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Coronavirus Relief Package: Tax Aspects Of The CARES Act

March 26, 2020

Forbes has posted a very thorough, insightful article written by Senior Contributor Tony Nitti on the tax aspects of the new CARES Act. See highlights below:

"...In addition to providing a large cash infusion to hospitals and broader access to COVID-19 testing to individuals, the CARES Act aims to boost the economy with over $2 trillion in relief, ranging from individual rebates and small business loans to increased unemployment benefits and a wide variety of tax breaks.

Individual stimulus payments:

The headliner of the CARES Act is the individual stimulus payment, or as it’s officially titled, the “2020 recovery rebate for individuals.” Whatever you choose to call it, it means that the government will immediately begin cutting checks directly to individual taxpayers, putting nearly $507 billion in cash into the hands of most adult Americans, and ideally, right back into the struggling economy. The CARES Act does this via the tax law by adding new Section 6428 to the Internal Revenue Code, but the final version of the bill has some subtle, and not so subtle, changes from the proposal we examined on Friday. All things considered, however, the final stimulus package is much more generous and simple to compute. Here’s how it will work:

The IRS is going to take a look at your 2019 tax return. Fear not, if your 2019 return has not yet been filed, the Service will grab your 2018 return instead. And even better: if you haven’t filed a return for EITHER year — for example, you collected Social Security, but did not have enough taxable income to necessitate the filing of a return — the IRS will determine that you are eligible for a check based on your Form SSA-1099, Social Security Benefit Statement.

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Small Business Loans

In a move designed to keep small businesses afloat, the CARES Act provides that businesses with fewer than 500 employees — including sole proprietors and nonprofits— will have access to nearly $350 billion in loans under Section 7 of the Small Business Act during the “covered period,” which runs from February 15, 2020 through June 30, 2020. The loans, which are referred to as “paycheck protection loans” and are fully guaranteed by the federal government through December 31, 2020 (returning to an 85% guarantee for loans greater than $150,000 after that date), are generally limited to the LESSER OF: the sum of 1) average monthly “payroll costs” for the 1 year period ending on the date the loan was made (an alternative calculation is available for seasonal employers) multiplied by 2.5, and 2) any disaster loan (discussed below) taken out after January 31, 2020 that has been refinanced into a paycheck protection loan, and
$10 million.

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