The CARES Act is a comprehensive economic aid package passed by Congress in March 2020 to help Americans and businesses weather the financial impact of the COVID-19 pandemic. The Coronavirus Aid, Relief, and Economic Security (CARES) Act includes a number of programs designed to support individuals, alleviate financial hardship and stimulate economic recovery. So. let’s take a closer look at the key components of this historic stimulus package.
CARES Act provides direct payments
First, the CARES Act provides direct payments to most individuals and households. This includes one-time payments up to $1,200 for single taxpayers, as well as $2,400 for married couples filing jointly and an additional $500 per qualifying child under 17. The payments are phased out for higher income levels, but no one earning over $99,000 (or $198,000 for joint filers) is eligible.
The way it works is that the IRS will use information from your 2018 or 2019 tax return (whichever is most recent) to determine eligibility and payment amount. If you have already filed your taxes, they will use the information on your return. If you haven’t yet filed your taxes, you can use the IRS Non-Filers Tool to provide the necessary information and receive payment.
CARES Act expands Unemployment BenefitsÂÂ
The CARES Act also includes an expansion of unemployment benefits. It provides up to 13 additional weeks of payments beyond the 26 weeks typically offered by states, as well as a $600 federal supplement to weekly unemployment payments. This additional funding helps workers who’ve lost their jobs due to the pandemic and need financial assistance during this difficult time.
In addition, when it was initially passed, CARES also provided a temporary suspension of the federal unemployment tax through 2020. This means employers don’t have to pay their portion of payroll taxes if they opt in, and the money saved can be used to fund employee wages or other business expenses during this time.
CARES Act provides Loans and AssistanceÂÂ
The CARES Act includes a number of loan and grant programs to help small businesses access the capital they need during this time. This includes the Paycheck Protection Program, which provides forgivable loans for employers with fewer than 500 employees, as well as grants for targeted industries such as arts, entertainment, and hospitality.ÂÂ
The CARES Act also includes loans for small businesses impacted by the pandemic as well as assistance for large employers struggling to stay afloat. Large corporations like airlines and cruise lines have access to $500 billion in government loans and grants, while other sectors such as energy and manufacturing are eligible for up to $58 billion in targeted assistance.ÂÂ
There are PPP loan forgiveness options and ERC refundable payroll tax credits that businesses can take advantage of as well. The difference between PPP loans and ERC credits is that PPP loans are meant to offset the costs of payroll and other business expenses, while ERC credits are refundable tax credits for businesses affected by COVID-19. So, it’s important to understand which one applies to you.
In addition, the CARES Act includes a new loan program to help state and local governments with their budgets during this crisis. This includes up to $500 billion in loans and grants for states, counties, cities, and other government entities to fund critical services or pay employee salaries.
CARES Act provides Tax CreditsÂÂ
The CARES Act includes a number of tax credits designed to help both individuals and businesses. For individuals, it provides a refundable tax credit of up to $1,200 per person or $2,400 for married couples filing jointly, plus an additional $500 credit per qualifying child under 17. It also increases the Child Tax Credit from up to $2,000 per child to as much as $3,000 and allows taxpayers to receive up to $3,600 per child under six.
For businesses, the CARES Act provides an Employee Retention Tax Credit of up to $5,000 per employee for employers that retain their workforce during the pandemic. It also expands and enhances other tax credits such as the Work Opportunity Tax Credit and the Research & Development Tax Credit.
Benefits for individuals and businessesÂÂ
By providing cash payments, tax credits, and loans to individuals and businesses, the CARES Act helps to stabilize the economy during this uncertain time. It ensures that Americans have access to the resources they need to get through this difficult period and provides a much-needed boost for businesses struggling to stay afloat.
Additionally, by suspending the federal unemployment tax and expanding unemployment benefits, the CARES Act helps to protect jobs and ensure that workers have access to financial assistance when they need it most.
As evidenced, the CARES Act is an expansive and far-reaching relief package that will help provide economic recovery. While it can’t fix every issue, it’s a great first step to giving both people as well as companies the necessary aid during this crisis. With an effective plan in place, we can conquer anything together!
