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The Coronavirus Aid, Relief, and Economic Security ("CARES") Act 

Below is a brief summary of the CARES Act as it relates to many of our clients. There are two major areas covered: Individual and Small Business assistance.

Individual Assistance

The CARES Act will provide direct payments to taxpayers, lessen restrictions to accessing retirement accounts, and expand unemployment benefits.

Recovery Rebates: All U.S. residents with adjusted gross income up to $75,000 ($150,000 married), who are not a dependent of another taxpayer and have a work eligible social security number, are eligible for the full $1,200 ($2,400 married) rebate. In addition, they are eligible for an additional $500 per child. This is true even for those who have no income, as well as those whose income comes entirely from nontaxable means-tested benefit programs, such as Social Security. 

For most Americans, no action on their part will be required in order to receive a rebate check. The rebate amount is reduced by $50 for each $1,000 that a taxpayer’s income exceeds the phase-out threshold. The amount is completely phased-out for single filers with incomes exceeding $99,000, $146,500 for head of household filers with one child, and $198,000 for joint filers with no children.

Source: Section 2201, Recovery Rebates for Individuals

Retirement Plan Withdrawals and Loans: The act provides tax relief for retirement plan and IRA “coronavirus-related distributions” taken in 2020. For any such distribution, the proposal (among other provisions):

  • permits in-service distributions for many plans that may not otherwise allow;
  • waives the 10% early distribution penalty if under 59 ½;
  • delays the time period in which the taxes are attributable and payback can be made.

Required Minimum Distributions (“RMDs”): RMDs for 2020 are waived for both employer plans (401(k), 403(b), and governmental 457(b) plans) and IRAs. This also applies to RMDs due in 2020, but attributable to 2019. It is a true waiver and does not need to be made up the next year. This has the potential to provide significant tax savings and is something we will be discussing with every client who is currently taking RMDs. 

Note: There are many caveats and details that should be explored before taking a retirement plan withdrawal. Please consult us and/or a tax professional before making such a decision. Click here for more details of the CARES Act provisions for individuals.

Source: CARES Act Section 2203

Unemployment Benefits: The CARES Act expanded unemployment benefits by the following:

  • expanding eligibility, including the self-employed and others who would normally not be eligible for unemployment;
  • increasing the amount of unemployment benefits by $600/week for up to four months;
  • increasing the duration of unemployment benefits by 13 weeks.


Small Business Assistance

Paycheck Protection Program: The measure would establish a forgivable loan option through the Small Business Administration (SBA).

What types of businesses are eligible?  

  • Any business, nonprofit, veterans group, or tribal business with 500 or fewer employees, or a number set by the Small Business Administration (SBA) for the relevant industry.
  • Sole proprietors, independent contractors, and eligible self-employed workers.
  • Hotel and food service chains with 500 or fewer employees per location.

Where to Apply for a Loan: Currently, the loan process will flow through SBA authorized banks. Lender Match on the Small Business Administration website is a free online referral tool that will connect you with already participating SBA-approved lenders. We suggest that you consult with your tax attorney before proceeding in the loan process.

Recipients could use the loans to cover expenses such as eligible payroll costs, healthcare benefits, and utility payments. The recipient would have to make a “good faith certification” that they’ll use the funds to retain workers, maintain payroll, and pay for rent and similar expenses. The loans are subject to caps on total amount and individual employee compensation.

Loan Forgiveness: Certain borrowers would be eligible for loan forgiveness provided they comply with the program’s requirements of employee retention and qualifying expenses.

Other small business provisions include an Employee Retention Credit, delay of payment of payroll taxes, and loosening of Net Operating Loss rules.

Undoubtedly, there is a lot that we’ll continue to understand in the weeks ahead but we encourage you to contact us if you are in need of exploring any of these assistance programs.

Phone: (913) 276-7110

Further Reading:

Treasury Department Assistance for Small Businesses

Paycheck Protection Program Fact Sheet

SBA Small Business Guide and Loan Resources

CARES Act Highlights

Important Information: Securities and Advisory services provided by LPL Financial, member FINRA/SIPC. This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

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