This past Friday, Congress passed a $2 trillion stimulus package called the CARES Act (Coronavirus Aid, Relief, and Economic Security). It’s nearly 883 pages and contains a bounty of information. At the Harding Group, we want to make sure our clients stay informed about every change that may impact them during this time. Below we will outline the most impactful elements of the CARES Act, along with a few highlights of the Families First Coronavirus Response Act and Maryland loan and grant initiatives.
How the CARES Act May Impact Individuals and Self-Employed People
Money for Individuals
Individuals with an adjusted gross income under $75K will receive a one-time payment of $1,200, or $2,400 for a couple with income under $150K, with $500 per child. The amount you receive is based on your 2019 tax return, or your 2018 tax return if you have not filed 2019 yet.
Each state will continue to pay unemployment to people who qualify, and the Federal government will kick in an additional $600 per week through the end of July 2020.
No Penalties for Early Retirement Withdrawal
The 10% early withdrawal penalty will be waived for distributions of up to $100K made before the end of the year if you qualify. You can pay the taxes over three years. To qualify, you or a family member had to be diagnosed with COVID-19, or you had to suffer adverse financial consequences.
Health Insurance Improvements
COVID-19 testing, treatment, and vaccines will now be covered by health insurance. High Deductible Health Plans are also allowed to cover telehealth and other remote care services without charging a deductible.
Employers Can Help with Student Loans
Employers can pay up to $5,250 in tax-free student loan repayment benefits.
Student Loans on Pause
All student loans and interest payments will be deferred through September 30th, 2020.
CARES Act Information for Small Businesses of Less Than 500 Employees
Loans That Can Be Forgiven
This part of the bill is referred to as the “Paycheck Protection Program.” It’s meant to encourage employers to keep payroll going, but it is also available to self-employed people. This brochure spells out who is eligible, how much you can borrow, and more. However, the details on how to apply are still forthcoming.
The Federal Government Will Advance Payroll Tax Credits Enacted in the Families First Act
The FFA requires businesses with fewer than 500 employees to pay two weeks of paid sick time and then up to another ten weeks of paid leave, all of which will be refunded by the Federal government. The CARES Act allows the refunds to be advanced instead of reimbursed “using forms and instructions the IRS will provide.”
Employers Can Defer Their FICA Share
The employer portion of Social Security and Medicare can be deferred for the rest of this year. Half of the deferral amount would be due December 31st, 2021, and the other half would be due one year later.
50% Payroll Tax Credit on the First $10,000 of Wages for Each Employee
FICA is 7.65%, so this credit would come to about $765 per employee. This is available to employers who suffered due to the virus and had gross revenues drop by 50% or more compared to the same quarter last year. We don’t yet know how that will be verified or how you get the credit.
If you want more thorough information on the CARES Act, this article contains even more information.
Families First Coronavirus Response Act Highlights
- The effective date is April 1st, 2020.
- The Emergency Paid Sick Leave Act requires employers to pay 80 hours of paid sick leave, which the Federal government will advance in full.
- The Emergency Family Medical Leave Expansion Act requires employers to provide an additional ten weeks of paid leave at 2/3rds pay to employees who have been employed for 30 days. The Federal government will now advance the funds in full.
- The following table, courtesy of Payroll Services, LLC, can offer you much more detailed information:
Maryland COVID-19 Programs
These programs will only apply to businesses with employees on payroll.
- MD $10K Grant: also known as the MD Small Business COVID-19 Emergency Relief Grant Fund. If you qualify, and you haven’t yet applied, you should do so immediately.
- MD $50K Grant: also known as the COVID-19 Layoff Aversion Fund — Workforce and Development and Adult Learning. If you should qualify, you should apply right away.
- MD $50K Loan: also known as the MD Small Business COVID-19 Emergency Relief Grant Loan. This loan has 0% interest for the first 12 months and then 2% for the remaining 24 months.
- MD Shared Unemployment: this allows employees with reduced hours to collect partial unemployment benefits.
Other Things to Know
- SBA Disaster Loans are still an option, although the application is complicated, and they may not be the best deal compared to other grants and loans currently available.
- Taxes are due July 15th instead of April 15th. You can file and pay as late as July 15th without an extension. However, DC has not extended their tax deadlines.
- 1st quarter estimated tax payments are also due July 15th. 2nd quarter estimated tax payments are still due June 15th.
- IRA and HSA contributions are due July 15th.
- MD sales taxes that are due in March, April, or May can be paid by June 1st and still be considered on time.
- MD withholding taxes for employers that are due in March, April, or May can be paid by June 1st and still be considered on time. However, we are currently unable to take advantage of this because the payroll software companies have not yet been able to adapt their software to this change.
- The IRS has suspended collection efforts and suspended installment plan payments from April 1st through July 15th, but by law, interest continues to accrue. You can find more info here.
- The IRS has closed its Tax Practitioner Priority Line, which is the department CPAs call when we have a power of attorney form for a client and need answers.
- Some lenders are suspending loan payments for mortgages, autos, and credit cards. Do not hesitate to ask your lender if a payment deferral is available.
If you have any further questions, reach out to the Harding Group by email, and we will get back to you as soon as we can.
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