date: CARES Act
March 27, 2020
We want to thank you again for your patience and understanding during this time of uncertainty. Things are changing on a daily basis, but please trust that we are working hard to provide you with updated and accurate information as we receive it.
Filing Deadline Extensions: Federal, State and Local
On March 20, Treasury Secretary Steven Mnuchin announced
the federal tax filing deadline extension
to July 15. Today Ohio Gov. Mike DeWine signed House Bill 197, officially extending the state income tax filing deadline to July 15 in alignment with the delayed federal deadline. The bill extends any of the state’s income tax filing and payment deadlines, and waives associated interest and penalties for taxpayers affected by the emergency. The municipal income tax due dates for individuals are tied to the state filing deadline, as such the cities’ deadlines are also extended.
We are strongly encouraging that our clients continue to file to allow for timely delivery of any expected refunds.
Today, President Trump officially signed into law the updated version of the Coronavirus Aid, Relief and Economic Security (CARES) Act. The CARES Act is the third round of federal government support in the wake of the coronavirus public health crisis.
The bill includes several items aimed at helping individuals, including direct cash for families, expanded unemployment benefits, and new rules for things like retirement contributions.
- Recovery Rebates: The bill would provide a $1,200 refundable tax credit for individuals and $2,400 for joint taxpayers. Additionally, taxpayers with children will receive a flat $500 for each child. It will be based on the 2018 return unless the 2019 return has been filed. Amounts are reduced for higher income taxpayers and begin phasing out after a single taxpayer has $75,000 in adjusted gross income and $150,000 for joint filers.
- Extra Unemployment Payments: The bill makes major changes to unemployment assistance, increasing the benefits and broadening who is eligible. The updated CARES Act includes an additional $600 per week payment to each recipient for up to four months, and extends Unemployment Insurance benefits to self-employed workers, independent contractors, and those with limited work history. The federal government will provide temporary full funding of the first week of regular unemployment for states with no waiting period and extend UI benefits for an additional 13 weeks through December 31, 2020 after state UI benefits end.
- Early Withdrawal Penalty Waived: Waives the 10 percent early withdrawal penalty on retirement account distributions for taxpayers facing virus-related challenges. Withdrawn amounts are taxable over three years, but taxpayers can recontribute the withdrawn funds into their retirement accounts for three years without affecting retirement account caps. Eligible retirement accounts include individual retirement accounts (IRAs), 401Ks and other qualified trusts, certain deferred compensation plans, and qualified annuities. The bill also waives required minimum distribution rules for certain retirement plans in calendar year 2020.
- Charitable Contributions: Creates a $300 partial above-the-line charitable contribution for filers taking the standard deduction and expands the limit on charitable contributions for itemizers.
- Student Loans: Certain employer payments of student loans on behalf of employees are excluded from taxable income. Employers may contribute up to $5,250 annually toward student loans, and the payments would be excluded from an employee’s income both tax free and payroll tax free.
- Insurance coverage: The bill requires all private insurance plans to cover COVID-19 treatments and vaccine and makes all coronavirus tests free.
Small businesses with 500 or fewer employees will be able to take advantage of emergency grants and a forgivable loan program for companies. The bill also encourages companies to keep employees on the payroll with changes to rules for expenses and deductions.
- Payroll Tax Credit: Employers are eligible for a 50 percent refundable payroll tax credit on wages paid up to $10,000 during the crisis. The credit would be available to employers whose businesses were disrupted due to virus shutdowns and those that had a decrease in gross receipts of 50 percent or more when compared to the same quarter last year. The credit can be claimed for employees who are retained but not currently working due to the crisis for firms with more than 100 employees, and for all employee wages for firms with 100 or fewer employees. The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020 through December 31, 2020.
- Delayed SS Payment: Employer-side Social Security payroll tax payments may be delayed until January 1, 2021, with 50 percent owed on December 31, 2021 and the other half owed on December 31, 2022. The Social Security Trust Fund will be backfilled by general revenue in the interim period.
- Limit on $500,000 pass through business losses is suspended.
- Business interest limit is now 50% adjustable taxable income instead of 30%.
- Qualified leasehold improvement property is 15 years and eligible for bonus.
- Net operating loss carrybacks are allowed for 2018, 2019, and 2020 and can be carried back 5 years.
Paycheck Protection SBA Program
- Forgiveness for Small Business Loans for Keeping Employees: The bill creates a “paycheck protection program” for small employers, self-employed individuals, and “gig economy” workers, with $350 billion to help prevent workers from losing their jobs and small businesses from going under due to economic losses caused by the COVID-19 pandemic. The “Paycheck Protection Program” would provide 8 weeks of cash-flow assistance through 100 percent federally guaranteed loans to small employers who maintain their payroll during this emergency. If the employer maintains payroll, the portion of the loans used for covered payroll costs, interest on mortgage obligations, rent, and utilities would be forgiven.
There is a lot of information out there right now. Here’s what we recommend your next steps should be in order to take advantage of available relief and support:
- We strongly encourage both individuals and businesses to continue to file their 2019 return as soon as possible.
- Individuals who have been laid off due to COVID 19 should file for unemployment as soon as possible. Because of the high-volume of filings currently, you may experience difficulty when applying online. Try visiting the site during off hours, including early mornings or evenings.
- For businesses, we strongly encourage you to reach out to your lenders now as we anticipate there will be significant demand for the forgivable SBA loans. In the event that you would like a referral to a local bank that will be supporting this program, please let us know and we are happy to provide an introduction.
It's our job as your trusted advisor to make sure that you are aware of this legislation and encourage you to take early action on it. We know that you are probably overwhelmed with COVID emails from the past couple of weeks. Please continue to check our website for a full list of our updates:
We want to make sure our firm is supporting you to the best of our ability. Please don’t hesitate to reach out if we can provide any immediate assistance. You can also expect us to contact you during the weeks ahead to check in and provide you with information on additional new regulations and legislation that might apply to you and your business.
Thomas L. Harrison, CPA, CEPA
President and CEO