Wolters Kluwer experts available to discuss potential tax implications of key provisions in the legislation enacted in response to the Coronavirus COVID-19.
March 27, the US Congress passed its third and by far the largest piece of legislation in response to the Coronavirus COVID-19 pandemic, and the President has signed it into law. The “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act) includes relief and economic stimulus for individuals and businesses and is the most expensive piece of legislation ever enacted by Congress.
To help tax and accounting professionals better understand the tax implications of this historic legislation, Wolters Kluwer Tax & Accounting has issued the “CARES Act” tax briefing highlighting key provisions impacting business and individual taxpayers.
The recovery rebate checks
One of the key provisions for individuals is recovery rebate checks of up to $1,200 for individuals and $2,400 for joint filers, plus $500 for each child under age 17. These are advances on a tax credit that can be claimed on the 2020 tax return but based on the 2018 or 2019 tax return. The recovery rebate checks start to phase-out with adjusted gross income (AGI) of $75,000 for single taxpayers, $112,500 for head of household taxpayers, and $150,000 for joint filers. They phase out at a rate of five percent of the AGI over those sums. If none of these taxpayers had qualifying children, the phase-out would be complete at $99,000 for single filers, $136,500 for head-of-household filers, and $199,000 for joint filers. A lower AGI and each additional qualifying child can add to the total:
- Each child can qualify an additional $10,000 of AGI for a rebate
- The rebate check for a typical family of four would not be phased-out completely until AGI reaches $218,000
- Arranging for the IRS to use the 2018 or 2019 tax return with the lowest AGI may increase your check
- Arranging for the IRS to use your 2018 tax return when you have more children under age 17 may increase your check
- Having a direct deposit account on file with the IRS can get you your check faster
- Filing a 2019 tax return even if you were not required to file a 2018 or 2019 tax return can qualify you for a check
- The Senate Finance Committee has stated that if you get a larger rebate than the credit you are entitled to on your 2020 tax return, you do not have to pay it back
Additional provisions
The legislation also includes the following additional tax provisions.
Individuals
- Penalty waiver for withdrawals from retirement accounts up to $100,000
- Waiver of required minimum distribution rules for certain retirement plans and accounts
- Partial above-the-line deduction for certain charitable contributions
- Modification of limits on charitable contributions
- Exclusion for certain employer payments of student loans
Businesses
- Exclusion for certain forgiven loans
- Employee retention credit
- Delay of payment of employer payroll taxes
- Modification of limit on losses for taxpayers other than corporations
- Modification of credit for prior year minimum tax liability of corporations
- Modifications of limitation on business interest deduction
- Technical amendment regarding Qualified Improvement Property
- Temporary exception from excise tax for alcohol used to produce hand sanitizer
- Suspension of certain aviation excise taxes
Wolters Kluwer Tax & Accounting tax expert and Principal Analyst Mark Luscombe, JD, LL.M, CPA, can discuss these and other legislative tax actions taken in response to the Coronavirus COVID-19.
Please contact Wolters Kluwer Tax & Accounting to arrange interviews with Mark Luscombe or other federal and state tax experts on this or any other tax-related topic.
