2020-14: More information on CARES Act provisions - Spidell

2020-14: More information on CARES Act provisions

In response to some of the questions we have received about stimulus payments and Payroll Protection loans, here is some additional information.

Stimulus payments

  • The payment is an advance payment of a 2020 tax credit;
  • The maximum credit is $1,200 per individual ($2,400 MFJ) plus $500 per qualifying child under 17 years old;
  • The credit is phased out by 5% ($5 for every $100 over the limit) for AGIs exceeding:
    • $150,000 for MFJ — phased out at $198,000 if there are no children;
    • $112,500 for HOH filers — phased out at $146,500 if the HOH has one child;
    • $75,000 for all other taxpayers — phased out at $99,000; and
    • For every child claimed, add an additional $10,000.
  • For people who have already filed their 2019 tax returns, the IRS will use this information to calculate the payment amount. For those who have not yet filed their return for 2019, the IRS will use information from their 2018 tax filing to calculate the payment. The stimulus payment will be deposited directly into the same banking account reflected on the return filed;
  • For taxpayers who did not provide direct deposit information, in the coming weeks the Treasury plans to develop a web-based portal for individuals to provide their banking information to the IRS online so that individuals can receive payments immediately as opposed to checks in the mail; and
  • For individuals who did not file a 2018 or 2019 return, the IRS is developing a simplified process for them to file.

Here is a link to the IRS’s FAQs on these payments:


Payroll Protection loans

In addition to the tax provisions we previously reported, the CARES Act provides for Payroll Protection loans of up to $10 million to COVID-19 impacted businesses:

  • The loans are guaranteed 100% by the Small Business Administration (no personal guarantees or collateral required);
  • Businesses with 500 or fewer employees can borrow 2.5 times their average monthly payroll, up to a maximum of $10 million;
  • The loans may be forgiven for amounts used to cover basic operating expenses such as payroll costs, rent and mortgage, and utilities for up to eight weeks from the loan origination date;
  • Loan forgiveness will be reduced by reductions in employee compensation or layoffs of employees over the last year;
  • The canceled debt will not generate taxable income;
  • Businesses that take these loans will not qualify for the Employer Retention Credit;
  • Any loan amount that isn’t forgiven has a maximum term of 10 years and a maximum interest rate of 4%; and
  • At press time, the SBA had not provided information to banks on the loan process, but we expect that to happen soon.

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