Coronavirus Aid, Relief, and Economic Security Act (CARES Act)


THIS PAGE IS UNDER CONSTRUCTION AND INCOMPLETE…AFTER THE MAIN SECTIONS ARE COMPLETE, FAQ CONTENT WILL CONTINUE TO BE ADDED AND OR MODIFIED DAILY WITH NEW INFORMATION OBTAINED…


Trillions allocated to the largest economic stimulus in US history…here are the key details of the bill and insight on whether or not it will work.

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law on 3/27/2020. The total package is valued at somewhere between $2-6,000,000,000,000 (TRILLION!). For context:

  • One Thousand is 1,000 ones
  • One Million is 1,000 thousands
  • One Billion is 1,000 millions
  • One Trillion is 1,000 billions

These numbers are nearly incomprehensible to the human mind. In future posts I will go into lengthy discussion on the actual experience of individuals and businesses in an attempt to utilize these funds along with opinion on its effectiveness. In the meantime, let’s just try to get our heads wrapped around what is on the table and how it is supposed to work. For an audio overview of my initial understanding of the bill and its components you can check out episode 3 of my podcast.

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Introduction

I have organized the main components related to this bill in the most logical way that I could think of. The sections of the bill itself are organized differently but would be more challenging for the layperson to follow.

  • Recovery Rebate
  • Tax and Retirement
  • Unemployment Compensation
  • Key Business Provisions
  • Other Notable Provisions
  • Non-CARES Act Items

As you will see, there are many sub-components, details, and nuances to understand and consider within each of these sections. As of the time of this writing we are still learning more each day about the way that these provisions will actually work in the real world.

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Recovery Rebate

Summary

The recovery rebate is a credit against 2020 income taxes. Every taxpayer is entitled to a starting amount and then some or all of that amount could potentially be lost based on income phaseouts. Initial estimates stated that over 90% of the taxpayer population would benefit from this provision.

A key component to the recovery rebate is that because it is credit for 2020, the IRS must look back to your most recent filed return (2018 or 2019) to calculate the amount that you are eligible to receive. The tax status along with the amount Adjusted Gross Income (AGI) for 2018, 2019, and 2020 can meaningfully impact the amount of money received and the timing of receiving the recovery rebate as part of this provision.

The income limits are as follows with a phaseout of $5 for each $100 of income over and above the stated limit:

  • Married Couples – $150,000
  • Head of Household – $112,500
  • Single – $75,000

FAQ

How much might I qualify to receive from the recovery rebate?

$1,200 for individuals and head of household, $2,400 for married couples, and $500 for each dependent child under the age of 17 before any reductions for phaseouts. See the summary above for the income limits for different types of filers.

  • Single filers are completely phased out at $99,000
  • The Head of Household calculation will vary based on the number of dependent children under the age of 17 they have. Their $1,200 credit would be fully phased out at $136,500, and each $500 credit for dependent children would phase out at $10,000 over and above the $136,500. So this type of filer with one dependent child would be entirely phased out at $146,500. For each additional child add $10,000 of income to reach the phase out limit.
  • The Married Couple calculation will vary based on the the number of dependent children under the age of 17 they have. Their $2,400 credit would be fully phased out at $198,000, and each $500 credit for dependent children would phase out at $10,000 over and above the $198,000. So this type of filer with one dependent child would be entirely phased out at $208,000. For each additional child add $10,000 of income to reach the phase out limit.
Should I file my 2019 return before the recovery rebate is calculated and paid even though it is not due until July 15th?

If you are able to review and compare your Adjusted Gross Income (AGI) for 2018 and 2019 before filing your 2019 return that would be a best case scenario.

Scenario 1: If the AGI for both 2018 and 2019 are below the income limits for your filing status (see summary above for details), it should not make any difference on whether you file your 2019 return or not.

Scenario 2: If you go through this exercise and 2018 is below the income limit, but 2019 is above, it would be wise to delay filing your return until the recovery rebate is calculated and paid.

Scenario 3: Lastly, if you go through this exercise and 2018 is above the limit, but 2019 is below, it would be wise to file your 2019 return as quickly as possible if you have not already done so.

As of the time of this writing my understanding is that there has not been clear guidance on a cutoff date for filing the 2019 return, so the suggestion would be that if you fall into scenario 3 that it would be wise to file the 2019 return as soon as possible.

What happens if I lost part or all of the recovery rebate based on my higher 2018 or 2019 income and then have lower income in 2020?

In this scenario you will be eligible to receive a partial or full recovery rebate in 2021 when you file your 2020 tax return if you fall below the phaseout range.

What happens if I receive part or all of the recovery rebate based on my lower 2018 or 2019 income and then have higher income in 2020?

In this scenario you will not have any of the recovery rebate clawed back even if your 2020 income exceeds the income limitations for this provision.

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Tax and Retirement

Summary

Coronavirus Related Distributions from Retirement Accounts

Plan Loans from Employer Plans

Required Minimum Distribution (RMD)

New Above the Line Charitable Deduction

Expanded Itemized Charitable Deduction

FAQ

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Unemployment Compensation

Summary

Traditional + New Provisions

Non-Traditional

FAQ

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Key Business Provisions

Summary

Economic Injury Disaster Loan (EIDL)

Paycheck Protection Program (PPP)

Employee Retention Credit

Deferral of Payment of Payroll Taxes

Net Operating Loss (NOL)

FAQ

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Other Notable Provisions

Summary

Deferral of Interest and Payments for Student Loan Borrowers

Exclusion of Student Loan Payments from Employer Compensation

Health Care Related Rules

FAQ

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Non-CARES Act Items

Summary

Mortgage Forbearance

Auto Loans & Leases

FAQ

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Congress

Access the actual legistlation…S.3548 – CARES Act

Remarks by President Trump at Signing of H.R.748, The CARES Act

SBA

Coronavirus (COVID-19): Small Business Guidance & Loan Resources

USDA

FAQ, Actions, and Resources

COVID-19 Federal Rural Resource Guide

Press Release: USDA Announces Coronavirus Food Assistance Program

Media & Other

Recovery Rebate

Tax and Retirement

Unemployment Compensation

Key Business Provisions

Other Notable Provisions

Non-Cares Act Items

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