03/28/2020
2020 Stimulus Check Headed your Way
As part of the “CARES Act” signed into Law by President Trump on 3/27/20 in response to the Corona Virus Pandemic.
**Individuals**
• Each individual will receive $1,200
• Plus $500 for each ‘qualifying child’ (under 17 years old)
The full credit is available for adjusted gross income below:
• $150,000 for Married Filing Joint
• $112,500 for Head of Household
• $75,000 for Single
The bill states the Treasury Department will deliver the funds as rapidly as possible
and will use direct deposit to any account the payee authorized after January 1,
2018. The Treasury Department has indicated they hope to start issuing payments by April 6th. If they send your check by mail, you could experience a delay between 3 weeks (but up to 4 months). The US Government has the authority to modify payment information to facilitate an accurate delivery of the payment. The Treasury will use your 2019 tax return (if filed), and if not, they will use your 2018 tax return to determine the adjusted gross income limits and direct deposit information. If you have not filed 2018 or 2019 tax returns, you will also receive the payment if you are receiving Social Security Benefits.
A Mailer Notice will be sent to the taxpayer’s last know address no later than 15 days after the date the funds are distributed. The notice will indicate the method in which the payment was made (direct deposit or mail), the amount of the payment, and the phone number to contact the IRS if you failed to receive the payment.
Reduced checks will be available for single adults who earn between $75,001
and $99,000 and married couples who earn between $150,001 and $198,000.
The check will be reduced by $5 for every $100 over $75,000 for single adults
and $150,000 for married couples.
**Businesses Employee Retention Credit**
Employers Subject to Closures due to Covid-19 can receive an employee retention credit. The credit is for 50% of wages paid to employees. You take the credit by reducing your payroll taxes (941 Tax.)
The amounts cannot exceed $10,000 per employee. The credit will reduce your payroll tax payments on all employees’
wages paid. This could cause your 941 tax to be zero. The excess wage credit can be applied as a “payment” on your 941 form
– for which you will receive a refund from the IRS. This refund would come each quarter when we file your 941 form.
Qualified wages to an employee cannot exceed the amount each employee received in the 30 days prior to the this event.
An eligible employer is one that:
1) was in business for 2020 and has seen the operation of the business fully or partially suspended due to orders from an
appropriate governmental authority limiting commerce, travel, or meetings due
to Covid-19 (Federal, State, or Local Governments)
Or
2) A business that has seen a gross receipt decline in first quarter 2020 of 50% of
more compared to the first quarter 2019. The business no longer qualifies at the
point in which gross receipts are greater than 80% of gross receipts in the same
quarter for the prior year.
**Important**
If an employer receives a covered loan (discussed later) they will not be
eligible for this retention wage credit.
**Business Covered Loans**
Covered Loans to Businesses – Small Business Interruption Loan
A Covered Loan means a loan guaranteed under the Small Business Act and
refers to a loan to cover the below operating costs for an 8-week period
that starts when the loan is originated.
An eligible recipient can be forgiven of the debt on a covered loan in an
amount equal to the sum of the following costs incurred made during
the 8 week covered period:
1. Payroll Costs
2. Salaries / Wages / Commissions
3. Payments of cash tips or equivalent
4. Payment for Vacation, Parental, Family, Medical, or Sick Leave
5. Group Health Insurance Benefits
6. Retirement Benefits
7. Payments of Interest on Mortgages (no pre-payment of principal allowed.) Mortgages incurred before 2/15/20
8. Payments for Rent – Rental agreements in effect prior to 2/15/20
9. Payments for Utilities – Services that began prior to 2/15/20
10. Payments of any compensation made to a sole proprietor or independent contractor (that would represent their net earnings from self- employment income.)
You will have to apply for the loan. In the presidential speech a few nights ago, they said that within a week’s time, every FDIC bank in the US would be able to offer the loans within the same day as applying for
them.
Be prepared to present receipts of expenses to get the loan forgiven. You
will have to present documentation to the bank that bills were paid in order to get the loan forgiven. (This should happen later.)
**Both employers and self employed will qualify for these loans.
**The loan is up to $10 million
**The maximum loan amount for you will be determined by calculating an average of the above expenses for the 1 year before the loan is made.
**Important**
Your loan forgiveness will be reduced if you cut your staff in this 8-week period. For example: if you normally have 20 employees and now you’ve cut your staff to 10 employees, your loan forgiveness will be 50%. This Sounds like an important reason to keep paying your entire staff during
this period.
If your wages are reduced in the covered period by more than 25%, you will experience a loan forgiveness reduction.
If you have already cut payroll, you have 30 days from 3/27/20 to get those employees rehired.
**Other Important Changes You Should Know**
1. The Income Tax filing due date – and payment due date is now July 15, 2020.
2. You are still eligible for an Filing Extension of October 15, 2020.
3. First Quarter Tax Estimates – Are now also due on July 15, 2020.
4. Employer Share of Payroll Taxes payments on employee wages can be
deferred (6.2% Social Security and 1.45% Medicare.) 50% of payroll tax payments are due at the end of 2021, and the other
50% of payroll tax payments are due at the end of 2022.
5. You are allowed to distribute funds from your retirement accounts in amounts up to $100,000 and not be subject to the 10% penalty.
You are also allowed to recontribute that money within a 3-year period. They are considering this a “rollover.”
6. You may also elect to pay taxes on your retirement withdrawal over a 3-year period.
Please contact my office or your financial advisor for the specific rules if you are needing to take a retirement withdrawal because you have been adversely affected by the Corona virus or the result of reduced business.
7. For 2020 there is a temporary waiver of your Required Minimum Distribution from your retirement plan.
8. You can receive a charitable deduction for up to $300 for 2020 – even
if you cannot itemize. Also, the cap on itemized deductions has been
lifted for 2020.
9. Student Loan payments – if held by the Federal Government – have
been deferred until 9/30/20.
10. Sole proprietors and other self-employed workers could be eligible for
expanded unemployment insurance benefits.
When we make it to the end of this pandemic, we want to see our families safe and our businesses in tact where we can all continue our livelihoods. Let's all remember where our true source of strength and security comes from, not a $2.2 trillion stimulus package, but in a God who holds the world and each one of us lovingly in His arms.
God Bless you all!
Becky Ladd, CPA
