Breaking Down the CARES Act

By Katie Seay on April 3, 2020

CARES Act Provides Relief to Individuals and Businesses

On Friday, March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. This $2 trillion emergency relief package is intended to assist individuals and businesses during the ongoing coronavirus pandemic and accompanying economic crisis.  The Act is quite extensive, so we've summarized many of the major relief provisions  here.

Unemployment provisions

The legislation provides for:

  • An additional $600 weekly benefit to those collecting unemployment benefits, through July 31, 2020.
  • An additional 13 weeks of federally funded unemployment benefits, through the end of 2020, for individuals who exhaust their state unemployment benefits.
  • Targeted federal reimbursement of state unemployment compensation designed to eliminate state one-week delays in providing benefits.
  • Unemployment benefits through 2020 for many who would not otherwise qualify, including independent contractors, part-time workers, and workers experiencing a reduction in hours.

Recovery rebates

Most individuals will receive a direct payment from the federal government. Technically a 2020 refundable income tax credit, the rebate amount will be calculated based on 2019 tax returns filed (2018 returns in cases where a 2019 return hasn't been filed) and sent automatically via check or direct deposit to qualifying individuals. To qualify for a payment, individuals generally must have a Social Security number and must not qualify as the dependent of another individual.

The amount of the recovery rebate is $1,200 ($2,400 if married filing a joint return) plus $500 for each qualifying child under age 17. Recovery rebates are phased out for those with adjusted gross income (AGI) exceeding $75,000 ($150,000 if married filing a joint return, $112,500 for those filing as head of household). For those with AGI exceeding the threshold amount, the allowable rebate is reduced by $5 for every $100 in income over the threshold. This is a great tool for calculating your allowable rebate:

If you are owed a rebate because you have a reduction in your 2020 income, you will be paid as part of your 2020 income tax return. If your 2019 (or in some cases 2018) income allows you to receive a payment, but your 2020 income exceeds the threshold amounts, you will not be required to repay. 

While details are still being worked out, the IRS will be coordinating with other federal agencies to facilitate payment determination and distribution. The Federal government is working to make payments as soon as possible, but realistically it may take 4-8 weeks for payments to be processed.  If you currently receive Social Security benefits, your payment will be made to the account where your Social Security benefits are paid. If you had your Federal tax refund direct deposited to a bank account on your last filed return, then this is where your payment will be made. All others will receive a check to their last known address. If you have had a change in address, you should file Form 8822 as soon as possible.

Retirement plan provisions

  • Required minimum distributions (RMDs) from employer-sponsored retirement plans and IRAs will not apply for the 2020 calendar year; this includes any 2019 RMDs that would otherwise have to be taken in 2020. This also includes RMDs for inherited or beneficiary accounts. It may also be possible to rollback any RMDs already taken in 2020 for the original account owner. This rollback opportunity does not extend to inherited or beneficiary accounts. If you are currently taking RMDs, expect to review a letter from us soon with some additional details!
  • The 10% early-distribution penalty tax that would normally apply to distributions made prior to age 59½ (unless an exception applies) is waived for retirement plan distributions of up to $100,000 relating to the coronavirus; special re-contribution rules and income inclusion rules for tax purposes apply as well.
  • Limits on loans from employer-sponsored retirement plans are expanded, with repayment delays provided.

Student loans

  • The legislation provides a six-month automatic payment suspension for any student loan held by the federal government; this six-month period ends on September 30, 2020.
  • It is important to note that this length of time will continue to count toward any loan forgiveness programs.
  • Under already existing rules, up to $5,250 in payments made by an employer under an education assistance program could be excluded from an employee's taxable income; this exclusion is expanded to include eligible student loan repayments an employer makes on an employee's behalf before January 1, 2021.

Business relief

  • An employee retention tax credit is now available to employers significantly impacted by the crisis and is applied to offset Social Security payroll taxes; the credit is equal to 50% of qualified wages up to a certain maximum.
  • Employers may defer paying the employer portion of Social Security payroll taxes through the end of 2020 and may pay the deferred taxes over a two-year period; self-employed individuals are able to do the same.
  • Provisions relating to specified Small Business Administration (SBA) loans increase the federal government guarantee to 100% and allow small businesses to borrow up to $10 million and defer payments for six months to one year; self-employed individuals, independent contractors, and sole proprietors may qualify for loans.

Qualified Charitable Contributions

  • You may now deduce up to $300 as an above the line deduction on your tax return. Contributions must be made in cash and cannot be made to Donor Advised Funds or supporting organizations.

Expansion of health care benefits

  • OTC medications are now qualified expenses for HSAs & FSAs.
  • Telemed services are now largely covered by private health insurance and Medicare.
  • Medicare Part D participants can now request a 90-day supply of medication to limit the need to visit the pharmacy.

Prior legislative relief provisions

Signed into law roughly two weeks prior to the CARES Act, the Families First Coronavirus Response Act (FFCRA) also included relief provisions worth noting:

  • Requirement that health plans cover COVID-19 testing at no cost to the patient.
  • Requirement that employers with fewer than 500 employees generally must provide paid sick leave to employees affected by COVID-19 who meet certain criteria, and paid emergency family and medical leave in other circumstances.
  • Payroll tax credits allowed for required sick leave as well as family and medical leave paid.


There is likely to be a steady stream of guidance forthcoming with details relating to many of these provisions, so stay tuned for more information. It’s also important to note that we suggest re-evaluating your 2020 estimated payments and income tax projections mid-year to account for how these provisions may impact your tax situation. We're here to help and to answer any questions you may have.