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Additional Non-business Changes in the CARES Act

Payroll Taxes

Self-employed individuals may elect to defer payment of the employer's portion of the 6.2% Social Security tax for any deposits not made as of March 27, 2020 through the rest of the year. It is important to note that this is merely a deferral of payment and should not be considered as an amount forgiven. Half of the amount deferred will be due on December 31, 2021 and the second half will be due on December 31, 2022. You may not delay the Social Security tax deposit if you receive a Paycheck Protection Loan to maintain payroll.

Student Loans

As a result of the pandemic, Congress has put a halt on all federal student loan interest accumulation and payment requirements through September 30. Individuals may continue to make payments during this time, although no financial penalties will apply if no payments are made. Additionally, for those who are on a loan forgiveness plan (e.g., those working in an eligible low-income school or non-profit job), these months will count toward the loan forgiveness plan as if the payments had been made.

Mortgage and Rent Payments

The CARES Act stipulates that homeowners with federally backed loans have two types of relief available to them in the event they cannot make their monthly payment:
  1. Lenders are precluded from initiating or continuing with foreclosure proceedings on federally backed loans for at least 60 days after March 18; and
  2. Homeowners experiencing financial hardship can request forbearance of 180 days, which may be extended for an additional 180 days if the homeowner is still experiencing financial duress.
What is not clear at this point is whether the lender will allow you to simply extend the life of your loan, whether you will be required to make a balloon payment for all payments missed, or whether you will be eligible for modified monthly loan payments. Regardless of whether you have a federally backed or privately held mortgage, you should reach out to your bank or loan servicer to see what options are available.

For individuals living in HUD properties, including holders of FHA loans, the Department of Housing and Urban Development has halted all evictions and foreclosures for 120 days from the signing of the CARES Act - that is, until July 25, 2020. Any eviction notice at that time must provide 30 days to leave the property. Tenants also may not be charged late fees, penalties, or other charges for late payment. It is important to note that mortgage holders and tenants are not relieved of their obligation to pay but merely provided an extension to pay.

Excess Business Losses

The 2017 TCJA implemented a limitation on the ability of individuals to utilize business losses to offset non-business income. Specifically, Net Operating Losses (NOLs) could only offset $250,000 of non-business income for a single individual or $500,000 if married filing jointly. The resulting excess business losses were then treated as NOLs carrying forward to the next tax year.

The CARES Act suspends the application of this loss limitation until 2021 and makes other technical corrections. Any taxpayer that was subject to this limitation for its 2018 or 2019 tax year will be required to amend that tax return in order to claim the excess business losses and make any other corresponding adjustments. This provision will provide individual taxpayers with a much greater ability to utilize business losses and obtain tax refunds.

If you have any questions about these or other changes, please feel free to let us know.
 
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