Here is an overview of the TAX provisions in the Families First Coronavirus Response Act (FFCRA) and the CARES Act that were signed into law this month.
These bills were massive so it will take weeks for the Administration to provide guidance and procedures on each of these items. As updates come out, I will provide more information in this blog. Below is a high-level summary of the provisions.
THIS IS NOT TAX ADVICE. You must contact your tax advisor to understand what each provision means to YOU specifically.
General Provisions
- 2020 Recovery Rebates (§2201) – payment of up to $2400 (joint filers) or $1200 (all other filers) for eligible taxpayers (see separate blog post).
- 2020 Required Minimum Distribution (RMD) (§2203) – if you have a 2020 RMD requirement, you do not have to take your RMD in 2020.
- Charitable Contributions (§2204) – if you take the standard deduction, you will be allowed to deduct an additional $300 as an adjustment to income for qualifying cash donations. Permanent change for 2020 and beyond.
- Retirement Distributions (§2202) – Coronavirus-related distributions up to $100k are not subject to 10% penalty, taxpayer can pay it back to avoid a taxable distribution if the plan allows, taxpayer can recognize the income in equal amounts in 2020, 2021 and 2022.
- Student Loan Payments by Employer (§2206) – employees can exclude from gross income payments up to $5250 from an employer to pay the principal or interest on a student loan.
Employer Provisions
- Employee Retention Credit (§2301) – eligible employers allowed a 50% credit of qualified wages if your business is fully or partially suspended but you continue to pay your employees.
- Payroll Tax Payment Delay (§2302) – for employer payroll taxes incurred between date of enactment and before 1/1/2021, 50% are due by 12/31/2021 and 50% are due by 12/31/20200. Does not apply if taxpayer gets loan forgiveness under the Act.
- Paid Sick Leave Payroll Tax Credit (FFCRA) – employer receives a payroll tax credit for qualified sick leave wages paid to employees impacted by the Coronavirus. Employer can reduce federal tax deposits by the anticipated credit amount to get immediate cash.
- Paid Family Leave Payroll Tax Credit (FFCRA) – employer receives a payroll tax credit for qualified family leave wages paid to employees impacted by the Coronavirus. Employer can reduce federal tax deposits by the anticipated credit amount to get immediate cash.
- Qualified Disaster Relief Payments (IRC §139) – qualifying disaster relief payments from an employer to employee are tax-deductible to the employer and fully excluded from income tax and payroll tax.
Self-Employed Provisions
- Paid Sick Leave Credit and Paid Family Leave Credit (FFCRA)- applies to self-employed taxpayers if they would have qualified for the leave if they had been employed by someone else.
- SE Tax Payment Delay (§2302)– applies to self-employment tax payments: 50% are due in 2020, 25% in 2021 and 25% due in 2022. Does not apply if taxpayer gets loan forgiveness under the Act.