CARES Act – Response to Covid19

There have been a lot of developments with the information changing daily regarding the CARES Act that was passed last week which is intended to help individuals and businesses get through this challenging time period. While not comprehensive, the below information is meant to focus on the items that will likely impact you the most. We are actively reviewing the impact some of the changes have on all of our clients and will reach out if we believe action should be taken. That said, we are not always aware of the latest in your life, if after reviewing the below information you feel something may be applicable to you, please do not hesitate to reach out as it may require expedient action.

Over the last few weeks, there were actually three pieces of legislation that were passed:

1.   Coronavirus Preparedness and Response Supplemental Appropriations Act – Signed into law on March 6th, it provides roughly $8.3 billion in emergency funding for research and development of medical supplies, health care preparedness, public health funding, vaccines, etc..

2.   Families First Coronavirus Response Act – Signed into law March 18th, estimated cost of $104 billion to provide paid leave, free coronavirus testing, support strong unemployment benefits, protects front-line health workers, and provide funding to states due to economic consequences of the pandemic, as well as other provisions.

3.   Coronavirus Aid, Relief, and Economic Security Act (CARES Act) – signed into law March 27th, estimated cost $2 trillion, this is the broadest reaching of the three pieces of legislation which I have broken down into two sections, business and non-business related:

Business-related items (many of these provisions have been expanded to include self-employed, 1099/contract employment and sole proprietors), if you have a business, it likely makes sense to consider and/or apply as soon as possible for one or both loan programs, I am anticipating a high demand as well as potential funding limits unless additional government relief is provided:

  • Economic Injury Disaster Loan (EIDL)
    • For any small business that has fewer than 500 employees in all 50 states. Self-employed individuals and non-profits are also eligible for this program
    • Normally SBA (federal Small Business Administration) loans are very difficult to get, but their EIDL program has fewer rules and documentation requirements
    • You are meant to show economic hardship, if awarded, the loan amount is for up to $2 million, a very low interest rate and the potential to pay back the loan over 30 years
    • In addition, the EIDL allows for the potential of a $10,000 emergency grant to be issued for anyone who applies for an EIDL. The $10,000 emergency grant is given to business owners within three days (however not guaranteed) of their application, and they’re allowed to keep that money even if they are not ultimately approved for the loan
    • The application is relatively straight forward and should only take 15 minutes:


  • Paycheck Protection Program (PPP) – this program has the potential to provide significant relief
    • For any small business with fewer than 500 employees (includes sole proprietorships, independent contractors and self-employed persons), private non-profit organization or 501(c)(19) veterans organizations affected by coronavirus/COVID-19
    • A federal loan from the SBA (Small Business Administration) that helps businesses cover their payroll costs to keep their workforce employed during the Coronavirus (COVID-19) crisis
    • The loan amount is based on 2.5x the business average monthly payroll
    • The loan will be partly or entirely forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (at least 75% of the forgiven amount must have been used for payroll) over the 8 weeks immediately after receiving these funds. This means it’s possible the entire amount of the loan will be forgiven
    • Any portion not forgiven will have payments deferred for at least six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees
    • Target date that applications will be available is April 3, 2020. You must go through an SBA-approved lender, the application will likely be online only, you should start with whoever you have an existing business banking relationship with otherwise:
    • More information from the SBA:


  • Payroll Programs – There are some additional payroll programs that may be of benefit if you do not pursue the EIDL or PPP

Non-business items:

  • Unemployment insurance coverage is now earlier (by a week), longer (by 13 weeks), and greater (by $600/week). This is also potentially available to self-employed, sole proprietors, and independent contractors. If you have been impacted, you should consider this as an option in addition to the loan programs noted above
  • One-time “Recovery Rebate”
    • Payment will arrive in May at the earliest
    • Single people with up to $75,000 in adjusted gross income in 2019 will receive a one-time payment of $1,200
    • Married couples with adjusted gross income up to $150,000 in 2019 will get a one-time payment of $2,400
    • If you have kids age 16 and under, you’ll get an extra $500 per qualified child
      • For single or married incomes that are above the AGI, a phase out of the payment will reduce the payment before offsetting the payment entirely (this phase out limit is extended for those with children per the above)
    • If your 2019 income is too high, but your 2018 income meets the cutoff, then delay filing your 2019 return until the new deadline: July 15, 2020
    • If your 2019 income meets the cutoff, but your 2018 income was too high, it’s possible if you file your 2019 ASAP, they may be able to consider your 2019 income instead
  • Required Minimum Distributions (RMDs) waived for 2020 (including on inherited IRAs). Many receive distributions from IRA’s for income needs, but it’s possible we may be able to stop or re-pay these contributions or consider Roth Conversions
  • Charitable contribution changes:
    • Above-the-line deduction (i.e. you don’t have to itemize) for up to $300 of charitable gifts (this is a permanent change)
    • 50% AGI limit on cash charitable contributions suspended for 2020 (corporate 10% limit increased to 25%)
  • Loans/withdrawals from retirement plans:
    • 10% early withdrawal penalty waived on withdrawals up to $100,000 for “corona-related purposes”
    • Income attributable to such distributions would be subject to tax over three years
    • Funds may also be re-contributed within three years (not sure how that will interact with the previous point) “without regard to that year’s cap on contributions”
  • Student Loans:
    • Employers can contribute up to $5,250 annually toward an employee’s student loans and it is not included in the employee’s income (2020 only – for now, otherwise why specify “annually”)
    • Principal and interest payments on all federal student loans waived through Sept. 30th (and interest doesn’t accrue)
    • Collection of federal student loan debt is suspended

While your CPA is probably the primary contact for many of these issues, please let me know if you have any questions or if there is something I can assist with.