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Planning Strategies During Market Uncertainty & Volatility: CARES Act & Other Programs

April 20th, 2020

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This is the third item in our "mini-series" on strategic and planning opportunities during stressed market conditions. This piece focuses on the CARES Act, the recently-passed stimulus package related to the COVID-19 novel coronavirus.This is intended to be an overview of the parts of the bill, but should not take the place of either more-detailed analysis and/or guidance from legal or tax advisors. The bill is quite large and details are still emerging regarding the legislation’s direct impact and consequences, so please reach out with questions on how this might more directly affect you and your family.

Cash Payments to Individuals and Families

Individuals earning less than $75,000 (Single) or couples who make less than $150,000 (Married Filing Jointly – “MFJ”) can expect to receive a one-time cash payment of $1,200 per person and up to $500 per child (under the age of 17) in the form of a tax refund against their 2020 income. Individuals making between $75,000 and $99,000 ($150,000 and $198,000 for MFJ) will receive a reduced benefit of $5 for every $100 above the lower limit, and those with income above the upper levels in both categories are disqualified from receiving any direct benefit.

Recipients, and their beneficiaries, will be categorized into four distinct groups based on their:

  1. 2018 Adjusted Gross Income - for filers who have not yet filed their 2019 taxes;
  2. 2019 Adjusted Gross Income - for filers who have already filed their 2019 taxes;
  3. 2020 Adjusted Gross Income - for filers disqualified by their 2018 and/or 2019 AGI but whose 2020 income brings them below the disqualification threshold. Recipients who qualify in this category will receive the benefit as a refund when they file their 2020 returns. And finally;
  4. Social Security benefits – for retirees who do not file a tax return. This group remains eligible and their payments will be based on information provided by the Social Security Administration.

As of this writing, the Internal Revenue Service expects that these checks (or direct deposits if taxes are filed electronically) will arrive in April. This income will not be taxed by the IRS.

Unemployment Benefits

The bill makes major changes for individuals filing for unemployment, increasing overall benefits and expanding eligibility. Weekly unemployment benefit amounts are determined by individual states rather than federal officials, but the bill adds $600 per week from the federal government on top of whatever base amount an unemployed worker receives from the state. It also allows for eligible filers to receive an additional 13 weeks of unemployment benefits beyond the standard covered period (26 weeks in most states).

The bill also creates a temporary Pandemic Unemployment Assistance program to provide four months of benefits to self-employed individuals and freelancers who are traditionally unable to apply for unemployment benefits.

Income Tax Filing

The bill extends the April 15th deadline for individuals to file and pay their 2019 taxes to July 15th. This change also extends the available window in which to make 2019 retirement plan contributions. The IRS plans to process returns and payments, and issue refunds, to those who file in advance of the new deadline.

Retirement Plans

The bill increases the limit on loans or hardship distributions that individuals can access penalty free from employer-sponsored retirement accounts. People affected by the crisis can access up to $100,000 (or, if lower, 100% of their account balance) of their retirement account balance without incurring the traditional 10% early withdrawal penalty. Please note that such loans or hardship withdrawals are not permitted from IRAs. Hardship withdrawals remain fully taxable at the individual’s marginal tax rate. However, account owners are allowed to pay the income tax due on these withdrawals over the next three years. Alternatively, loans from a retirement account are allowed, and repayments can be delayed through calendar-year 2020.

Required Minimum Distributions

Individuals above the age of 72 or beneficiaries of inherited retirement accounts can suspend required minimum distributions in 2020. This allows retirement account owners to keep their full account balance invested while asset values are low(er)and avoid incurring the income tax associated with taking a required minimum distribution.

Personal Debt Forgiveness and Benefits

The bill allows employers to provide up to $5,250 in tax-free student loan repayment benefits to workers. Additionally, all principal and interest payments for federally-owned student loans are deferred through September 30th, 2020.

Small Business Loans

  1. Forgivable Small Business Administration (SBA) Loans - The Paycheck Protection Program (PPP), administered through authorized bank SBA lenders, provides $350 billion for small businesses (fewer than 500 employees) in the form of low-interest loans of up to $10 million per enterprise. Any portion of the loan used to maintain payroll, keep workers employed, or pay rent, mortgage or utilities may be partially or fully forgiven, provided covered workers stay employed through the end of June. As of this writing, the Department of Treasury Secretary has requested an additional $250 billion in funding for the PPP.
  2. Existing Small Business Administration Loans - Businesses already using SBA loans will be relieved from making principal or interest payments for six months.
  3. Tax Credits - The bill also establishes a fully refundable tax credit for businesses of all sizes that are closed or distressed to help keep workers on payroll. The credit covers 50% of payroll costs on the first $10,000 of compensation (including health benefits) for each employee. The credit for employers with more than 100 full-time employees is for individuals who are not working, but employers with 100 or fewer employees can use the deduction even if they are not closed.

Payroll Taxes

Businesses that retain employees during the crisis are able to receive a refundable payroll tax credit through 2020. The credit is equal to 50% of wages of up to $10,000 per worker and can be claimed against quarterly payroll taxes. It is not available for businesses that also get a loan through the Paycheck Protection Program. The bill also allows small businesses to defer a portion of payroll taxes this year, making them due at a later date.

Not all of the strategies outlined herein will be applicable for every individual client. Resonant Capital Advisors does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Resonant Capital Advisors, LLC (“Resonant”) is an SEC registered investment adviser located in Madison, Wisconsin. This newsletter is limited to the dissemination of general information pertaining to Resonant’s investment advisory services, and should not be construed as the provision of personalized investment advice. Investing involves risk, including risk of loss. This newsletter contains certain forward‐looking statements (which may be signaled by words such as “believe,” “expect” or “anticipate”) which indicate future possibilities. Due to known and unknown risks, other uncertainties and factors, actual results may differ materially from the expectations portrayed in such forward‐looking statements. There is no guarantee that the views and opinions expressed in this newsletter will come to pass. For additional information about Resonant, please request our disclosure brochure as set forth on Form ADV using the contact information set forth herein, or refer to the Investment Adviser Public Disclosure web site ( Please read the disclosure statement carefully.