April 07th, 2020

On March 27, 2020, President Trump signed an extensive $2 trillion piece of legislation called the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act” or the “Act”). This legislation addresses the severe impact of the coronavirus (COVID-19) pandemic.  The legislation provides specified conditions for:

- Loans and assistance to companies and state and local governments

- Low-interest and small business loans that can be partially forgiven

- Payments to individual taxpayers

- Additional unemployment benefits

- Suspension of certain federal student loan payments

- Financial hardship forbearance on federally backed mortgage loans

- Assistance to hospitals and veterans care

- Funding for national stockpile of pharmaceutical and medical supplies

- Tax relief provisions.


Individual Provisions

Individual Rebate Checks

The Act provides recovery credits for eligible individuals of up to $1,200 for single filers (and up to $2,400 for joint filers), plus a $500 credit per qualifying child. Rebates are subject to phase-out thresholds beginning at $75,000 of adjusted gross income (“AGI”) for single filers/$150,000 for joint filers.  Rebates are not available for single filers with AGI over $99,000 and over $198,000 for joint filers. AGI is generally based on 2019 return information (or 2018 information if a 2019 return has not yet been filed).

Retirement Plan Waivers
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The Act waives the 10% early withdrawal penalty tax (under IRC Sec. 72(t)) on early withdrawals up to $100,000 from a retirement plan or IRA for an individual who is diagnosed with COVID-19; whose spouse or dependent is diagnosed with COVID-19; who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care due to COVID-19, closing or reducing hours of a business owned or operated by the individual due to COVID-19; or other factors as determined by the Treasury Secretary. 
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Business Provisions

Paycheck Protection Program Loans

To help small businesses and their employees, the Act provides loans to small businesses. These loans apply to any business that employs less than 500 employees or, if applicable, the amount set by the Small Business Administration for the business industry.  For these loans, the definition of small business includes sole proprietorships and independent contractors. 
The maximum loan amount is 2.5 times the average monthly payroll costs incurred in the previous year ending on the date of the loan or $10 million. 

​Employee Retention Credit

The Act provides a refundable payroll tax credit for 50% of “qualified wages” paid or incurred by eligible employers to employees after March 12, 2020 and before January 1, 2021.  The credit can be claimed on a quarterly basis.  The credit is available to employers carrying on a trade or business during calendar year 2020 and whose (i) operations are fully or partially suspended due to a COVID-19 related shutdown order or (ii) gross receipts decline more than 50% as compared to the same calendar quarter in the prior year.  Tax-exempt organizations are eligible where their operations are fully or partially suspended due to COVID-19. 
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Delay of Payment of Employer Payroll Taxes

Employers and self-employed individuals are allowed to defer payment of Social Security (Old Age, Survivors, and Disability Insurance) taxes for the period from the date of enactment of the Act through December 31, 2020.  All of the employer portion of the Social Security tax and 50% of such taxes incurred by self-employed persons qualify for the deferral.  Half of the deferred tax is to be paid by December 31, 2021; the other half is to be paid by December 31, 2022.

Net Operating Losses

Under the Act, a net operating loss (“NOL”) arising in a tax year beginning in 2018, 2019 or 2020 can be carried back for five years.  It also allows for NOLs arising before January 1, 2021 to fully offset income. 


It is important to note that many of the provisions of the Act may require the filing of additional forms to amend previously filed tax returns and individuals and businesses will still need to take state and local tax considerations into account. Contact jason@bovellfinancial or (212) 332-1660 for questions about the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).
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Any questions otherwise contact [email protected] before I take off.