in accordance with this new Federal law. There is a maximum of 39 weeks of assistance, where the amount is equal to what is authorized under the state unemployment compensation law, plus an additional $600 per week for up to four months.

Business Owners

The CARES Act dramatically increased the role of the Small Business Administration (SBA) in efforts to assist U.S. businesses impacted by the COVID-19 crisis. The two main vehicles for these relief efforts are the SBA 7(b)(2) loans - Economic Injury Disaster Loans - and the SBA 7(a) loan program. Both loans are available to businesses with 500 or fewer employees that have been negatively impacted by the crisis.

Emergency Economic Injury Disaster Loans

  • Businesses with 500 employees or fewer, including sole proprietors, independent contractors, and cooperatives are eligible for Economic Injury Disaster Loans (EIDL) during the covered period of January 31st to December 31, 2020 in response to COVID-19.
  • The business must show hardship due to the Coronavirus.
  • The Economic Injury Disaster Loans are available for up to $2 million dollars for businesses.
  • During the covered period, SBA can determine loan eligibility based solely on the applicant's credit score or use of an alternative appropriate method for determining an applicant's ability to repay.
  • The SBA must waive any personal guarantee on loan advances or loans under $200,000.
  • Legislation provides $10 billion in funding to provide an emergency advance of up to
  • $10,000, which is forgivable debt, to small businesses within 3 days of the business applying for the Economic Injury Disaster Loan (EIDL).
  • Economic Injury Disaster Loans may be used for the following:
    • Paid sick leave to employees impacted by COVID-19
    • Payroll
    • Rent/Mortgage Payments
    • Debt obligations due to loss revenues
    • Increased costs for due to chain supply disruptions and materials.
Payroll Protection Program (PPP)

  • Businesses with 500 employees or fewer, including sole proprietors and independent contractors, are eligible for SBA 7(a) loans in response to COVID-19 covering expenses for the period of February 15, 2020 through June 30, 2020. The CARES Act appropriates $349 billion to cover these loans.
  • The loan amount will be 250% of the average salary expenditures/month for the year prior to the loan, up to $10 million. For businesses not open yet in that period, the SBA will look at earlier receipts from 2020.
  • 7(a) loans can be used for:
    • Payroll, including for independent contractors and employees who work on commission;
    • Rent/Mortgage interest;
    • Utilities.
  • All or a portion of these loans will be forgivable for businesses that maintain at least 75% of the average payroll levels as in the previous year; forgivable amounts phase out as employers payroll levels drop below that.
  • The bill also increases the SBA "Express Loan" limit from $350 thousand to $1 million.

Housing Including Mortgages/ Evictions/ Rental Assistance

  • Mortgage Forbearance - Borrowers of government-backed mortgages ((Fannie Mae, Freddie Mac, HUD, VA and USDA) can request up to 360-day payment forbearance without proof of hardship. No additional fees, interest, or penalties can be assessed for the forbearance. Except for abandoned or vacant property, there may be no foreclosure actions for 60 days from 3/18/2020.
  • Owners of multifamily properties who were current on their mortgage payments as of February 1, 2020, and have federally insured, assisted, or supplemented loan (Fannie Mae, Freddie Mac, FHA or any loans backed or assisted by any branch of the federal government, including LIHTC) may request forbearance for 30 days due to financial hardship, with extensions of up to a total of 90 days. Borrowers receiving the forbearance may not evict or charge late fees to tenants for the duration of the forbearance period.
  • Moratorium on eviction filings, or fees or penalties for tenants for nonpayment of rent for 120 days on properties insured, guaranteed, supplemented, protected, or assisted in any way by HUD, Fannie Mae, Freddie Mac, the rural housing voucher program, covered by the Violence Against Women Act of 1994.
  • $1.25b for Section 8 voucher rental assistance for seniors, the disabled, and low-income working families, who will experience loss of income from the coronavirus.
  • $5b for CDBG to help communities and states address COVID-19.
  • $1 billion for project-based rental assistance to make up for reduced tenant payments as a result of coronavirus.
  • $50m for Section 202 Housing for the Elderly to maintain housing stability and services for low-income seniors.
  • $15 million for Section 811 Housing for Persons with Disabilities to make up for reduced tenant payments as a result of coronavirus.





















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