April 3, 2020
By now, you probably have seen the CARES Act was signed into law last Friday, March 27th. As a response to the COVID-19 pandemic, CARES stands for “Coronavirus Aid, Relief, and Economic Security.” The size of this economic relief is unprecedented as the legislation provides $2 trillion in funding.
Similar to other financial legislation, this type of Act impacts us all differently and requires us to sift through the details to find the opportunities. To assist, we have summarized some of the highlights below, with key points organized by Individuals and Businesses to help you quickly see how this might apply. Please know your Joseph Group advisor will help you determine how this Act impacts you.
More importantly, we want you to know how much we are thinking about you. As we have all become too keenly aware, this pandemic has impacted us all, but in different ways. Some have found themselves hit hard with the news a friend or loved one has the virus. Others have lost jobs or been in the unfortunate position needing to layoff great employees. We’ve seen how social distancing has impacted families uniquely whether single, married with no kids, married with young kids, or empty nesters. No matter your situation, your personal well-being is our highest priority. Please let us know if you have needs. We would love to connect and see how we can help. The Joseph Group CARES too!
Individuals will receive checks in the amount of $1,200 (for single taxpayers) and $2,400 (for married filing jointly taxpayers) for an advance recovery rebate (stimulus check). In addition, there is an additional rebate of $500 for each qualifying child.
The rebate is reduced by $50 for every $1,000 earned over the Adjusted Gross Income (AGI) thresholds by filing status below:
- Single: $75,000
- Head of Household: $112,500
- Married Filing Jointly: $150,000
An above-the-line deduction of up to $300 will be allowed in 2020 for charitable donations up to $300. This is applicable even to individuals who do not itemize.
For taxpayers that itemize, cash contributions made during 2020 will not be subject to the previous limit which was 60% of AGI. It allows cash contributions up to 100% of AGI.
Tax Filings and IRA Contributions
Federal tax filings are not due until July 15, 2020 for Individuals. Please check your applicable State and Local rules. Ohio resident tax filing deadline is now July 15, 2020.
IRA Contributions: 2019 IRA Contributions can now be made up until the July 15, 2020 tax filing date.
Retirement Account Required Minimum Distributions
The CARES Act enacts a waiver on required minimum distributions (RMD) from retirement accounts for 2020. No RMD will need to be fulfilled in 2020. This is applicable to all types of retirement plans. i.e. IRA, 401(k), 403(b), etc.
Paycheck Protection Program (PPP)
The CARES Act made funds available (through the Small Business Administration (SBA)) for businesses employing under 500 people. The program will provide loans through June 30, 2020. The purpose of these funds is to continue keeping employees on payroll and keeping their benefits. It would include sole proprietors, independent contractors, and certain self-employed individuals.
Employer Payroll Tax
Employers will be allowed to delay payments on their share of the 6.2% Social Security tax that would be due during 2020. It can be deferred over the next two years with 50% being due by 12/31/21 and the remaining 50% being due by 12/31/22.
Net Operating Loss (NOL)
If a business has losses from 2018, 2019, or 2020 they can be carried back five years and applied against taxes in those years. Current law only allows to carryforward NOLs.
Employee Retention Credit Subject to Closure or Reduced Receipts
A credit is available for those employers who are 1) forced to close operations or 2) remain open during any quarter in 2020 but gross receipts were less than 50% of what they were for the same quarter in 2019.
This WealthNotes Inform was written by Todd Walter, CFP, CPA, The Joseph Group Partner and Chief Wealth Planning Officer and Jeff Tudor, CRPS, The Joseph Group Client Advisor