Mar. 28th, 2020

CARES Act Summary for Businesses and Individuals

President Trump Signed the $2T COVID-19 Relief Bill into Law yesterday after the House passed the stimulus package early Friday afternoon. The Coronavirus Aid, Relief, and Economic Security “CARES” Act is intended to provide economic relief amidst the coronavirus outbreak. Our team at Hungerford Nichols CPAs + Advisors has prepared the following summary of the highlights of the law and how it may impact you and your business.

CARES ACT: Summary of Business Provisions:

“Paycheck Protection” SBA Loans

Business with 500 employees or less are eligible for federally insured loans that are partially forgivable. The loans can be used to cover short-term operating expenses, including payroll and rent, during the economic crisis.

Employee retention credit

Refundable payroll tax credit equal to 50% of the first $10,000 in wages paid by the employer to an eligible employee during the COVID-19 crisis.

Delayed payment of employer payroll taxes

The CARES Act allows taxpayers to defer paying the employer portion of certain payroll taxes through the end of 2020.

Net operating losses (NOL)

Removes the taxable income limitation to allow an NOL to fully offset income. NOLs can be carried back five tax years.

Loss limitations

Non corporate taxpayers can deduct excess business losses arising in 2018, 2019, and 2020.

Corporate minimum tax credit

Corporations can claim 100% of AMT credits in 2019.

Deductibility of interest expense

The limitation on the deductibility of interest expense increased from 30% to 50%.

Bonus depreciation for qualified improvement property

Qualified improvement property is designated as 15-year property for depreciation purposes and is qualified for bonus depreciation.

CARES ACT: Summary of Individual Provisions

Individual rebate checks

The CARES act allows for individual rebate checks in the following amounts:

  • $1,200 for single filers
  • $2,400 joint filers
  • Plus $500 for each qualifying child of the taxpayer

Phaseout of credit: The rebate check is reduced by 5% of the taxpayer’s adjusted gross income (AGI) in excess of:

  • $75,000 for single filers
  • $150,000 for joint filers
  • $112,500 for head of household

No 10% penalty tax for coronavirus-related retirement distributions

The 10% additional penalty tax does not apply to any coronavirus-related retirement plan distributions, made between January 1, 2020 and December 31, 2020, up to $100,000.

Qualified individual:

  • Diagnosed with the coronavirus, or
  • Whose spouse or dependent is diagnosed with the coronavirus, or
  • Who experiences adverse financial consequences of the coronavirus as a result of:
    •     Being quarantined,
    •     Being furloughed, laid off, or having work hours reduced
    •     Being unable to work due to lack of childcare
    •     Closing or reducing hours of a business owned or operated by the individual

Taxation of the distribution can be avoided if contributed back within three years.

Instead of contributing the distribution back, the distribution can be included in taxable income over a three-year period.

Required minimum distribution (RMD) requirement waived for 2020

RMD requirements do not apply for calendar year 2020 for certain retirement plans.

$300 charitable deduction

For tax years beginning in 2020, you can get a deduction for up to $300 in charitable contributions, even if you claim the standard deduction.

Contact us

As always, our team at Hungerford Nichols CPAs + Advisors is available to answer your questions during this time. Please reach out to your Hungerford advisor directly.

Additionally, please visit our Business Resource Page on our website for continuously updated resources, executive orders, and additional information that may help you run your business or organization.

Business Resource Page:
Phone: (616) 949-3200