The CARES Act includes 14 new tax provisions as well as additional IRS funding for operations and implementation ($293.5 million for taxpayer service; $170 million for operations support; $37.2 million for enforcement). The statutory language is here, and a summary of the tax and unemployment insurance provisions are here. Here is what we see as the most important tax elements: Individual Provisions §2201. 2020 Recovery Rebates for Individuals Recovery rebate for each taxpayer of $1,200 ($2,400 for joint returns). o Plus $500 for every qualifying child. o Rebates are means tested and begin phasing out after $75,000 adjusted gross income (AGI) (single), $112,500, (HoH), and $150,000 (MFJ). o The rebate amount is reduced by $5 for each $100 a taxpayer’s income exceeds the phase-out threshold and completely phased-out at $99,000/$198,000 (single/MFJ). o No payment without proper tax identification numbers. IRS will base these amounts on the taxpayer’s 2019 tax return o 2018 tax return if 2019 not yet filed o If no filing for either year, then based on information provided by Form SSA-1099 or RRB-1099, 2019 Social Security Benefit Statement The Department of Treasury is required to conduct a public awareness campaign. §2202. Special Rules for Use of Retirement Funds Waiver for the 10-percent early withdrawal penalty for distributions up to $100,000. Coronavirus-related distributions may be o repaid any time during the three years from distribution. o included in gross income ratably over three-taxable-year period. Loan limit increased from $50,000 to $100,000. Sections 2203, 2204, 2206. RMDs; Non-Itemized Charitable; Employer-Paid Education Loans Minimum distribution rules for certain retirement plans and accounts are waived for 2020. A $300 deduction for cash contributions allowed for taxpayers not itemizing beginning in 2020. An employer payment of any qualifying education loan is excluded from income. §2205. Modification of Limitations on Charitable Contributions During 2020 For individuals, the 50-percent of adjusted gross income limitation is suspended for 2020. For corporations, the 10-percent limitation is increased to 25 percent of taxable income. The limitation on deductions for contributions of food inventory from 15 percent to 25 percent. Business Provisions §2301. Employee Retention Credit for Employers Subject to Closure Due to COVID-19 All eligible employers are permitted to claim a 50 percent credit against wages paid. Credit provided for first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit offsets employment taxes otherwise paid during a calendar quarter (reduced by any other credits used) with any excess refundable by the federal government. Employer is eligible if operations fully or partially suspended during a calendar quarter due to a government order or gross receipts for a calendar quarter are less than 50 percent of gross receipts from the same quarter in the prior year (ending when they are 80 percent). Credit is based on qualified wages paid to the employee. o If greater than 100 full-time employees, qualified wages are wages paid to employees when they are not providing services due to the COVID-19-related circumstances. o If eligible employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order. The credit applies to tax-exempt organizations. §2302. Delay of Payment of Employer Payroll Taxes Corporations may postpone employer payroll taxes (Sections 3111(a), 3211(a), and 3221(a)). 50 percent of social security taxes for the self-employed may be postponed. 50 percent of deferred taxes are due by December 31, 2021; the remainder due by December 31, 2022. The Social Security trust funds are held harmless under this provision. Sections 2303, 2304. Modifications for Net Operating Losses Temporarily removes the taxable income limitation to allow a net operating loss (NOL) to fully offset income. Losses from 2018, 2019, or 2020 may be carried back five years. §2304. Modification of Limitation on Losses for Taxpayers Other than Corporations The provision modifies the loss limitation applicable to pass-through businesses and sole proprietors, so they can benefit from the NOL carryback rules. In a word: Yowza. In two words: (with apologies to Rocky Horror) Great Scott! We have seen a lot: TCJA, the 2008 market meltdown, 9/11, but to move from nothing to $2 trillion in the space of a week…it just leaves us slack-jawed.IRS will need to administer these provisions and enrolled agents will need to understand how to deploy some powerful tools for their small business clients (current and future) as well as help individual clients understand the answers to several questions, including: Should I file my 2019 tax return before or after the credit is issued? What if I did not file in either 2018 or 2019 How much should an individual expect? When? How? Which one of my clients should carry back NOLs to prior years? What about all the unemployment? Please call us at (248) 816-1220 or 800-276-8319 to set up a free consultation. Or Book Your Consultation here: We service clients worldwide.