Covid 19 & Tax Law

September 9, 2020September 8, 2020 jmoran Year 2020 tax law change

How the Coronavirus Aid, Relief and Economic Security (CARES) Act Impacts You

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law. This legislation is intended to provide relief to taxpayers during these unprecedented times of the coronavirus (COVID-19) outbreak. According to NPR, the $2 trillion aid package breaks down like this:

Individuals: $560 billion
Big corporations: $500 billion
Small businesses: $377 billion
State and local governments: $339.8 billion
Public health: $153.5 billion
Education/other: $43.7 billion
Safety net: $26 billion

As an individual, here is how you might benefit/be impacted:

Relief payment – This week, taxpayers have started to receive relief funds in the amount of $1,200 per taxpayer and $500 per dependent. That amount is phased out after $75,000 AGI ($150,000 for married filing jointly). Individuals with AGI of more than $99,000 and couples with AGI of more than $198,000 receive no payment.
Extra unemployment payments – Unemployment assistance is increasing for those who qualify—by an additional $600 per week for four months. The legislation also adds 13 weeks of unemployment insurance. “Gig” workers and freelancers can apply for temporary Pandemic Unemployment Assistance through the end of the year.
Taxes aren’t due until July 15 – The tax return deadline has been extended to July 15.
Student loan repayments – Employers can provide up to $5,250 in tax-free student loan repayment benefits to their employees.
Free tests and covered COVID-19 treatments. All private insurance plans must cover COVID-19 treatments and vaccines, and make all coronavirus tests free.

As a small business owner, here’s how you might benefit/be impacted:

Emergency grants – Companies with 500 or fewer employees can receive grants of up to $10,000 to cover immediate operating costs.
Payroll protection – Businesses can receive loans of up to $10 million per business to maintain payroll, keep workers on the books and pay rent, mortgage, etc. The “loan” can be forgiven as long as your business keeps people employed through the end of June.
Existing SBA loan relief – Businesses with existing SBA loans can receive help for up to six months of payments.

There’s lots more to the CARES Act, summarized briefly as follows:

Big businesses are the category receiving the second most funding from the CARES Act. Airlines are receiving money for employee salaries/wages/benefits, and businesses of all sizes that are closed or distressed receive a fully refundable tax credit to keep workers on the payroll. The goal is to get employees hired back or put on paid furlough. For companies with more than 100 full-time employees, the credit is for wages paid to employees. For those with less than 100 full-time employees, the deduction counts even if they aren’t closed.
Public health institutions are receiving funding in the form of grants for hospitals and community centers that provide health care services, drug access for diagnostics, treatments and vaccines, CDC programs and response efforts, veterans’ health care, telehealth program support, and funding for equipment, ventilators and masks.
Safety net funding covers meals that schools can distribute to students, food stamps, and food bank donations/distributions.
State and local governments receive funding for COVID-19 response efforts, including direct aid and Community Development Block Grants for K-12 schools, higher education institutions and children/families/child care centers.
College students and graduates with student debt receive temporary student loan relief through September 30, 2020, conversion of work-study funds into grants, waiving of grant/aid repayment for students who must drop out of school, and waiver of student aid being deducted from subsidized loan and Pell Grant eligibility.
Other programs are receiving support as well, including arts programs, universities and other institutions.

Thanks to NPR for their astute summary of this complex bill. Here’s the full version should you want to understand more of the details of each aspect of the bill.

Moran & Long is here to help.

These are trying times, without a doubt. If there’s anything our firm can do for you, please call. If nothing else, sometimes it is comforting to talk with your advisors to get a “big picture” perspective and a little insight on how the CARES Act might help you.

Or, if you have yet to apply for some of the small business relief or want to make sure you understand parts of the legislation that apply to you or your business, give us a call. We’d be happy to help you navigate these challenging times, answer any questions, and plan ahead to mitigate your tax bill for 2020 (post coronavirus economic crisis).

Keep your heads up: we will get through this!