Warburton Capital were early adopters of the ‘Shelter In Place’ strategy and
have been working from our homes for the past 25 days.
We are sad to
report that we haven’t seen any of our buddies face-to-face – We miss the
interaction – however, we have enjoyed dozens of Video Meetings along with
phone calls, emails and text messages!
Please keep the interaction alive and reach out at any time.
topics of buddy conversations have been “the market decline”, “The
Novel Coronavirus” and “The Coronavirus Aid, Relief and Economic
Security Act – aka The CARES Act”.
With much of the country in self-isolation, perhaps you’ve
got time to read the entire H.R. 748 Coronavirus
Aid, Relief, and Economic Security Act, or CARES Act?
If you’d prefer, here is a summary of many of the key provisions
that may apply to you.
Direct Payments/Recovery Rebates: Most
Americans can expect to receive rebates from Uncle Sam. Depending on your
household income, expect up to $1,200 per adult and $500 per dependent child. To
calculate your payment, the Federal government will look at your 2019 Adjusted
Gross Income (AGI) if it’s available, or your 2018 AGI if it’s not. However,
you’ll receive an extra 2020 tax credit if your 2020 AGI ends up lower than the
figure used to calculate your rebate. This Nerd’s
Eye View illustration offers a great overview:
Various Healthcare-Related Incentives: For
example, certain over-the-counter medical expenses previously disallowed under
some healthcare plans now qualify for coverage. Also, Medicare restrictions
have been relaxed for covering telehealth and other services (such as COVID-19
vaccinations, once they’re available). Other details apply.
For Retirees (and
Retirement Account Beneficiaries):
RMD Relief: Required Minimum
Distributions (RMDs) go on a holiday in 2020 for retirees, as well as beneficiaries
with inherited retirement accounts. If you’ve not yet taken your 2020
RMD, you do not have to! If you have, please be in touch with us to
explore potential solutions.
For Charitable Donors:
“Above-The-Line” Charitable Deductions:
Deduct up to $300 in 2020 qualified charitable contributions (excluding Donor
Advised Funds), even if you are taking a standard deduction.
Donate All Of Your 2020 AGI: You can effectively
eliminate 2020 taxes owed, and then some, by donating up to, or beyond your AGI.
If you donate more than your AGI, you can carry forward the excess up to 5
years. Donor Advised Fund contributions are excluded.
Paycheck Protection Program (PPP) is making loans available for qualified businesses
and not-for-profits (typically under 500 employees), sole proprietors, and
independent contractors. Loans for up to 2.5x monthly payroll, up to $10
million, 2-year maturity, interest rate 1%. Payments are deferred and, if
certain employment retention and other requirements are met, the loan may be
Economic Injury Disaster Loans (EIDLs) of up to $2 million to qualified small
businesses and non-profits, “to help overcome the temporary loss of revenue
they are experiencing.” Interest rates are under 4%, with potential repayment
terms of up to 30 years. Applicants also are eligible for an advance on
the loan of up to $10,000. The advance will not need to be repaid, even
if the loan is denied.
Payroll Tax Credits And Deferrals: For
qualified businesses who are not taking a loan.
Employee Retention Credit: An additional employee
retention credit (as a payroll tax credit), “equal to 50 percent of the
qualified wages with respect to each employee of such employer for such
calendar quarter.” Excludes businesses receiving PPP loans, and may exclude
those who have taken the EIDL loans.
Net Operating Loss Rules Relaxed: Carry back
2018–2020 losses up to five years, on up to 100% of taxable income from these
Immediate Expensing For Qualified
Improvements: Section 168 of the Internal Revenue Code of 1986 is amended
to allow immediate expensing rather than multi-year depreciation.
Dollars Set Aside For Industry-Specific
Relief: Please be in touch for a more detailed discussion if your entity
may be eligible for industry-specific relief (e.g., airlines, hospitals and
Retirement Plan Loans And Distributions:
Maximum amount increased to $100,000 on up to the entire vested amount for
coronavirus-related loans. Delay repayment up to a year for loans taken from
March 27–year-end 2020. Distributions described above in In General.
Paid Sick Leave: Paid sick leave benefits
for COVID-19 victims are described in the separate, March 18 H.R.
6201 Families First Coronavirus Response
Act, and are above and beyond any benefits received through the CARES Act.
Whether in your role as an employer or an employee, we’re happy to discuss the
details with you upon request.
For Funding Defined Benefit Plans: Due date for 2020 funding is extended to
Jan. 1, 2021. Also, the funding percentage (AFTAP) can be calculated based on your
For Facilitating Pre-Retirement Plan Distributions And Expanded Loans: As
described above for Employees/Plan
Participants, employers “may rely on an employee’s certification that
the employee satisfies the conditions” to be eligible for relief. The
participant is required to self-certify in writing that they or a direct
dependent have been diagnosed, or they have been financially impacted by the
pandemic. No additional evidence (such as a doctor’s release) is required.
Extension For Filing Form 5500: While the Dept. of Labor (DOL) has not yet granted
an extension, the CARES Act permits the DOL to postpone this filing deadline.
Student Loan Pay-Down Compensation: Through year-end, employers can help
employees pay off current educational expenses and/or student loan
balances, and exclude up to $5,250 of either kind of payment from their
Increased Unemployment Compensation:
Federal funding increases standard unemployment compensation by $600/week, and
coverage is extended 13 weeks.
Federal Funding Covers First Week Of
Unemployment: The one-week waiting period to start collecting benefits is
Pandemic Unemployment Assistance:
Unemployment coverage is extended to self-employed individuals for up to 39
weeks. Plus, the Act offers incentives for states to establish “short-time
compensation programs” for semi-employed individuals.
Student Loan Payments Deferred To Sept. 30,
2020: No interest will accrue
either. Important: Voluntary payments will continue unless you explicitly
pause them. Plus, the deferral period will still count toward any loan
forgiveness program you’re in. So, be sure to pause payments if this applies to
you, lest you pay on debt that will ultimately be forgiven.
Delinquent Debt Collection Suspended Through Sept.
30, 2020: Including wage, tax refund, and other Federal benefit
Employer-Paid Student Loan Repayments
Excluded From 2020 Income: From the date of the CARES Act enactment through
year-end, your employer can pay up to $5,250 toward your student debt or your
current education without it counting as taxable income to you.
Pell Grant Relief: There are several
clauses that ease Pell Grant limits, while not eliminating them. It would be
best if we go over these with you in person if they may apply to you.
A Break For “Non-Designated” Beneficiaries:
2020 can be ignored when applying the 5-year rule for “non-designated”
beneficiaries with inherited retirement accounts. The 5-Year Rule effectively
ends up becoming a 6-Year Rule for current non-designated beneficiaries.
There. You’re now
familiar with much of the critical content of the CARES Act!
Whew – that’s a ton of information.
That said, given the complexities involved and unprecedented
current conditions, there will undoubtedly be updates, clarifications,
additions, system glitches, and other adjustments to these summary points. The
results could leave a wide gap between intention and reality.
I do want to stress that here at Warburton Capital we are
neither CPA’s nor do we practice law.
your accountant, and/or estate planning attorney on any
details specific to you.
In closing, we’ve
enjoyed a lot of interaction with our buddies online and would be pleased to
meet with you online as well – or – phone, email or text if you prefer.
will find you and yours healthy, sheltered in place and doing your best to
defeat the coronavirus, I remain
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