COVID-19 – How It Is Changing Our World
While all but those individuals deemed “essential workers” are under stay at home orders, Congress has been busy trying to ease the devastating impact this pandemic is having on businesses and individuals in our country.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed by President Trump on March 27. The CARES Act, along with other related legislation, provides relief for individuals and businesses. Here is a summary of the most significant provisions:
1. Paycheck Protection Program
Starting April 3, 2020, small businesses and sole proprietorships can apply for the SBA’s “Paycheck Protection Program”. Starting April 10, 2020, independent contractors and self-employed individuals can apply. We encourage you to apply as quickly as you can, as there is a cap on funding. Please click here for the form: PPP application form. ECS is available to assist with the applications.
2. Tax deadlines have changed
The deadline for filing and payment of 2019 federal and Illinois income taxes has been moved from April 15 to July 15, 2020, by the Internal Revenue Service (IRS) and the Illinois Department of Revenue. We still encourage you to send your tax information to us now so it can be processed as efficiently as possible. The IRS confirmed that July 15, 2020, will also be the deadline to make 2019 contributions to IRAs and health savings accounts (HSAs). Deadlines associated with contributions to workplace savings plans are not affected.
3. Direct payments to many individuals and families
The CARES Act includes a provision to send most Americans direct payments of $1,200, or $2,400 for joint filers, plus $500 for each child. There are income limits to receive the disbursements. For individuals filing taxes as singles, the reduced amount begins at an adjusted gross income (AGI) of $75,000 per year and is completely phased out at $99,000. For joint filers, the reduced amount begins at $150,000 and payment is eliminated at $198,000. The AGI will be based on your 2019 or 2018 (if 2019 is not yet filed) tax filings. The payments will be made by direct deposit or check based on the most recently filed tax returns or with other information available to the government.
4. Retirement plan rules have been eased
• Required minimum distributions (RMDs) for 2020 are suspended for certain defined contribution plans and IRAs to help retirement accounts recover from stock market losses. This includes the first RMD, which individuals may have delayed from 2019 until April 1, 2020.
• Affected eligible participants in workplace retirement plans and IRA owners can take an aggregate distribution in 2020 of up to $100,000 from all retirement accounts without incurring the usual 10% early withdrawal penalty. The affected participant or IRA owner (including a spouse or dependent) would need to either be diagnosed with SARS-COV-2 or COVID-19 or experiencing adverse financial consequences as a result of an event, including but not limited to quarantine, furlough, lay-offs, reduced work hours, no available childcare, business closing or reduced business hours (self-employed), or other factors determined by the Secretary of the Treasury. In addition, the income tax on the distributions may be spread evenly over 3 years. Or, the distribution may be repaid to an eligible retirement plan within a 3-year period.
• Loan repayments for affected participants in workplace retirement plans may be delayed for one year. In addition, the amount of loans participants can take is doubled from $50,000 to $100,000.
5. Paid sick and family leave available for more workers
Paid leave is required for more employees by the Families First Coronavirus Response Act. These provisions apply to businesses of 500 employees or less. Businesses with 50 employees or less may be exempt from the paid leave provisions. Eligible employees must be allowed up to 2 weeks (or 80 hours) of paid sick time:
• At their regular rate of pay if the employee is unable to work due to quarantine or experiencing COVID-19 symptoms and seeking a medical diagnosis. Or, at two-thirds of their regular rate of pay to care for someone who is ill or to take care of a child whose school has been closed as a result of COVID-19.
• The CARES Act caps these payments at $200 or $511 per day or an aggregate payment of $2,000 or $5,110, depending on the reason for leave.
• Family leave was expanded under the Families First Coronavirus Response Act. Affected employees are entitled to up to 10 additional weeks of leave with job protection to recover from illness, at two-thirds their regular rate of pay, or to care for school-age children whose school has been closed. The CARES Act capped family leave payments at $200 per day and $10,000 in aggregate.
For more information, visit https://www.dol.gov/newsroom/releases/whd/whd20200324
6. Unemployment insurance has been expanded
The Families First Coronavirus Response Act provides up to $1 billion in aid to the unemployment insurance system. The CARES Act also expands unemployment insurance. Under the provisions in the bill, more people will qualify for benefits and the amounts of weekly benefits will be increased.
7. Tax credits for the self-employed may be available
The Families First Coronavirus Response Act includes help for people who are self-employed. It includes a tax credit for sick leave and family leave of up to $200 a day or 67% of average daily pay. It also allows for up to $500 a day for emergency paid sick leave for quarantine or testing for COVID-19, or 100% of average daily pay.
8. Federal student loan payments, interest waived
The CARES Act suspends payments on federal student loans for six months. The act waives any interest on the loans for six months as well. Students who are forced to withdraw from school due to the outbreak may have the portion of their loan covering that semester canceled. Requirements to return portions of grants or loan assistance will be waived for students who had to withdraw from school as well.
Find out more at https://studentaid.gov/announcements-events/coronavirus.
9. More funding available for health care and expanded coverage
Testing for COVID-19 must be covered by private health insurance without cost-sharing. Any vaccines for COVID-19 must be covered as well, without cost-sharing. The act expands coverage of telehealth services under Medicare. It also allows high-deductible health plans with health savings accounts (HSAs) to cover telehealth services even if patients have not met their annual deductible. For health savings accounts, health flexible spending accounts, and health reimbursement arrangements, the act includes over-the-counter (OTC) medicines (without a prescription) and feminine products as qualifying medical expenses that can be reimbursed by these accounts.
10. Additional deductions for charitable contributions
The CARES Act allows for a $300 above-the-line deduction for cash charitable contributions made to 501(c)(3) organizations for taxpayers who take the standard deduction. The act also relaxes the limit on charitable contributions for itemizers—increasing the amount that can be deducted from 60% of adjusted gross income to 100% of gross income. These changes go into effect beginning in the 2020 tax year.
Please contact your ECS representative to discuss how these changes impact you and your business and for assistance in preparing any required forms or applications to take advantage of the assistance offered by the CARES Act.
About the Author - Jan Forgue is a senior manager in the assurance group. In addition to planning and managing client attest engagements, she performs firm quality control responsibilities including engagement quality control reviews, coordination of annual monitoring and inspection procedures, update of the firm's quality control policies and practice aids, and provides assistance with complex accounting issues. She assists in expansion of the firm's attest practice, including peer review and accounting and attest consulting services. She is considered a subject matter expert in the employee benefit plan area. She also assists in developing staff through leading in-house training and identifying external CPE opportunities, on-the-job-training, and technical research skills.