Tips for Understanding the CARES Act 

 

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law provides relief for individuals and businesses. Below are some key points about its benefits 

 

The CARES Act provides up to $1,200 stimulus check to each qualifying person with income below $99,000 for single filers ($198,000 Married Filing Jointly / $136,000 Head of Household). Households were also set to receive $500 per dependent under age 17. If the dependent is 17 or older, they will not receive a stimulus check and their guardians do not get the $500 credit. Direct deposit will be used if the Treasury has your bank information (can be entered online if not on previously filed tax returns) or check/debit cardIf the amount was never received or was too low, there will be an opportunity to claim the correct amount on your 2020 tax return. Any excess amounts will not need to be paid back. 

 

The CARES Act also created the Small Business Paycheck Protection Program (PPP), which provides loans through the SBA for small businesses, sole proprietors, independent contractors, and non-profit organizations. The PPP provides small businesses with up to 8 weeks of support to cover payroll costs, mortgage interest, rent, and utility costs. Payroll costs include salaries/wages (up to $100k annually per employee), tips, commissions, severance, group health benefits (including insurance premiums), retirement benefits, state or local employer taxand parental, family medical and sick leave. For the loan to be forgiven, 60must be used for payroll costs. There is a possible reduction of forgiveness if wages or the number of employees are reduced by 25% or more. 

 

To preserve jobs the CARES Act also set up an employee retention credit. Employers get a 50% credit of up to $10,000 in wages for each employee they keep on payroll from March 12th, 2020 to January 1st, 2021.  Employers can receive the credit if they operate a trade or business during 2020 and their operations are affected because of government orders limiting travel, commerce/meeting, or their income goes down.   

 

Employers can also defer their share of payroll taxes. Normally due quarterly, they are instead due at later dates and over two installments. Half is due December 31, 2021, and the rest on December 31, 2022.   

 

If you want more information on the CARES Act, PPP loan forgiveness, or need help with tax preparation, contact our tax professionals at The Innovative CPA Group at 203-489-0612.  Or contact us online. 

By Rachel Schulze, Staff Accountant