The Coronavirus Aid, Relief, and Economic Security (CARES) Act; What Does it Mean for Individuals and Businesses?

The CARES Act is a government relief bill passed on March 27, 2020, to help individuals, families, and businesses during the economic struggles from the COVID-19 pandemic.

Let’s try to break it down so people and businesses in Wisconsin know what to expect.

How the CARES Act Helps Individuals:

  • Direct Payments

The CARES Act provides for a $1,200 stimulus check to eligible adults who earn up to $75,000. Couples who earn up to $150,000 will receive $2,400. (For more on this, see here.

Your annual income will be based off of your 2019 Adjusted Gross Income (or your 2018 Adjusted Gross Income if you haven’t filed your 2019 tax return). Families who are eligible will receive an additional $500 for each child under age 17.

If the IRS has your bank information from previous tax filings, qualifying individuals and families should expect a direct deposit after April 16, 2020. The amount individuals receive declines after $75,000 of income and after $150,000 for couples.

Individuals who make over $99,000, and couples who make over $198,000 combined income, will not receive a stimulus check. If you made too much in 2018 or 2019 (whichever taxes you filed most recently) to qualify, but your 2020 income qualifies you for the rebate, you are allowed to claim it as a credit on your 2020 tax return.

For more information, visit: https://www.irs.gov/coronavirus

  • Enhanced Unemployment Insurance

The CARES Act expands the scope of individuals who are eligible for unemployment benefits. Included are individuals who are furloughed or out of work as a direct result of COVID-19, self-employed or gig workers, and those who have exhausted existing state and federal unemployment benefit provisions.

The only individuals excluded from coverage are those who have the ability to telework with pay, and those who are receiving paid sick leave or other paid benefits.

The CARES Act expands the definition of a “covered employee” as anyone who self certifies that they are able and available to work but are unemployed due to a variety of COVID-19 qualifying factors. Many of these circumstances are beyond what would qualify for standard unemployment under most state laws.

The CARES Act provides an increase of $600 per week in addition to the amounts usually available for unemployment under state law. The Act also extends unemployment compensation benefits, otherwise available in most states, from 26 weeks to 39 weeks for the period beginning on January 27, 2020, and ending on December 31, 2020.

  • Forbearance of Mortgages

The CARES Act prohibits foreclosures on all federally-backed mortgages for a 60-day period beginning on March 18, 2020. Holders of federally backed mortgages can request forbearance if they have experienced financial hardship related to COVID-19.

If approved by the bank, the borrower won’t have to pay the mortgage for 180 days, and the bank cannot impose any penalties or other fees.

Applicable mortgages include, but are not limited to, those purchased by Fannie Mae and Freddie Mac, insured by HUD, VA, or USDA, or directly made by USDA.

For Wisconsin-specific temporary bans on foreclosures and evictions, see here.

  • Temporary Suspension on Eviction Filings

Beginning on the date of enactment, landlords are prohibited from commencing an eviction action of a rental unit and from charging fees, penalties, or other charges to a tenant related to such nonpayment of rent, where the landlord’s mortgage on that property is insured, guaranteed, supplemented, protected, or assisted in any way by HUD, Fannie Mae, Freddie Mac, the rural housing voucher program, or the Violence Against Women Act of 1994.

  • Use of Retirement Funds

The bill waives the 10% early withdrawal penalty for distributions up to $100,000 for coronavirus-related purposes, retroactive to January 1, 2020. Withdrawals are still taxed, but taxes are spread over three (3) years, or the taxpayer has the 3-year period to roll it back over.

CARES Act Benefits for Businesses:

  • Employee Retention Payroll Tax Credit

The CARES Act provides a refundable tax credit against employment taxes paid by eligible employers -- in an amount equal to 50% of the first $10,000 of “qualified wages” paid to employees.

An employer is eligible for the payroll tax credit if, during any calendar quarter of 2020, it either has:

  • operations fully or partially suspended due to a governmental order related to COVID-19, or;
  • a decline in gross receipts of more than 50% compared to the same quarter of the prior year.

Since this is a refundable tax credit, if the amount subject to the credit would otherwise exceed the applicable amount of employment taxes payable by the employer, then the excess amount will be treated as an overpayment subject to a tax refund.

For employers with more than 100 full-time employees, “qualified wages” only covers wages paid to those employees who are not providing services due to a COVID-19-related impact, as described above.

For employers with 100 or fewer full-time employees, “qualified wages” covers wages paid to all employees of the employer during any applicable quarter in which a COVID-19-related impact occurs, as described above, including employees who are continuing to provide services to the employer.

NOTE: This credit is not available to businesses that receive a loan under the Paycheck Protection Program (PPP). The PPP is a financial assistance program under the CARES Act providing loans of up to $10 million to offset certain payroll costs for employers with fewer than 500 employees. Read more here about the PPP.

  • Deferral of Employer Payroll Taxes

The CARES Act provides that employers and self-employed individuals may defer payment of the employer’s share of payroll taxes owed on wages paid for the period ending December 31, 2020.

Such deferred taxes are due in two installments: 50% by December 31, 2021, and 50% by December 31, 2022.

This payroll tax deferral applies to all employers, with no requirement to show any specific COVID-19-related impact.

Note, however, the deferral is not available to any business that receives loan forgiveness with respect to the PPPP.

  • Paycheck Protection Program

For information on the Paycheck Protection Program, visit here.

Lenders may start processing loans on April 3, 2020. Visit this link to start the application process.

Contact Murphy Desmond for help with processes related to the CARES Act

Murphy Desmond lawyers are available to help you navigate issues related to the CARES Act. Benefits included could affect your business, estate planning, family matters, and more. Please email us at email@murphydesmond.com or call us at 608.257.7181.

Published April 3, 2020

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