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CARES Act Signed into Law – The Highlights You Should Know

March 28, 2020

This $2 trillion bill is meant to impact both individuals and businesses and contains significant tax-savings measures. It could affect prior tax years while also creating immediate cash flow.

The following is the summary presented by Michael Kitces and Jeffery Levine ( on March 27, 2020.  I aim to provide you the highlights that may help you in your personal life, business and that may help someone you know.  I am sure we will dive in deeper in the next a few weeks in terms of planning strategies and action plans to improve your financial situation.


Up to $100,000, made from IRAs, employer-sponsored retirement plans, or a combination both

Must be made in 2020

Must be because they:

  • Have been diagnosed with COVID-19
  • Have spouse/dependent diagnosed with COVID-19
  • Experience adverse financial consequences as a result of being quarantined, furloughed, being laid off, or having work hours reduced because of the disease, or
  • Are unable to work because they lack childcare as a result of the disease, or
  • Own a business that closed or operated under reduced hours because of the disease or
  • Meet some other reason that the IRS decides to say is ok.
Exempt from 10% early withdrawal penalty

Not subject to mandatory withholding from employer-sponsored retirement plan

Eligible to be repaid over 3 years

  • Effectively a roll back into the account

Still taxable but income may be spread evenly over 3 years (default option)

  • Unless 2020 is a low-income year and client doesn’t want to spread it out


  • Maximum loan is usually limited to $50,000 (or half your vested balance) and is now $100,000 and now up to 100% of the vested balance may be used.
  • Any payments on the plan loan otherwise owed may be delayed up to one year.


Required Minimum Distributions (RMDs) are suspended for 2020

  • Includes those who delayed their RMDs from 2019 (the year turned age 70 ½)
  • Includes IRAs and also employer-sponsored retirement plans

Also suspends RMDs that may have otherwise needed to be taken

  • Stretch IRA RMDs
  • 2020 ignored as a year for purposes of the 5-year rule
  • Inherited IRAs

What if RMDs were already taken in 2020?

It depends: If you have already taken it

  • 60-day rollover back into account, watch out for the one rollover per year rule
  • Rollover as a Coronavirus-Related Distribution if eligible
  • No option to roll back for beneficiary RMDs from inherited accounts.


“Qualified Charitable Contribution” is available for those who do not itemize

  • But only available for those who do not itemize and claim the standard deduction
  • Limited to $300, must be made in cash
  • Must go direct to a 501(c)(3) charity
  • Not to a donor-advised fund
  • Not to a 509(a)(3) supporting organization


Federal student loan payments deferred

  • No payments required until September 30, 2020
  • No interest will accrue during the interim
  • Will continue to count towards loan forgiveness programs
  • Required payments are suspended, but voluntary payments are not prohibited
  • Involuntary debt collections on Federal student loans also suspended.
  • YOU MUST STOP the payment yourself if you want to (not automatic)

Employers can exclude student loan repayments from compensation

  • Employers have through the end of the year to pay up to $5,250 for student debt purposes
  • Payments are excluded from employee income
  • Must still be coordinated with regular $5,250 limit for tax-free education reimbursements

Pell Grant & Subsidized Federal Loan Relief for Students Leaving School

  • Periods of enrollment will not include a semester not complete due to a qualifying emergency


Definition of Medical Expenses expanded

  • Specifically for HSAs, Archer MSAs and FSAs
  • Eligible medical expenses will now include over the counter medication
  • Also expanded to include menstrual care products

Other Notable changes

  • Medicare beneficiaries to receive no-cost COVID-19 vaccine (when available)
  • Part D recipients can request up to 90 day supply of medication
  • Telehealth services temporarily covered by HSA Eligible HDHP


Pandemic Unemployment Insurance

  • Unemployment compensation for those who don’t qualify for anything else – like self-employed individuals.  Will be eligible for up to 39 weeks of benefits.

Elimination of Waiting Period (typically a week)

  • Federal government will cover first week of unemployment

Bonus Check

  • Regular state unemployment benefit bumped by $600/week
  • Up to 4 months

Extension of Benefits

  • 13 extra weeks of unemployment insurance

Incentives for States to create Short-Time Compensation Programs

  • Federal government to pay 50%


Paycheck Protection Program:

A loan that is fully guaranteed by the Small Business Administration

  • Issued by SBA approved lender and others specially designated
  • Must be applied for by June 30, 2020
  • Maximum duration of 10 years

Eligibility (in general)

  • Less than 500 employees, or employee size standard under NAICS Code if larger
  • Good-faith certification that the loan is necessary due to the uncertainty of current economic conditions caused by COVID -19. Includes cost of qualified health care expenses allocable to wages
  • Maximum loan equals the lesser of $10 million or 2.5x average monthly payroll cost of previous year (excluding employee comp> $100,000)

Proceeds may be used for

  • Payroll costs
  • Group health insurance premiums and other healthcare costs
  • Salaries and/or commissions
  • Rent or Mortgage interest (excluding amounts pre-paid)
  • Utilities
  • Other business interest incurred prior to February 15, 2020

Forgivable portion of the loan equals 100% of amounts spent on the following items during the 8 week period following the issuance of the loan

  • Payroll costs, excluding prorated amounts for individuals with compensation greater than, $100,000
  • Rent pursuant to a lease in force before February 15, 2020
  • Electricity, gas, water, transportation, telephone, or internet access expenses for series which began before February 15, 2020
  • Group health insurance premiums and other healthcare costs.

But only if…

  • Same # of employees from February 15, 2020 through June 30, 2020
  • During either the same period in 2019 
  • January 1, 2020 until February 15, 2020
  • No employees with compensation under $100,000 have reductions of >25% compared to the most recent quarter

If you already laid off EE, if you hire them back quickly, this can be rectified.


Other benefits include

  • Discharged debt nontaxable
  • Maximum interest rate is 4%
  • Initial Payments will be deferred for 6 to 12 months


New credit against payroll taxes

  • 50% of wages paid to each employee up to a max of $10,000 of wages per person

Must qualify by either:

  • Having operations partially/fully suspended due to government-required suspension of operations
  • Have a quarter with <50% of revenues (not profit) from same quarter 2019

Will qualify to receive until earlier of

  • End of 2020
  • When suspended operations resume for the quarter, or when revenue >80% of same calendar quarter of 2019


Employers will be permitted to defer 2020 payroll taxes

  • 50% will be due on December 31, 2021
  • Remaining 50% will be due on December 31, 2022

Applies to self-employed individuals as well (only the ‘employer equivalent’ portion)


For many years, NOLs could only be carried back 2 years and forward up to 20 years. The TCJA changed those rules, beginning in 2018, to allow them to be carried forward indefinitely.

Now CARES Act allows NOLs to be carried back up to 5 years

  • Applies for 2018, 2019, 2020 NOLs
  • Accelerates a tax refund for current/immediate use
  • NOLs will now be able to offset 100% of taxable income (up from 80%)
  • Taxpayers who had losses suspended because of this provision in 2018 or 2019 should consider the potential benefits of filing an amended return.

Schedule a No-Obligation Discovery Call

Managing your wealth is a very personal subject, one we should discuss in a more personal setting.