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The CARES Act: What is it and how could it affect our lives? (E-blast)

Updated: Sep 27, 2022

March 26, 2020

Over the past few weeks the COVID-19 epidemic has resulted in an unprecedented change in our financial lives, personal lives, and in some cases the health of our families. In an attempt to help return some sense of normalcy and stability to the US economy, Congress passed an unprecedented relief package, known as the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This economic relief bill is the largest in U.S. history and allocates over 2.2 Trillion dollars to support the individuals and business that have been hit the hardest by the recent economic turmoil. This 880 page document contains a number of provisions and nuances, and these rules make changes to an already complicated tax code, but we will highlight many of the items we believe are most important to our clients (and their families) below (with appropriate simplicity, because not all of us are CPAs).

We have a very diverse group of clients that we serve. Some of these items may not apply to you directly, but they may apply to members of your family. In order to make it easy to navigate this message, we have split the document up between personal finance provisions and business provisions.

Please note, we are Financial Advisors – CPAs. Please confirm all of this information with your trusted tax advisor.

Personal Finance Provisions

Recovery Rebates: Single tax filers and married individuals (filing jointly) will receive a one-time payment of $1,200 or $2,400 respectively, subject to income limits (single: under $75,000 adjusted gross income receives the full benefit with a partial phase out up to $99,000; married filing jointly: under $150,000 adjusted gross income receives the full benefit with a partial phase out up to $198,000). These numbers are based on your most recently filed tax return. If you have children, you receive an extra $500 for each child. This rebate is not considered “taxable income” for tax purposes.

Note: This does not apply for individuals who are considered “dependents” on someone else’s tax return.

Recommendation: If you or a member of your family will been titled to these benefits and needs the money sooner rather than later, make sure that the IRS has your bank account information on file so that you can receive a direct deposit. If they don’t, the IRS will send a check and this process could take significantly longer.

Tax Deadline:

The tax filing deadline has been moved from April 15th to July 15th for 2020.

If you pay estimated tax payments, the April 15th payment has been changed to July 15th. The June payment has not been changed yet, but we expect to see details on a potential change soon.

Recommendation: If you believe you are entitled to a refund, you should file as soon as possible

Unemployment Insurance:

Benefits have been expanded to include self-employed individuals and independent contractors. The payment period has been extended to 39 weeks, and the normal payment has been increased by $600 per week.

Recommendation: If you lose your job, make applying for Unemployment Insurance your top priority.

Student Loan Relief: All payments and interest accrual for federal student loans (through the Department of Education) are suspended through September 30th, 2020. While the Act focuses on federal loans, it’s possible that private lenders may loosen up their rules as well.

Recommendation: Call your lender or loan administrator to determine whether or not you (or your family members) are eligible.

Retirement Accounts: Required Minimum Distributions (RMD):

RMDs from IRAs and Qualified Retirement Plans do not need to be taken for 2020.

Recommendation: If you do not need to use your Required Minimum Distribution payment to supplement your cash flow, it may make sense to take advantage of this deferral. If you have already taken your RMD, though, you may be out of luck. One exception to this is if you have taken your RMD in the past two months, you may be eligible for a “60 day rollover” and be allowed to either add the funds back to the account or to another pre-tax IRA.

Note: only one “60 day rollover” can be done within one calendar year, so be aware that if you utilize this option, you lose the ability to do it again until next year.

Note 2: There is no specific exception to this rule for inherited IRAs that have a RMD, so for now at least we are operating under the assumption that RMDs from these accounts can be deferred as well. However, we expect the IRS to provide additional clarity on this issue sometime soon.

Hardship Distributions

Individuals that either have been diagnosed with COVID-19 or those experiencing financial issues (hardships) as a result of quarantine, layoffs, or reduced working hours may take up to a $100,000 hardship distribution from their 401(k) plan and avoid the 10% early withdrawal penalty they would otherwise have to pay (subject to the normal exclusions). As was the case prior to the CARES act, you have to pay income tax on any dollars withdrawn from a pre-tax retirement plan, but the CARES act allows you to allocate that income over the next three tax years. If you are able to pay this hardship distribution back within three years, then the amount taken out may not be taxable (similar to the “60 day rollover” described above, but for three years).

Recommendation: Check with your plan administrator to see what plan specific requirements apply to your situation.

401(k) Loans

The CARES act increased the amount you can take as a loan from your 401(k) from the higher of 50% or $50,000 to 100% or $100,000 of your vested account balance. Like the Hardship distributions described above, you must have been adversely affected by the COVID-19 epidemic to qualify for this change.

The repayment for these loans are also delayed for one year.

Charitable Deductions:

For 2020, you may receive a partial “above the line” tax deduction for charitable contributions up to $300, which means you can get a benefit whether or not you itemize your deductions or take the standard deduction on your taxes.

Normally, charitable distributions are limited to 50% of the taxpayer’s adjusted gross income (AGI) for cash contributions. Under the CARES act, that limit has been increased to 100% of AGI. Business Provisions

“Paycheck Protection Program” (Business loans) The CARES act expanded the maximum 7(a) loan from the Small Business Administration to a maximum of $10,000,000 and expanded the use of such loans to include employee salaries, paid sick or medical leave, insurance premiums, mortgage payments, and other liabilities.

This change also expands the qualification for who can qualify to include nonprofit organizations, veteran organizations, independent contractors and eligible self-employed individuals.

These are nonrecourse loans, except if the proceeds are used for an unauthorized use. Importantly, no personal guarantee or collateral are required. Origination fees are covered by the SBA and there is a 6-12 deferment of payment, including principal, interest, and fees.

Recommendation: the loan period for this program ends on June 30, 2020. We recommend “getting in line” sooner rather than later if you’d like to participate.

Payroll tax changes

Employers can take a 50% tax credit for wages paid to employees from March 13 -December 31, 2020 to a maximum of $5,000 per employee.

Net Operating Loss (NOL) changes

In 2017 when the Tax Cuts and Jobs Act (TCJA) passed, the ability to carry back/forwardNet Operating Losses was dramatically affected. The CAREs act temporarily changed these rules in the following ways:

For tax years 2016 and 2017, a three year carry-back and an indefinite carry- forward is allowed (with no cap).

For tax years 2018 and 2019, a five year carry-back and an indefinite carry-forward is allowed (with no cap).

For tax years 2020 and 2021 (and beyond), a twenty year carry-forward for NOLs.

Miscellaneous: IRA contributions for 2019 can now be made until July 15, 2020.

- The Team at Christopher Weil & Company, Inc.

Information contained in this publication is obtained from sources believed to be reliable; however, no representation as to accuracy and completeness of this information/data can be provided. Data used may be based on historic returns/performance. There can be no assurance that future returns/performance will be comparable. Neither the information, nor any opinion expressed herein, constitutes a solicitation by us for the purchase or sale of any securities or commodities. This publication and any recommendation contained herein speak only as to the date hereof. Christopher Weil & Company, Inc., with its employees and/or affiliates, may own positions in these securities.

All investments involve risk, including the risk of losing principal. It is vitally important that you fully understand the risks of trading and investing. All securities trading is speculative in nature and involves substantial risk of loss. Further, the investment return and principal value of an investment will fluctuate; Upon liquidation, a security may be worth more or less than the original cost. Past results do not guarantee future performance.

Investment in mutual funds is also subject to market risk, investment style risk, investment adviser risk, market sector risk, equity securities risk, and portfolio turnover risks. More information about these risks and other risks can be found in the funds’ prospectus. You may obtain a prospectus for CWC's mutual funds by calling us toll-free at 800.355.9345 or visiting The prospectus should be read carefully before investing. CWC's mutual funds are distributed by Rafferty Capital Markets, LLC—Garden City, NY 11530. Nothing herein should be construed as legal or tax advice. You should consult an attorney or tax professional regarding your specific legal or tax situation. Christopher Weil & Company, Inc. may be contacted at 800.355.9345 or

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