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Highlights of the Coronavirus Aid, Relief, and Economic Security (CARES) Act

In an attempt to relieve organizations and Americans, the CARES Act was passed on Friday March 27th in response to the concerns mounting in relation to Coronavirus.

While there are many provisions you can find HERE, this post aims to explain some of the more relevant changes for individuals and businesses.

Tax Credit (AKA “Free Money”)

Many are awaiting a check in the mail, which is happening for most. Here is what you need to know:

· $1,200 for single filers and $2,400 for married filers with an additional $500 for children under 17 years old IF:

o Single taxpayers make less than 75k Adjusted Gross Income in 2019 (or 2018, if 2019 hasn’t been filed yet)

o Married taxpayers make less than 150k Adjusted Gross Income in 2019 (or 2018 if 2019 hasn’t been filed yet)

· If you and/or you and your spouse make more than these thresholds, the amount deducted from your stimulus check is: $5 x every $100 of additional income over those thresholds

o Ex. Mary is a single filer with an AGI of $77,600 so her actual check would be for $77,600 - $75,000 = $2,600 over threshold. $2,600 / $100 = 26. 26 x 5 = $130 so her check would be for $1,070

· These checks are documented as a “Tax Credit” for 2020 and are not considered taxable income

· Congress hopes to have checks cut in three weeks but that may be unrealistic

Distributions & Plan Loans from IRAs/Employer Plans

In order to support citizens with the need for cash, congress signed into law some changes specific to distributions and loans from retirement plans in 2020. Here’s what you need to know:

Distributions from IRAs or Employer Plans

· To qualify, you must have had adverse financial consequence(s) or have been unable to work due to a lack of childcare based on Coronavirus

· Individuals can take up to a total of $100,000 (aggregate, not per account)

· If an individual is below 59 ½ years old, there is no 10% withdrawal penalty

· There is no mandatory withholding

· The tax owed on the distribution can be paid in one year or spread across 3 years

Required Minimum Distributions:

· RMDs are completely waived for 2020 and if you’ve already taken it, there may be ways to get those dollars back into your account

· The factor used to determine the amount to take is simply skipped for this year (not delayed or deferred into next year)

Employer Plan Loans (if already offered by employer retirement plan)

· Amount able to be loaned increased from 50k to 100k

· Repayments of an existing 401k loan can be delayed up to a year


Here’s what you need to know:

· There is a new program specific to the pandemic and it is aimed at assisting self-employed individuals (ex. companies that don’t have unemployment insurance and wouldn’t be otherwise eligible for traditional unemployment)

· There has historically been a one-week waiting/elimination period before claiming benefits and this period is waived

· Regular unemployment payments are increased by $600/week up to four months

· Extensions of 13 weeks can be claimed after regular unemployment benefits end

Small Business

If you or someone you know is a small business, there is a very high likelihood this could benefit them. Here is what you should know:

Paycheck Protection Program:

· There is a new loan that is fully guaranteed by the Small Business Administration (SBA)

· The loan needs to be applied for by June 30th and to qualify, the business must:

o Have less than 500 employees (or have less than NAICS category)

o Good faith certification that a loan is necessary

· The details of the loan include:

o Maximum duration is 10 years

o Up the lesser of: $10 mil OR 2.5x average monthly payroll cost of previous year (excluding any employees making >100k)

o Proceeds must be used for: (1) payroll, (2) group insurance, (3) salaries/commissions, (4) rent/mortgage interest, (5) utilities

o Max interest rate is 4%

o Payments can be deferred either up to 6 months or 12 months (depends on SBAs decision)

o This loan can be forgiven (YES, FORGIVEN) and the debt is nontaxable for up to 100% of amounts spent on payroll, rent, utilities, group health insurance spent on items following the 8 weeks after loan issuance

Employee Retention Credit

· This is a new credit that can be claimed against payroll taxes for up to 50% of wages for each employee (up to 10k per person)

· To qualify, the government had to have suspended the business or the revenue is impacted by 50% or more compared to same quarter in 2019

o After you qualify for one quarter, as long as revenue is below 80% of previous year, the business can continue to take the credit

Deferring Payroll Taxes & Net Operating Loss Carrybacks

· This allows businesses to defer payroll taxes:

o 50% will be due 12/31 or 2021

o 50% will be due 12/31 of 2022

· This can apply to self-employed individuals on the employer portion of taxes

· Net operating losses can be carried back for up to 5 years and can offset up to 100% taxable income (vs. 80% previously)

Student Loan Payments

Many of us are also wondering about changes to our federal student loans so here you go:

· Student loan payments can be deferred to 9/30 but anyone who is trying to accomplish this needs to INFORM THEIR LOAN SERVICER

· No interest will accrue during this same time frame

· Those individuals planning to take advantage of Public Student Loan Forgiveness (PSLF) can count these six months towards their qualifying payments

While the events happening around us are unprecedented and nerve-racking, it’s comforting to know congress is acting quickly to support its fellow Americans

For more detail or any questions, don’t hesitate to email us at

Photo Cred:

Resources & References:

Levine, Jeffrey, and Team Kitces. “CARES Act Provisions For Financial Advisors And Their Clients.” Nerd's Eye View |, 30 Mar. 2020,

McConnell, and Mitch. “Text – S.3548 – 116th Congress (2019-2020): CARES Act.”, 21 Mar. 2020,

“Premier Member Content.” Nerd's Eye View |, 13 Mar. 2020,

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