On March 27, 2020, The Senate and House passed the Coronavirus Aid, Relief and Economic Security Act (CARES) which has now been signed into law and includes the following provisions:
Individual Tax Relief
- Individual taxpayers will receive checks (known as stimulus checks) from the IRS in the amount of $1,200. Joint filers will receive $2,400. Taxpayers will also receive $500 for each dependent child. Phase-outs of these checks begin at $75,000 in adjusted gross income for single filers, $112,500 for head of household and $150,000 for joint filers.
- The 10% early withdrawal penalty from qualified retirement plans is waived for coronavirus-related distributions. Any income attributable to an early withdrawal is subject to tax over a three-year period. Taxpayers may re-contribute the withdrawn amount to a qualified retirement plan within three years.
- Required minimum distributions (RMD’s) have been waived for 2020, regardless of whether the taxpayer has been impacted by the pandemic.
- A new $300.00 charitable contribution deduction for taxpayers that do not itemize their deductions has been established.
- Charitable contributions that were limited to a 50 or 60% adjusted gross income threshold have no limitation for 2020.
- Additionally, pass-through business limitations and Net Operating Loss provisions have been re-defined.
- The CARES Act has relaxed the definition of unemployed to include self-employed individuals.
Business Tax Relief
- The act grants eligible employers a credit against employment taxes equal to 50% of qualified wages (up to $10,000) per employee for amounts paid to employees. This is available to employers if their operations were fully or partially suspended due to the current pandemic or if they experienced a significant decline in gross receipts. Qualifying wages are wages paid after March 11, 2020, and before January 1, 2021. It is anticipated that this credit will be facilitated by payroll service providers. We don’t recommend stopping paying until you proactively have communication with your provider.
- Payroll taxes due from the period beginning on the date the act was signed (March 27, 2020) into the law through December 31, 2020, are deferred. The employer’s share of social security tax qualifies for this deferral which needs to be paid back 50% in each of the following two calendar years (2021 & 2022).
- Net operating losses (NOL) can be carried back five years for losses incurred in 2018, 2019 or 2020 by a business.
- The bill also eliminates loss limitation rules for sole proprietorships and pass-through entities to allow them to take advantage of the NOL carryback. Additionally, the bill allows for NOL’s arising before January 1, 2021, to fully offset income, under current law the NOL’s are limited to 80% of taxable income.
- The business interest expense limitation that was limited to 30% of adjusted taxable income has now been increased to 50% of adjusted taxable income.
- Qualified improvement property (QIP) which is a commercial property with a 39-year depreciable tax life, NOT eligible for 100% bonus depreciation will now have a 15-year depreciable life and IS eligible for 100% bonus depreciation.
- Any small business loans, mortgage obligations, or other loan obligations are forgiven by a lender during the applicable period is excluded from taxable income.
Financial Assistance Opportunities
The CARES Act also established a $350 billion fund to help small businesses keep workers employed amid the pandemic and economic downturn. Click here to review the questions you may be asking and what you need to know.
In addition to the CARES Act, there are also a number of federal, state and city resources available for all business owners. If you are not an Illinois resident please check with your local state and city governments for available loans and grants. Below are some of the ones we are aware of:
Small Business Administration (SBA) Resources for Small Businesses
The U.S. Small Business Administration has approved the state’s eligibility for disaster assistance loans for small businesses facing financial hardship in all 102 counties due to COVID-19. Eligible businesses can apply for up to $2 million in low-interest loans to help offset the economic impact of the coronavirus pandemic.
State of Illinois
The State of Illinois is working to provide emergency assistance program for Illinois small businesses and include Hospitality Emergency Grants, Small Business Emergency Loan Fund, and a Downstate Small Business Stabilization Fund.
- Emergency Small Business Grants and Loans
- State Treasurer’s Small Business Relief Program
- IDES COVID-19 and Unemployment Benefits FAQ
City of Chicago
On March 19, 2020, Chicago Mayor Lori E. Lightfoot announced a $100 million relief package for Chicago’s small businesses amid the COVID-19 breakout. Download the PDF here. You can indicate your interest here. Applications are not being taken until March 31, 2020, for those businesses that reside in the city only.
This is a unique and uncertain time for all of us. Contact us with any questions about the above.