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CARES Act Part I: Key Provisions Explained

The Coronavirus Aid, Relief, and Economic Security (CARES) Act is an approximately $2 trillion emergency fiscal stimulus package created to help ease economic effects resulting from the global pandemic, COVID-19.

The following is a high-level overview of some of the act’s key provisions as they pertain to individuals and small businesses in our community. This outline does not capture the entirety of funding or policy changes within the act. We will continue to publish content in the coming days to help explain what this means for you, and what steps you can take moving forward.


Small Business Forgivable Loans

  1. Paycheck Protection Program: Read here for more information about the program and how to qualify. You can also check out the US Chamber of Commerce Small Business Guide.

Other Business Provisions

Employee Retention Credit: Payroll tax credit for businesses subject to closure due to COVID-19. Businesses receiving a covered loan under section 7(a)(36) of the Small Business Act do not qualify. Read more here.

  1. Deferral of Payment of Payroll Taxes: With the exception of employers who have debt forgiven through the Payroll Protection Program, employers (and self-employed individuals) are eligible to defer payroll taxes from the date of enactment, through the end of the year, until the end of 2021 and 2022.
    a. Employers: Employer share of FICA (6.2%) can be deferred; 50% of deferred amounts due on December 31, 2021, with the remainder due on December 31, 2022.
    b. Self-employed: Employer share (half the total tax) can be deferred; thus, 50% is paid this year (employee share), leaving 25% due on December 31, 2021, and the remaining 25% due on December 31, 2022.
  2. Net Operating Loss Rules Loosened: The CARES Act allows any NOL from 2018, 2019, or 2020 to be carried back up to five years. In theory, this could provide further liquidity to aid companies during this time by reducing prior years’ tax bills and allowing them to claim refunds of amounts previously paid. It also amends the law to allow for up to 100% of taxable income to be offset for 2018, 2019, and 2020 (up from 80%). Limits on cumulative losses attributable to business for non-corporation taxpayers are also repealed for 2018, 2019, and 2020. Accordingly, taxpayers who had losses suspended because of this provision in 2018 or 2019 should consider the potential benefits of filing an amended return.


Tax Rebates (i.e. Direct Payments): Eligible taxpayers will receive rebates of up to $1,200 per individual and $2,400 per married couple, plus $500 per child under the age of 17. This is subject to income phase out, between $75,000 – $99,000 single and $150,000 – $198,000 joint, based on AGI from your most recent tax filing (2019 or 2018). If the IRS has your bank information (i.e. your last tax return was paid via direct deposit) you can expect payment via direct deposit potentially by April 16th—checks will take longer

Important notes:

  1. If your bank account or address has changed since your last tax filing be sure to notify the IRS immediately.
  2. If you made too much in 2019 to qualify for the rebate, but your 2020 income qualifies you (due to layoff or salary reduction, for example), you’ll claim it as a credit on your 2020 tax return.

Enhanced Unemployment Benefits: Unemployment compensation benefits have been significantly expanded by the CARES Act.

  • Pandemic unemployment assistance provided to self-employed and otherwise ineligible individuals for up to 39 weeks.
  • States have the ability to increase regular unemployment compensation by up to $600 per week with federally funded dollars, for up to four months.
  • The one-week elimination period is waived and those who reach the maximum number of weeks of unemployment will be able to collect for an additional 13 weeks.
  • Incentives provided for states to create short-time compensation programs for those who have seen hours or compensation cuts but are still employed.

Availability of Retirement Funds: Coronavirus-related distributions of up to $100,000 will be available from IRAs and/or employer sponsored retirement plans for individuals impacted by the Coronavirus pandemic. Read more about the guidelines and potential tax benefits here

Required Minimum Distributions Waived for 2020: Please click here for more information about this provision, including options for returning unwanted RMDs already distributed and other tax planning opportunities.

Charitable Contributions: The 60% of AGI limit for cash contributions to charity is temporarily lifted. Qualified Charitable Deductions (QCDs) are still allowed, even though RMDs are waived for 2020, and an additional $300 above-the-line deduction for qualified charitable contributions has been added—a change that will benefit non-itemizing taxpayers (that’s most of us).

Student Loan Relief: The CARES Act includes several provisions aimed at providing relief to student loan borrowers. Read about them here.

Medical Expenses and Healthcare: The definition of medical expenses has been expanded. Learn more about these expansions, the implications for Medicare recipients, and telehealth options here.

Megan Nichols, CFP®


This memorandum expresses the views of the author as of the date indicated and such views are subject to change without notice. Community First Bank, HFG Trust, and HFG Advisors have no duty or obligation to update the information contained herein. Further, Community First Bank, HFG Trust, and HFG Advisors make no representation, and it should not be assumed that past investment performance is an indication of future results. Moreover, wherever there is potential profit there is possibility of loss. This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as an offering of advisory services, banking services, or an offer to sell or solicit and securities or related financial instruments in any jurisdiction. Certain information contained herein concerning economic trends and performance is based on or derived from information provided by independent third-party sources. Community First Bank, HFG Trust, and HFG Advisors believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based. This memorandum, included the information contained herein, may not be copied, reproduced, republished, or posted in any form without the prior written consent of Community First Bank and/or HFG Trust and/or HFG Advisors. HFG Advisors, Inc, is a wholly owned subsidiary of HFG Trust, LLC. HFG Trust, LLC is a Washington state-registered Trust company and wholly owned subsidiary of Community First Bank.