I spent the weekend cooped up with a case of beer and guides to the tax law changes from the stimulus package that just passed Congress and was signed by President Trump. I expect that the fiscal fallout from the crisis will last a decade or more. Here is a pretty good summary of the tax law changes. Trying to cover it all would be impossible – or would have required two cases of beer. Some sacrifices I will not make for you…
1. Most well known and anticipated is $1,200 checks for individuals, $2,400 for joint filers with an additional $500 per qualifying rug rat (child). Phases out for individuals with AGI $75,000 to $99,000. For joint filers, $150,000 to $198,000. It will be paid based on 2018 tax returns or 2019, if filed, and will be reconciled to 2020 tax returns. S&K CPAs can help you figure out what you qualify if you have any questions.
2. The 10% penalty for early retirement distributions is waived for distributions up to $100,000. I read somewhere that you can pay back the money over 2020 – 2021 and not pay taxes, but I can’t find where I read that initially. That may not have made the final bill.
3. Employers can delay the payment of the employer share of Social Security for the rest of the year and pay it back over 2021 – 2022.
4. The maximum for 401(k) loans has been doubled to $100,000. The loan limit of 50% of plan balance has also been waived.
5. Required minimum distributions for IRAs and 401(k) plans have been waived for 2020.
6. A $300 “above the line” charitable contribution has been established. The key to this is that people don’t have to itemize deductions to get the deduction. So please be generous to those in need.
7. Net operating losses (business) for 2018, 2019, and 2020 can be carried back 5 years. The 2018 tax act had previously eliminated carry backs. We’ll be busy the rest of the year. There goes my two month beauty spa vacation. If this part confuses you, we can help.
8. There is now a 50% refundable payroll tax credit on wages paid during the crisis up to $10,000 per employee. Eligible firms have had a 50% or more decrease in revenue versus the same quarter last year.
That’s the main tax stuff. There are a lot of small changes that don’t affect any or very many of our clients. Here are some other stimulus bill items to note. There are too many details to the provisions to cover these in much depth.
1. New funding through the SBA 704(A) loan program. You can get the details through your bank. Banks beyond the high volume SBA banks will be able to participate.
. a. Loans for payroll, rent, and utilities may be forgiven.
. b. Banks don’t yet have application information.
. c. The SBA technically has 30 days to get the logistics working. I hope they get moving a lot faster than that. Maybe a few cases of beer would help.
2. Expanded unemployment benefits.
. a. Covers the self-employed as well.
. b. Longer benefit period and bigger payments.
3. Credits for mandatory sick leave coverage.
4. Credits for mandatory family leave to care for a sick loved one.
There are also benefits tied to hard hit industries such as transportation. There is so much in this bill, my head hurt.
We’ll give you updates as we hear more. My best guidance for businesses is to apply for everything. Start with your bank and find out when they’ll be up and running with the new SBA money. Then complete the SBA disaster loan application. I wish I had all the answers. I don’t even have all the questions.
If you need help in any way we in which we can assist in these uncertain times, please contact us at (703) 818-8284 or e-mail email@example.com.
Thanks for reading!
Frank Stitely, CPA, CVA