2020 Recovery Rebates for Individuals
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides payments to taxpayers (subject to income limits) in the way of a credit under §6428 of $1,200 per individual ($2,400 for married couples filing a joint return) plus $500 per qualifying child who is under age 17 (as defined under §24(c)).
The payment is reduced by 5% of the taxpayer’s adjusted gross income in excess of $75,000 ($112,500 for head of household; $150,000 for joint filers). The payment will fully phase out when income reaches $99,000 for single filers, $146,500 for head of households with one child and $198,000 for joint filers.
Eligible taxpayers include anyone except:
• Nonresident aliens
• Any taxpayer who does not have a Social Security number (SSN) or Adoption Taxpayer
Identification number (ATIN)
• Taxpayers who qualify as a dependent of another taxpayer (§151)
• Estate or trust
Individuals who have no income, as well as those whose income comes entirely from non-taxable means- tested benefit programs, such as SSI benefits also qualify for the advance payment.
Joint filers are each treated as having received one-half of the advanced payment. The eligibility for the payment is based on the taxpayers 2019 tax return, or if the taxpayer has not filed a 2019 return, eligibility is based on the 2018 return. If no returns were filed in 2018 or 2019, information from 2019 Forms 1099-SSA and 1099-RRB will be used.
The payments are not subject to offset.
Business Provisions – Employee Retention Credit:
Employers are provided a refundable payroll tax credit for 50% of wages paid to employees during the COVID-19 crisis. The credit is available to employers whose:
• Operations were fully or partially suspended due to a COVID-19-related shutdown order, or
• Gross receipts declined by more than 50% when compared to the same quarter in the prior year.
The credit is based on qualified wages paid to the employee. For employers with 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 described above. For 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 is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020 through Dec. 31, 2020.
Delay of Payment of Employer Payroll Taxes
Employers and self-employed individuals can defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government with respect to their employees. Employers generally are responsible for paying a 6.2% Social Security tax on employee wages.
The provision requires that the deferred employment tax be paid over the following two years, with half of the amount required to be paid by Dec. 31, 2021 and the other half by Dec. 31, 2022. The Social Security Trust Funds will be held harmless under this provision.
OTHER PROVISIONS:
Expansion of Unemployment Benefits
The size and scope of unemployment benefits is expanded under this bill. It includes relief for workers who are self-employed, as well as independent contractors. These changes are temporary.
• Provides $250 billion to expand unemployment benefits
• Makes sure self-employed and independent contractors, like Uber drivers and gig workers, can
receive unemployment during the public health emergency. The bill also includes support to state
and local governments and nonprofits so they can pay unemployment to their employees
• Makes benefits more generous by adding a $600/week across-the-board payment increase through the end of July. In addition, for those who need it, the bill provides an additional 13 weeks of benefits
beyond what states typically allow
Unemployment insurance eligibility is expanded to those who are not eligible for regular compensation or extended benefits under state or federal law, or previously passed pandemic emergency unemployment compensation.
To qualify, an individual must self-certify that s/he is otherwise able and available to work but cannot for one of the following reasons:
• Diagnosis of COVID-19 or is experiencing the systems and seeking a medical diagnosis
• Member of household has COVID-19
• Individual is providing care for a family member or member of household who has been diagnosed
with COVID-19
• Child or other person in household for whom the individual is the primary caregiver is unable to attend
school or other facility because of COVID-19 and such attendance is necessary for that individual to
attend work
• Individual is unable to reach place of employment because of mandatory quarantine
• Individual has been advised by a medical professional to self-quarantine due to COVID-19 concerns
• Individual was scheduled to start a job and doesn’t have a job or unable to reach job due to COVID-19
• Individual has become the primary source of income or major support for household due to head of
household dying due to COVID-19
• Individual has quit job as a direct result of COVID-19
• Place of business is closed due to COVID-19
• Individual is self-employed, is seeking part-time employment, doesn’t have sufficient work history, or
otherwise doesn’t qualify for regular unemployment or extended benefits
• This does not include individuals who can telework with pay or who are receiving paid sick leave or
other leave benefits due to other provisions in COVID-19 relief.
This assistance is available beginning Jan. 27, 2020 and goes until Dec. 31, 2020 with a 39-week maximum for an individual receiving assistance.
The bill also allows for states to waive their one week waiting period for unemployment benefits and the federal government will reimburse them for that week, thus incentivizing states to provide an immediate benefit.
Paid Leave for Rehired Employees
The CARES Act amends the expanded paid leave requirements for employers in the Families First Coronavirus Response Act to include employees who are laid off and then rehired by an employer.
Specifically, an employee who was laid off by their employer on March 1, 2020 or later, had worked for the employer for at least 30 of the previous 60 days before being laid off, and was then rehired by the employer will be eligible for the paid family and sick leave benefits.
Small Business Loans
The SBA is providing low-interest working capital loans of up to $2 million to small businesses and nonprofits affected by the coronavirus. These loans carry an interest rate of 3.75% for small businesses and 2.75% for nonprofits. Loan repayment terms vary by applicant, up to a maximum of 30 years.
These loans can be forgiven. Loan recipients can calculate the amount to be forgiven by calculating the sum total of the following “costs incurred, and payments made” during the 8-week period beginning on the date of the covered loan origination:
• Payroll costs (defined later)
• Interest on mortgage obligation (which shall not include any prepayment of or payment of principal)
• Rent
• Utility payments
The total amount for forgiveness must not exceed the original principal amount. The amount of loan forgiveness can be reduced if the recipient reduces the number of employees or reduces salaries during the 8 weeks following the origination date.
Payroll costs are defined as the sum of all payments for:
• Salaries, wages, commissions, or similar compensation (up to $100,000 annual compensation as prorated for the covered period)
• Payment of cash tip or equivalent
• Vacation, parental, family medical, or sick leave
• Severance payment
• Health care benefits, including insurance premiums
• Retirement benefits
• State or local tax assessed on said compensation
• Payments of wages, commission, or similar compensation to any independent contractors
that is $100,000 or less per year (as prorated for the covered period).
Payroll costs would not include:
• Federal income tax and payroll tax contributions
• Compensation of any employee whose principal residence is outside the US
• Qualified sick and family leave wages covered by tax credits under the Families First
Coronavirus Response Act