Our first thought is for the safety and health of all individuals. You, your family and your customers are our top priority.
We continue our mission to assist our small business clients during this trying time, ensuring their business continuity. We are offering numerous services to our clients with completing SBA loan applications and preparing support documents for federal, state and local grant, loan and relief options. We are also consulting our clients on their compliance obligations and best course actions for dealing with cost reduction efforts and available resources for their employees. Please reach out to us if you need any advisory assistance of this kind.
As COVID-19 continues to upend nearly every aspect of life in the United States, Congress has been working to relieve suffering Americans. On March 27, 2020 the Coronavirus Aid, Relief, and Economic Security (CARES) Act passed with a $2.2 trillion price tag. Following is a summary of the most significant provisions.
Individual Tax Relief
The most well talked about provision is the $1,200 recovery rebates to individual taxpayers. The rebates are advance refunds of credits against 2020 taxes, and equal to $1,200 for individuals, or $2,400 for joint filers, with a $500 credit for each child. These amounts begin to phaseout at Adjusted Gross Income (“AGI”) of $75,000 for single filers and $150,000 for joint filers and capped at $99,000 for single filers and $198,000 for joint filers.
The act waives the 10-percent penalty on early withdrawals up to $100,000 from qualified retirement plans for coronavirus related distributions. The act also waives all required minimum distributions for 2020, regardless of whether the taxpayer has been impacted by the pandemic.
The Act provides an above-the-line deduction of up to $300 for charitable contributions made by individuals. This allows an individual to claim a deduction for a charitable contribution, even if the individual does not itemize deductions.
Additionally, for 2020 tax year, individuals can claim an unlimited itemized deduction for a charitable contribution, which is normally limited to 50 percent of AGI.
Business Tax Relief
Employee Retention Credit
The CARES Act grants eligible employers a credit against employment taxes equal to 50 percent of qualified wages paid to employees who are not working due to the employer’s full or partial cessation of business or a significant decline in gross receipt. The credit is available to be claimed on a quarterly basis, but the amount of wages, including health benefits, for which the credit can be claimed is limited to $10,000 in the aggregate per employee for all quarters.
Payroll Tax Deferral
In order to free up employers’ cash flow and retain employees during times of quarantine or shutdown, the CARES Act defers the payment of payroll taxes. Payroll taxes due from the period beginning on the date the CARES Act is signed into law and ending on December 31, 2020, are deferred. The 6.2 percent of OASID portion of payroll taxes incurred by employers, and 50 percent of the equivalent payroll taxes incurred by self-employed persons qualify for the deferral. Half of the deferred payroll taxes are due on December 31, 2021, with the remainder due on December 31, 2022.
Net Operating Losses
The Act allows for five-year carryback of net operating losses (NOLs) arising in 2018, 2019, or 2020 by a business. Businesses will be able to amend or modify tax returns for tax years dating back to 2013 in order to take advantage of the carryback.
We continue to lean on our core values of integrity, professionalism and responsibility to guide us in all that we do. Please reach out to us with any questions or concerns you may have – we are here to help.
The Eshel, Aminov and Partners LLP Management Team
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