Tag: Covid-19

Fast on the heels of passing the Families First Coronavirus Response Act (a law which ensures paid sick leave and unemployment benefits for employees affected by the COVID-19 pandemic along with payroll tax credits for affected employers), Congress passed and the President signed the CARES Act – a massive economic relief package with numerous tax breaks – on March 27, 2020.

For individuals, the most important form of tax-related relief may be the recovery rebate tax credits, which are direct payments (sometimes referred to as “stimulus checks”) the government will be making to those with income under a certain level. For businesses, key tax-related provisions include a payroll tax credit to encourage employee retention, an extension of the time for paying employment taxes, and a small business loan program with provisions for converting qualifying loans to grants (which do not have to be repaid).

The following are the key tax provisions of the CARES Act.

CARES Act Tax Relief for Individuals

Direct Payments: Single individuals and joint filers can expect to receive a payment of $1,200 or $2,400, respectively, plus $500 for each qualifying child. However, the rebate is reduced (but not below zero) by 5 percent of the amount by which the taxpayer’s adjusted gross income exceeds (1) $150,000 in the case of a joint return, (2) $112,500 in the case of a head of household, and (3) $75,000 in the case of a single taxpayer or a taxpayer with a filing status of married filing separately. Rebates will be issued based on 2019 income tax returns, or 2018 returns for individuals who haven’t yet filed in 2019. The rebates are eligible for electronic disbursement to any account to which the payee authorized, on or after January 1, 2018, the delivery of a refund of taxes or of a federal tax payment, including federal retirement benefits.

Note:  Qualifying child is generally dependents under the age of 17.

Using Retirement Funds Without Penalty: The CARES Act waives the 10% early withdrawal penalty for coronavirus-related distributions from retirement plans and provides the option of recontributing the funds for up to three years after such distributions are made. A “coronavirus-related distribution” is any distribution from an eligible retirement plan made: (1) on or after January 1, 2020, and before December 31, 2020, (2) to an individual (i) who is diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention, (ii) whose spouse or dependent is diagnosed with such virus or disease by such a test, or (iii) who experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, the closure or reduction of hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Secretary of the Treasury.

Required Minimum Distribution Rules Waived for 2020: The CARES Act waives the required minimum distribution rules for 2020 for defined contribution plans, including an eligible deferred compensation plan, and individual retirement plans.

Above-the-Line-Deduction for Charitable Contributions of Up to $300: Individuals, whether they itemize deductions or not, can take a deduction of up to $300 for charitable contributions made during 2020 and the limitations on the amount of charitable contributions that a taxpayer may take an itemized deduction for are loosened. In addition, the CARES Act loosens the deduction limitation on contributions of food inventory.

Repayment of Student Loan Debt Excluded from Income: The CARES Act excludes from income certain student loan debt repaid by an individual’s employer. It applies to repayments made after date of enactment and before 2021.

We are committed to serving your tax preparation and tax planning needs.  If you have questions or need assistance, please do not hesitate to contact our office.

Stay safe and healthy!

David K. Raye, CPA                  704-887-5298                          david@davidrayecpa.com

March 25, 2020

I hope you and your families are doing well and staying safe & healthy!

Last week, the Families First Coronavirus Response Act was passed by Congress.  This Act requires businesses with fewer than 500 employees to provide paid sick and family leave to employees affected by the virus.  Details are below:

  • Full time workers must receive 80 hours of sick leave and part-time employees must receive pay in the amount of their average hours in a two- week period.
  • BENEFITS: There are three levels of eligible employees.  Those sick or quarantined would receive full pay up to $ 511 per day for up to 10 days.  Those caring for someone affected by the virus would receive 2/3 of their pay up to $ 200 per day for up to 10 days.  Individuals with childcare needs due to school or daycare closings will have a 10-day wait period and then receive 2/3 pay up to $ 200 per day, capped at a total of $ 10,000.
  • TAX CREDITS: Employers will receive dollar-for-dollar tax credits against Social Security and Medicare taxes due to offset the benefits paid.  Those taxes would normally be 6.2% of wages for Social Security and 1.45% for Medicare.
  • The self-employed are not left out. They would also receive tax credits against self-employment tax which are the same percentages shown above (6.2% and 1.45%)

As I write this, the Senate has come to an agreement on a separate $ 2 trillion stimulus bill and all indications are that the House will take up the bill immediately.  This bill is expected to include several measures that will affect individual income taxes.  Once this bill is officially passed, I will provide more details in a separate post.

We are committed to serving your tax preparation and tax planning needs.  If you have questions or need assistance, please do not hesitate to contact our office.

Stay safe and well.  Our thoughts and prayers are with everyone as we move through this crisis.

David K. Raye, CPA                  704-887-5298                          david@davidrayecpa.com

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