Late Wednesday night, the Senate passed in a 96-0 vote the $2 trillion Coronavirus Aid Relief, and Economic Recovery Act (Cares Act).
Recovery Rebates for Individuals
- Recovery rebate for each taxpayer of $1,200 ($2,400 for joint returns).
- Plus $500 for every qualifying child.
- Rebates are means tested and begin phasing out after $75,000 adjusted gross income (At single), $112,500, (HOH), and $150,000 (MFJ).
- The rebate amount is reduced by $5 for each $100 a taxpayer’s income exceeds the phase threshold and completely phased out at $99,000/$198,000 (single/MFJ).
- No payment without proper tax identifications numbers.
- IRS will base these amount on the taxpayer’s 2019 tax return
- 2018 tax return if 2019 not yet filed
- If no filing for either year, then based on information provided by Form SSA-1099 or RRB-2019 Social Security Benefit Statement
- The Department of Treasury is required to conduct a public awareness campaign.
Special Rules for Use of Retirement Funds
- Waiver for the 10-percent early withdrawal penalty for distributions up to $100,000.
- Coronavirus-related distributions may be
- Repaid any time during the three years from distribution.
- Included in gross income ratably over three-taxable-year period.
- Loan limit increased from $50,000 to $100,000.
Delay of payment of Employer Payroll Taxes
- Corporations may postpone employer payroll taxes.
- 50 percent of social security taxes for the self-employed may be postponed.
- 50 percent of deferred taxes are due by December 31, 2021; the remainder due by December 3.
- The Social Security trust funds are held harmless under the provision.
Modifications for Net Operating Losses
- Temporarily removes the taxable income limitation to allow a net operating loss (NOL) to fully offset income.
- Losses from 2018, 2019, or 2020 may be carried back five years.
Modifications of Limitation on Losses for Taxpayers Other than Corporations
- The provision modifies the loss limitation applicable to pass-through businesses and sole proprietors they can benefit from the NOL carryback rules.