If you are feeling confused about the CARES Act, Payroll Protection Program and other recently released legislation, you’re not alone.
In this article, we are addressing a few of the most commonly asked questions we’re hearing from clients along with a few helpful observations.
Regarding the Payroll Protection Program (PPP):
- Banks started accepting PPP loan applications on April 3. If your bank tells you they are not accepting them, that’s simply not true
- If you are on the fence about the PPP loan program, we encourage you to act quickly. Be prepared to provide any financial information documentation to support your application. You can find the loan application here and a worksheet we created to help you gather data here.
- If you are self-employed, you can apply for a PPP loan on Friday, April 10
- Don’t forget to compare PPP benefits to the payroll tax credit provision to make sure you are utilizing the most beneficial option for your business
- Remember that mandatory sick and extended FMLA benefit provisions are in effect
The CARES Act is about more than just PPP and payroll tax credits. There are significant changes to income taxes which include:
- The Qualified Improvement Property (QIP) definition has been corrected to now qualify for bonus depreciation, effective 2018.
- Net operating losses can now be carried back up to five years beginning in 2018.
- The loss limitation rules for trade or business losses and interest expense limitation rules are relaxed.
- There is no penalty for early withdrawals up to $100,000 from retirement plans. And income can be spread, or money can be put back within certain timeframes.
- The changes also impacted 401(k) plan loan limits which are increased from $50,000 to $100,000.
- If you take the standard deduction on your 2020 tax return (the return you’ll file in 2021), you can claim a brand new “above-the-line” deduction of up to $300 for cash donations to charities. Donations to donor advised funds and some organizations that support charities are not deductible.
Finally, remember to consider your personal financial planning situation. Now is a good time to look at your gifting strategies to your children. Depending on your investment strategies, gifting in 2020 maybe more advantageous given the swing in stock values and the market.
Also don’t forget about Roth IRAs which can be a good idea when the markets and income levels are down.
You can find resources and other articles on our COVID-19 Resource Center which is updated regularly. And, as always, we encourage you to contact your Mize CPAs professional.
This content was created during a snapshot in time and should be relied upon as such. Legislation and guidance continue to change as we progress through the current fluid environment and the information may not be applicable at a later date. All content and materials are for general information purposes only. If you have questions regarding your specific situation, please contact us.