CARES Act: Coronavirus Stimulus Package Signed Into Law

After unanimous passage in the U.S. Senate and an overwhelming voice vote in the House, President Donald J. Trump has signed the CARES Act into law. The largest economic stimulus package in U.S. history, the CARES Act will aid individuals and businesses during the COVID-19 pandemic.

The package will provide benefits to a wide swath of individuals, businesses and organizations hurting most from the coronavirus emergency. We’ve detailed the provisions that are most likely to directly affect you.

Individual Benefits

Perhaps the most anticipated portion of the CARES Act, the individual stimulus benefits take front and center on our coverage. Here are the basics:

• Individuals earning $75,000 or less in adjusted gross income will receive a $1,200 one-time payment. Married couples filing jointly will receive $2,400 if their income is $150,000 or less.
• These amounts will begin phasing out above those income levels. Those making $99,000 (individuals) and $198,000 (married couples) will not qualify for these payments.
• Parents will receive an additional $500 payment per dependent child.
• Student loan payments will be suspended by the Department of Education without penalty through September 30, 2020.
• Under certain circumstances, the 10% withdrawal penalty for IRA distributions has been waived.

As of this writing, it’s not clear whether you must claim these funds as income on your 2020 return, or if any other tax considerations apply.

Small Businesses

While the $500 billion loan fund for large corporations has been a big media focus, small businesses are a primary driver of local economies. Several provisions of the CARES Act are designed to help these enterprises:

• The legislation establishes a $350 billion fund for forgivable loans to small business.
• There is a 50% refundable payroll tax credit for 2020 payroll taxes. This provision was established to discourage layoffs.
• Employer-side payroll taxes for Social Security are delayed until 2021 and 2022.
• Self-employed workers and sole proprietorship owners are eligible for unemployment benefits (see that section).

Unemployment Benefits

Unemployment insurance benefits have been raised to 100% of the recipient’s income for 13 weeks. This applies to loss of employment caused by COVID-19 beginning on or after Jan. 27, 2020 and ending on or before Dec. 31, 2020. Examples of eligible unemployment include layoffs, business closures and governmental orders to cease operations.

Benefits have also been extended to freelance and gig-economy workers in a “pandemic unemployment assistance” provision. This also includes self-employed workers and sole proprietorship owners.

Unemployment insurance spurred a last-minute holdup in the Senate as an initial $600/week of additional benefits was discussed. This benefit was ultimately reduced to the 100% figure, which still provides a significant increase over typical benefit amounts.

Additional Information

The 880-page bill include a $500 billion lending program for large corporations and state and local governments—along with restrictions and oversight for its use. There is also funding for hospitals, food assistance, the Kennedy Center, and “evacuation expenses” for Americans in other countries.

The CARES Act also includes industry-specific provisions regarding debt forgiveness, tax breaks and more. We’ll provide more information once the bill becomes law—and as the picture clears about what these provisions mean for you.

Stay tuned for more articles regarding this historic legislation. James Moore’s tax CPAs will be tracking every development and keeping you informed.

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