March 26, 2020
In a historic vote, the US Senate has approved the largest U.S. stimulus package in our history. The bill will provide aid for devastating economic effects caused by the coronavirus (COVID-19).
The huge $2-trillion stimulus bill is 880 pages and details will continue to be understood as the days and weeks unfold. The bill is intended to directly help American taxpayers, businesses and hospitals. Note that the House has not yet voted on the bill but is expected to pass it on Friday so that President Trump can sign it into action.
Over the coming hours and days, we will learn more regarding this legislation. In the meantime, here are major highlights:
Individual/Family Direct Stimulus Payment
(If you have an extension or have not filed your 2019 taxes, use your 2018 1040 Line 8B to identify your adjusted gross income.)
- Individuals with reported adjusted gross income of $75,000 or less, would receive a $1,200 payment in the upcoming weeks.
- Married couples with no children who reported adjusted gross income of $150,000 or less, would receive a one-time payment of $2,400 in the upcoming weeks.
- Individuals with a reported adjusted gross income of up to $99,000 and married couples who reported up to $198,000, will have gradually decreased amounts in their stimulus payment. Above these amounts, no payment will be received.
- Per child: an additional $500 payment will be made.
Small Business Loans/Loan Guarantees
The bill includes $349 billion in federally guaranteed small business loans.
Small businesses (under 500 employees), independent contractors, sole proprietors and those self-employed would have expanded eligibility to receive these loans of up to $10 million. Loan funds could be used for payroll, paid sick, medical or family leave, group health care benefit costs, mortgage or rent, utilities, or other debt payments. Loans could be eligible for forgiveness if they meet specific criteria.
If you are unemployed, partially unemployed or cannot work for many various COVID-related reasons, you might now qualify for unemployment benefits. The bill provides a wide expansion of who qualifies to include those self-employed and part-time workers. The bill adds another 13 weeks of unemployment benefits to the number that each state allows. It also pays $600/week for up to four months, covering unemployment weeks through July 31, 2020. The state of North Carolina currently allows a weekly maximum of $350.
Special rules for coronavirus-related distributions from certain retirement plans are included in the bill. Distributions up to $100,000 would not receive 10% withdrawal penalties. Income tax attributable to the withdrawals would be allowed three years to pay.
Required Minimum Distributions (RMDs)
RMDs for 2020 are waived in this bill.
Payroll Tax Credit
The bill allows employers who maintain their employees during the COVID crisis to be eligible for a payroll tax credit. Per employee, there is allowance for a 50% credit to offset the employer’s Social Security portion, up to $10,000 of the employee’s qualified wages.
For employers with more than 100 full-time employees, qualified wages are wages paid when they are not providing services due to the COVID-19. For eligible employers with fewer than 100 full-time employees, all employee wages qualify for this credit.
Payroll taxes are extended in this bill, including the employer portion of self-employment taxes. The tax may be paid over two years – half paid by December 31, 2021 and the remaining portion by December 31, 2022. This includes corporate payroll taxes.
Net Operating Losses (NOLs)
NOLS will be modified for individuals and businesses, with possible 5-year carry backs for NOLs beginning in 2018 – 2020.
Landlords will be banned from filing evictions on many renters. Some foreclosures will be banned and there are additional options now for federally backed mortgage loans.
The bill includes $130 billion to assist hospitals in acquiring medical masks, ventilators and hospital beds.
To aid state and local governments dealing with COVID-related effects, $150 billion is allotted in the stimulus package.
Charitable Contribution Limits
The bill allows for temporary adjustments for cash donations. Charitable contributions up to $300 do not have to be itemized; they will be considered above-the-line deductions.
The 50% adjusted gross income limitation is suspended for 2020. Corporations are now temporarily allowed 25% of taxable income. Also, specifically there is an increase from 15% to 25% on the limitation of deductions for contributions to food inventory.
Again, this legislation will not become law until it is approved by the House and signed by the President. JPS will provide greater details as they are known.
Stay updated with JPS. And, as always, feel free to contact your JPS team to assist you.
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Johnson Price Sprinkle PA is a 60+ year old accounting firm providing small to middle market businesses with tax, business consulting, audit, and technology solution services. With offices in Asheville, Boone, and Marion, NC, our CPAs and JPS team strive to provide personal service alongside technical expertise resulting in our clients’ long-term financial success. We also invest time and energy in our community, taking pride in doing what we can to make Western North Carolina a better place. JPS Mission: To Be Greater by positively impacting our Clients, People, Community and Profession.