The CARES Act Overview Part 1: Tax Benefits, Unemployment, and Health Care
This past Friday Congress passed the CARES Act which includes a number of individual, family and small business provisions. We are evaluating the legislation, so we can provide timely advice to our clients. The CARES Act includes over $350B of benefits to small business and self-employed individuals, as well as one-time recovery rebate payments to taxpayers, expanded unemployment, and more. The magnitude of the relief package requires careful study and quick action – there is no guarantee of how long the money will last.
The CARES Act Tax Benefits:
One time “Recovery Rebates”
-For Individuals and Families (subject to income limitations) direct payments to American citizens. Certain taxpayers will receive $1,200 if they filed single or $2,400 for married couples with an additional $500 per child. There is an income threshold for direct payments which is $75,000 or under for those who filed single, $150,000 or under for those who are married and filed jointly and $112,500 for head of household.
-If your AGI is above those numbers, the payments begin to phase out.
-If your AGI was lower in 2018, postpone filing your 2019 taxes as that could reduce your payment.
Tax Return Deadlines
-Tax return deadlines (for income tax, estate tax, and gift tax returns) are delayed from 4/15 to 7/15
-Payments due for those returns are delayed to 7/15 as well.
-Estimated income tax payments that would have been due on 4/15 are also delayed to 7/15 (but the 6/15 estimated tax payment is not delayed).
-Prior year retirement plan and HSA contributions have a 7/15 deadline now too.
-Most, but not all, states have moved their deadlines to match.
Expanded Unemployment Benefits
-The CARES Act provides an additional $250 billion for extended unemployment insurance programs. It expands eligibility while also providing qualified workers with an additional $600 per week for 4 months. Unemployment benefits will also be extended through December 31, 2020.
-Pandemic Unemployment Insurance: Who does this apply to? The self-employed, contractors, and gig economy workers.
Health Care
FSA/HAS/MSA accounts can now be used to purchase over-the-counter (not just prescription) drugs and medicines as well as “menstrual care products.”
Legislation Timeline
There have been three pieces of legislation passed in pretty short order:
Coronavirus Preparedness and Response Supplemental Appropriations Act was signed into law on March 6th and provide an estimated $8.3 billion in emergency funding for research and development of vaccines, therapeutics and diagnostics, public health funding, and medical supplies, health-care preparedness, etc.
Families First Coronavirus Response Act was signed into law on March 18th and, quoting from the White House statement, “provides paid leave, establishes free coronavirus testing, supports strong unemployment benefits, expands food assistance for vulnerable children and families, protects front-line health workers, and provides additional funding to states for the ongoing economic consequences of the pandemic, among other provisions.” (Estimated to cost in the vicinity of $104 billion, but the CBO has not provided a firm number yet.)
Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law on March 27th and has a number of provisions that will be covered below. (Estimated to cost in the vicinity of $2 trillion, but again legislation is passing so quickly that there is no official estimate from the CBO yet.)
