The CARES Act: A Brief Overview | Fee-Only Financial Planners Long Island

The CARES Act: A Brief Overview

The CARES Act

On Friday, March 27, 2020, President Trump signed into law a $2 trillion Coronavirus economic stimulus bill known as the “Coronavirus Aid, Relief, and Economic Security (CARES) Act.” The CARES Act is in response to the global health pandemic, COVID-19, and aims to provide financial relief for both large and small businesses, individuals, state governments and the healthcare industry, who have been adversely affected by the recent economic damage.

Highlighted below are some features of the CARES Act that apply to individuals and business owners, as well as links to some informative resources:

Individuals:

  • Taxpayers with an Adjusted Gross Income (AGI) up to $75,000 for individuals, and married couples with an AGI up to $150,000 will receive a one-time direct deposit of $1,200 and $2,400 respectively, as well as an additional $500 per qualified child. Beyond those incomes, the amount received is phased out.
  • For Coronavirus-related withdrawals from retirement accounts of up to $100,000, the 10% withdrawal penalty is waived, and you have the option to spread taxes over three years or repay the amount withdrawn as a rollover made during the three-year period.
  • Required Minimum Distributions (RMD’s) from IRA’s, 401(k)’s, 403(b)’s and Government 457(b) plans have been suspended for 2020.
  • $250 billion has been allocated to provide enhanced unemployment benefits, increasing unemployment by $600 per week up to four months, and expanding benefits for self-employed, independent contractors and workers from the gig economy.
  • For taxpayers who itemize their deductions in 2020 and make cash contributions to public charities, the AGI limitation for qualifying cash contributions has been temporarily repealed.
  • Over-the-counter medications are now included in the expanded definition of Qualified Medical Expenses for Health Savings Accounts (HAS’s), Medical Savings Accounts (MSA’s) and Healthcare Flexible Spending Accounts (FSA’s).
  • Student loan payments can be deferred through September 30, 2020, with no interest on the loans during this period, as well as no garnishment of wages, tax refunds or social security benefits. After September 30, you will resume paying federal student loans normally.

Business Owners:

  • Employers can delay the payment of their portion of 2020 payroll taxes until 2021 and 2022 and will have more flexible net operating loss rules so they can obtain immediate refunds.
  • Small business owners in all states, Washington D.C. and U.S. territories are eligible to apply for the Economic Injury Disaster Loan (EDIL). The EDIL can be up to $2 million for up to 30 years, at interest rates of 3.75% for small businesses and 2.75% for non-profits.
  • Companies with 500 or fewer employees who maintain their payroll, can take out loans up to 2.5 times their average monthly payroll expense over the previous year, with the total loan amount being capped at $10 million, using the Paycheck Protection Program (PPP). The loan term can be up to 10 years by statute, but most will be for 2 years. The loan will be subject to an interest rate of up to 4% capped by statute, but most will be charged .5%.
  • $500 billion has been allocated to provide support in lending to industry specific businesses (i.e. airlines and cargo air carriers) and programs as well as to states and municipalities.

Informative Resources:

  • Small business owners can find the Paycheck Protection Program borrower application form by clicking here.
  • A Paycheck Protection Program fact sheet is available by clicking here.
  • To view the CARES Act in its entirety, click here.

The goal of the CARES Act is to provide individuals and businesses with many different options to help recover from the financial impact sustained from the Coronavirus pandemic, and we have only scratched the surface here by highlighting a few important pieces of the Act. As our team becomes more familiar with the nuances of the CARES Act, we welcome you to contact us at 631.218.0077 or at info@rwroge.com with any questions.

R.W. Rogé & Company, Inc. helps clients plan, achieve and live the life they want. To learn more about how we do this, click here. To discuss your financial future with a knowledgeable Senior Wealth Advisor, contact us at 631.218.0077 or at info@rwroge.com for a complimentary consultation.

 

Sources
SBA Disaster Assistance in Response to the Coronavirus
Analyzing The CARES Act: From Rebate Checks To Small Business Relief For The Coronavirus Pandemic
The CARES Act Has Passed: Here Are The Highlights
Quickly Maximizing Paycheck Protection Program’s (PPP) Forgiveable Loan Opportunity for Financial Advisors

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