CARES Act

CARES Act -

The Coronavirus Aid, Relief and Economic Security (CARES) Act is an estimated $2 trillion federal relief package designed to combat the harmful economic effects of the COVID-19 pandemic. 

INDIVIDUALS -

• For retirement savers who need to tap tax-deferred savings
  
  • Waives 1% early-withdrawal penalty
    
  • Can spread income tax payments over the next 3 years
    
  • Withdrawals can be repaid to the retirement account within 3 years of the distribution
    
  • Not subject to 20% tax withholding
• For retirement savers who prefer to delay distributions this year, required minimum distributions (RMDs) are suspended in 2020 for retirement account owners and beneficiaries. 
  
  • This applies to traditional, Roth, SEP and SIMPLE individual retirement accounts, as well as 401(k), 403(b) and governmental 457(b) plans
    
  • Have until the end of 2021 to start taking distributions
    
  • Those who have taken an RMD in the past 60 days may have the option to undo it.
• Retirement accounts that are currently subject to the five-year rule following the account owner’s death may skip counting 2020 among the five years.

 
SMALL BUSINESSES - 

• Businesses with fewer than 500 employees — including sole proprietors, independent contractors, “gig economy” workers and anyone otherwise self-employed — can apply for loans of up to $10 million, or 2.5 times total payroll expenses for the loan period.
  
  • Those who are able to access funds can use them to help pay for payroll costs and other expenses, such as mortgage payments, rent, utilities and other debt service from February 15 to June 30. 
    
  • At least 75% of the loan must be payroll and payroll costs (salary, wages, commissions, and tips)
    
  • Capped at $100,000 for each employee.
    
  • The portion of the Paycheck Protection Program Loan that was used for the first eight weeks of payroll costs, interest on mortgage obligations, rent, and utilities is eligible for permanent forgiveness.
    
  • 501(c)(3) charitable organizations with fewer than 500 workers can qualify as well. All entities must have been in operation as of February 15, 2020.
• Expansion of the SBA Disaster Loan Program
  
  • This expansion enables sole proprietors to access disaster loans and enables them to receive a working capital loan to overcome the temporary loss of revenue.
• The employer’s portion of Social Security payroll tax payable in 2020 may be deferred until January 1, 2021, with the first half of the deferred 2020 payment due at the end of 2021 and the second half due at the end of 2022.
• Employers may be eligible for up to one year of credit against the employer’s 6.2% share of Social Security tax for a business that is fully or partially suspended due to government orders, or where revenue in a quarter in 2020 is less than 50% of the revenue in the same quarter last year.