2020 CARES Act Overview
Apr 03, 2020 09:25AM
By David Dykes
By George Brock
Brock Tax Settlements
· Deadlines for filing 2019 tax returns (SCDOR and Federal – includes 1040, 1040-SR,-1041, 1120-C and 1120-H)-extended to July 15, 2020 without penalty and interest.
· 2020 Estimated tax payment due April 15 deadline extended to July 15, 2020.
· IRA contribution deadline (for 2019) extended to July 15, 2020.
· Within limits, direct withdrawals for payment of federal taxes can be postponed during the period April 15, 2020 to July 15, 2020.
· HSAs funds can be utilized to pay for COVID-19 testing.
· For employers with less than 500 employees, the legislation makes the employees eligible for paid sick leave if they cannot work from home if:
1) They are subject to government (federal, state, local) quarantine
2) A healthcare provider advises quarantine
3) They are seeking COVID-19 medical diagnosis
4) They are caring for someone subject to quarantine
5) They are caring for children during closure of childcare facility.
Related Sick Pay Benefits
· For reasons 1 – 3 above, the amount is normal pay with a limit of $511 per day (for ten days)
· For reasons 4 – 5 above, the limit is $200 per day (for ten days)
These benefits should not affect accrued leave, sick leave already in place with the employee.
Child Care Leave and Paid Family Leave
Under the act, employers with fewer than 500 employees are required to pay childcare leave for any employee who has been employed by the employer more than 30 days.
Employee Qualifications: To qualify, the employee must be unable to work, or work from home, because the employee must care for a child under 18 years of age, due to school or childcare closures related to a COVID-19 emergency.
Family Leave Benefit: Two-thirds of their normal rate of pay, but limited to $200 per day, and a maximum of $10,000.
Fear of Losing Job
· 25 Employees or more: employers with 25 or more employees must allow their employees to return to work after the leave.
· Less than 25 employees: employers with fewer than 25 employees must allow their employees to return to work after the leave unless the position no longer exists.
Small Business Exemption
Small businesses with fewer than 50 employees will be eligible for an exemption from the leave requirements relating to school closings or childcare unavailability where the requirements would jeopardize the ability of the business to continue.
Social Security Payroll Tax Credit
Employers who provide Emergency Paid Sick Leave Benefits and Emergency Child Care Leave Benefits will be given refundable tax credits against their Social Security taxes that will refund them fully for qualified sick leave and family leave wages under the act. A similar credit is available for self-employed individuals against their self-employment tax.
People First Initiative
The IRS will avoid in-person contacts between April 1 and July 15.
Installment Agreements for Past-Due Taxes
For taxpayers under an existing installment agreement, payments due between April 1, 2020 and July 15, 2020 can be suspended. The IRS will not default an agreement during this period. However, interest will still accrue.
IRS Collection Activities
During the period April 1, 2020 to July 15, 2020
· Offer in Compromise (OIC) information request deadlines extended
· OIC payments on accepted OIC’s extended
· Liens and levies (automatic and field) suspended
· Passports will not be suspended for new delinquencies
· No IRS debts forwarded to collection agencies
· No field, office and correspondences exams will be initiated
· Appeals will continue but conferences will be held via phone only.
2020 Recovery Rebates for Individuals (Act Sec 2201)
Maximum Credit Amounts
· Each eligible individual: $1,200
· Married couple (both eligible) filing jointly: $2,400
· Each qualifying child: $500.
The credit is phased out by 5% of the taxpayer’s Adjusted Gross Income (AGI) that exceeds the filing status threshold.
Recovery Rebate Credit AGI Phaseouts
Complete Phase Out
Unmarried Taxpayers (as well as Married Filing Separately)
Head of Household
Married Taxpayer Filing Joint
1) Must have filed a 2019 or a 2018 return
2) Must have received Social Security benefits.
10% Penalty Waived on IRA Distributed
If diagnosed with the virus or if quarantined, laid off, has had pay reduced.
Required Minimum Distributions
Waived in 2020 for taxpayers over age 70-1/2 in 2019.
Limits on 2020 charitable contributions eased for both individuals and corporations. Taxpayers can contribute more without having to carry over deduction.
Delay of Payment
of Employer Payroll Taxes – this provision applies to all taxpayers
· 50 percent of the 12.4 percent FICA taxes for the period beginning on the date of the act’s enactment and ending before January 1, 2021 are not due until December 31, 2021.
· The balance of the taxes from this period are not due until December 31, 2022.
In the case of any net operating loss arising in a taxable year beginning after December 31, 2017, and before January 1, 2021 (2018, 2019 and 2020), the loss shall be carried back to each of the five taxable years preceding the loss year. Previously, losses could be carried back only two years.
George Brock is a Greenville CPA with a bachelor's degree in financial management from Clemson University.
In 1993, he left public accounting and became CEO of a bookstore gift distribution business. The business expanded into all 50 states and several continents and countries, most notably Central America and Canada. In 1999 he handed the business over to his associates and returned to his first love, public accounting.
Since returning, he has concentrated in the areas of individual and corporate taxation.