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Key Provisions of the CARES Act

On Friday March 27, 2020, the government signed the Coronavirus Aid, Relief and Economic Security (CARES) Act into law. This act has several provisions to help individuals and businesses as they deal with the coronavirus and the attempts to flatten the contagion curve. Here's a look at the main elements.

Paycheck Protection Program

The Paycheck Protection Program (PPP) authorizes $349 billion in loans for small businesses, nonprofits, and self-employed individuals through the Small Business Administration's (SBA) loan program. To apply, businesses must have 500 or fewer employees, or be hotel or food service chains with 500 or fewer employees per location. Loans are worth 250% of the business's monthly payroll costs, up to $10 million, and the funds can be used to cover payroll costs including wages, paid leave, healthcare benefits, mortgage interest, and utility payments.

Loan Forgiveness

Businesses and individuals who receive loans through the PPP can apply for loan forgiveness for eligible costs that they paid in the first eight weeks after acquiring the loan. The amount forgiven gets reduced if the business let employees go or reduced their wages by more than 25%.

Employee Retention Credit

To qualify for this credit, a business has to shut down due to government orders or experience a 50% reduction in revenue in one quarter this year compared to the same quarter last year. Designed to offset paying wages during the crisis, the credit is worth 50% of up to $10,000 of employee wages paid during the crisis.


Businesses can claim the credit for all their employees who were paid while on furlough or who had reduced hours due to lack of business, and businesses with 100 or fewer employees can claim the credit even if their employees' hours weren't reduced.

Deferred Payment of Employer Payroll Taxes

Employers pay 6.2% of their employee’s wages to the government as Social Security contributions, and the CARES act allows businesses to defer making these payments from March 13, 2020 to December 31, 2020. However, the payments have not been canceled. Businesses must make half these payments by the last day of 2021 and the other half by the last day of 2022.

Modification to Loss Limitations

This provision modifies the loss limitation rules for all taxpayers except corporations. Now pass-through businesses and sole proprietors can claim excess business losses. This reduces their tax liability, potentially increasing their cash flow.

2020 Recovery Rebates

Individuals with adjusted gross incomes (AGI) up to $75,000 will receive $1200 rebate checks, and couples filing jointly with AGIs up to $150,000 will receive $2400. Families will also receive $500 per child. The rebate phases out over those income levels and disappears completely for individuals with income exceeding $99,000 ($198,000 for couples).

Retirement Plan Withdrawals

Individuals can take distributions of up to $100,000 from their retirement accounts at any time during 2020. They will not face the 10% early distribution penalty or the mandatory 20% withholding. They can report these funds as income over the next three years, or if they repay the money to their retirement account within three years, they can avoid any taxes or penalties.


To take these distributions, the individual, their spouse, or dependent must have the coronavirus, or they must have experienced financial difficulties due to the coronavirus.

Required Minimum Distributions


The CARES act waives the requirement to take required minimum distributions (RMD) from retirement plans for 2020. You don't have to make up the distributions the following year — this is a true waiver.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.


The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor.

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