In response to the Coronavirus Pandemic and in an attempt to preserve the economy and help the American taxpayer, two relief packages were recently signed into law.
The Families First Coronavirus Response Act (“FFCRA”) was passed by Congress and signed by President Trump on March 18th, 2020. The FFCRA’s goal is to help small and mid-size businesses as well as employees, by providing paid sick leave, tax credits, and free COVID-19 testing; expanding food assistance and unemployment benefits, and increasing Medicaid funding.
In addition, Congress just enacted the largest relief package in history- The Coronavirus Aid, Relief and Economic Security (“CARES”) Act, providing a massive 2 trillion dollar stimulus package. This is projected to impact almost 94% of Americans and contains many areas of relief for business owners, hospitals, and individual taxpayers.
Here are the main takeaways:
Small Business Benefits:
Small businesses, including 501(c)(3)non-profits, and physician practices can qualify for small business loans up to a maximum of $10 million and can equal 2.5 times the business’s monthly average payroll costs. The loan can be used to cover payroll, rent, utilities, mortgage interest, group insurance premiums, etc. No collateral will be required or any personal guarantee.
The maximum interest rate is 4%, and the loans are eligible for full or partial forgiveness.
The eligible amounts must be spent during the first eight weeks after the loan is made if spent on payroll costs, rent, utilities, and group health insurance premiums, but businesses must maintain the same number of employees.
Employers are eligible to defer the deposit of the employer share of social security taxes (but not Medicare taxes). Specifically, all employer social security taxes otherwise required to be deposited between the date of enactment and December 31, 2020, are not required to be deposited on the normal deposit schedule. Instead, half of such taxes would be required to be deposited by December 31, 2021. The remaining deferred social security taxes would be required to be deposited by December 31, 2022.
There is a payroll tax credit for the qualifying businesses that do not apply for a loan.
Unemployment Compensation Benefits:
The unemployment benefit will be available during the first week of unemployment, waiving the standard one-week waiting period.
Unemployment compensation will be increased by $600 per week, and the benefit period will be extended by 13 weeks.
More workers are eligible for benefits.
Payment to Taxpayers:
Individual tax filers will receive a one-time payment of $1,200 or less, depending on your adjusted gross income as reported on your tax return for either 2018 or 2019. Married couples filing a joint return will be eligible for up to $2400. Families with children 17 or younger will receive $500 per child.
Eligibility Income Thresholds:
Married Joint: $150,000 or less
Single and Head of Household: $112,500 or less
Single Filer: $75,000 or less.
Payment is reduced by $50 for every $1,000 over threshold amounts.
Individuals must have a work-eligible Social Security number, be a US citizen or legal resident and not be a dependent of any other taxpayer.
The IRS will send the payments via direct deposit or a check to your address of record. To qualify for payment, you must have filed your taxes for 2018 or 2019.
Checks are expected to be processed and sent by the IRS in 3-6 weeks, per the Cares Act.
Remember, you do not have to pay or file your 2019 taxes until July 15th, 2020.
Coronavirus-Related Retirement Distributions:
You may withdraw up to $100,000 from IRA’s, employer-sponsored retirement plans, or a combination of both.
Distributions are not subject to the 10% penalty, not subject to mandatory withholding requirements, and are eligible to be repaid over three years. You may also realize the income for over a three year period.
All Required Minimum Distributions (RMD’s) are suspended for 2020, and taxpayers who have already taken their RMD can return the funds, within sixty days to avoid paying taxes on it.
To qualify for these changes, a loan or distribution must be coronavirus- related, or the individual adversely affected financially due to the virus.
The deadline for making a 2019 IRA contribution is July 15th.
Other Provisions:
Student Loan Payments can be deferred until September 30th, 2020.
Please reach out if you have additional questions regarding the Stimulus Packages and what they mean for you.
Strauss Financial is closely monitoring all updates to the market, pending legislation, and, more importantly, our clients' personal situations.
Please let us know how we can be of help during these difficult times!
-Your Advisors from Strauss Financial Group, Inc.
IMPORTANT DISCLOSURES
Investment advice offered through Strauss Financial Group, Inc., a Registered Investment Advisor.
These materials, opinions, analyses and information are provided for general informational purposes only based upon sources believed to be reliable and in good faith—but are not considered all-inclusive, and no representation or warranty of any kind, expressed or implied, is made concerning accuracy, completeness, correctness, timeliness or appropriateness. In addition, we undertake no obligation to update such opinions, analysis or information, and no warranty or guarantee is made. The information in these materials may change at any time and without notice. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Please consult your attorney and/or accountant regarding legal and tax issues.