The CARES Act passed in 2020 had aid for families and businesses. This help ranged from paycheck protection to unemployment aid to tax breaks for companies.
The COVID-19 pandemic doesn’t seem to be going anywhere anytime soon. And there have been several changes to the CARES Act since its initial signing. Some programs have been extended and others modified.
Keep reading this article to understand the CARES Act 2022 changes and requirements for businesses.
The CARES Act 2022 Eligibility and Changes
In 2021, Congress extended several parts of the CARES Act until 2022. These include:
- Debt relief related to bankruptcy
- Pauses on student loan payments
- Extended deadlines for tribal governments
You can read the details and more about these changes below.
The ERC and Infrastructure Bill: The Infrastructure Investment and Jobs Act
President Joe Biden signed the Infrastructure Investment and Jobs Act on November 15, 2021. This bill is for improvements to modes of transportation, including:
This act included new safety requirements for all types of transportation. It also had provisions about climate change and its impact on transportation.
It also included provisions about aid provided by the CARES Act. You’ll find those changes below.
CARES Act Extension
The CARES Act Extension, as included in The Infrastructure Investment and Jobs Act, is designed to provide additional assistance to individuals and businesses struggling amidst the ongoing economic upheaval created by the COVID-19 pandemic. This extension includes additional funding for Paycheck Protection Program (PPP) loans, which provides low-interest financing to small business owners so that they can keep their employees on payroll during difficult times. Congress extended the deadline for tribal governments to apply for relief funds in December 2021. The deadline to apply is now 12/31/2022 instead of 12/31/2021.
The CARES Act Extension also includes various tax incentives designed to benefit both individuals and businesses. For example, businesses will be able to deduct expenses related to certain qualifying wages from their taxes; this deduction could offer significant savings for businesses that are already struggling financially. Individuals who received unemployment benefits during 2020 will not be required to pay taxes on up to $10200 of those benefits; this measure is expected to provide substantial relief for many people who experienced a reduction in income due to the pandemic.
Altogether, the CARES Act Extension offers much-needed financial support for individuals and businesses alike who are grappling with the economic fallout of the COVID-19 pandemic. By providing low interest financing options, extended unemployment benefits, rental assistance funds, food security grants and tax incentives, the extension aims to alleviate some of the financial burden felt by countless Americans while helping jumpstart an economy still reeling from unprecedented disruption.
CARES Act Eligibility
The CARES Act provides relief funds specifically targeted at small businesses through both forgivable loans (Paycheck Protection Program) and other forms of financial assistance (Emergency Injury Disaster Loans). These funds are designed to help employers keep employees on payroll despite decreased business activity caused by coronavirus-related restrictions imposed by governments around the world. Small business owners who applied for this assistance must meet specific eligibility criteria including having fewer than 500 employees or meeting other size standards established by the SBA depending on their industry sector.
Pension Interest Rates
The Act includes an extension for pension interest rate stabilization by five years. “Pension Smoothing” is where employers use higher future interest rates to establish future pension liability.
Employers must make minimum payments to pension funds. These payments vary depending on current interest rates. By stabilizing interest rates, current contributions and taxable income are expected to decrease.
CARES Act Withdrawal Deadline
Retirement plans that allow hardship withdrawals must be updated by 12/31/2021. There are several aspects to this update in the CARES Act that you can find here.
The Setting Every Community Up for Retirement Enhancement Act has a deadline of 12/31/2022. This Act combined with the CARES Act allows for mandatory and optional retirement plan changes.
All plans must be formally updated by 12/31/22. These changes include:
- Allow for part-time employee participation
- Change the required beginning date
- Distributions for births and adoptions
- COVID-19 relief and loans
Learn more about each of these below.
Part-Time Employee Participation
Employees working more than 500 but less than 1,000 hours annually are now eligible for retirement plans. They must meet these requirements for three consecutive years before being eligible.
Tracked hours must start after December 31, 2020.
Required Beginning Date
You can change the required beginning date for required minimum distributions. This date can change from 70 and one-half to 72 years of age.
Defined contribution plans have to remove the ability of non-spouse beneficiaries to stretch required minimum distributions for more than 10 years.
Distributions for Births and Adoptions
This is for plans that established penalty-free distributions following the birth or adoption of a qualified child. You must formally amend these plans to show this distribution by 12/31/22.
COVID-19 Relief and Loans
Many plans implemented relief during the COVID-19 pandemic. This could have been coronavirus-related distributions or increased plan limits. These plans must be formally updated to include these changes by the end of 2022.
CARES Act IRA Withdrawal Rules
The CARES Act waived required minimum distributions for IRAs and retirement plans. This included beneficiaries.
To be eligible for early withdrawal, a medical professional has to diagnose you with COVID-19. Individuals that experienced adverse financial impact due to the pandemic are also eligible.
This could include lost wages due to quarantine or furlough due to shutdowns. This extends to spouses and household members.
It was up to employers whether or not to make these changes. It’s also up to employers to determine how they will amend plans to meet the CARES Act requirements.
Amendments must be adopted by the last day of the first plan year beginning after January 1, 2022. This is for non-governmental plans.
Governmental plans have until the last day of the first plan year beginning January 1, 2024.
All amendments must be retroactive. Plans must also operate according to any amendments made before the CARES Act changes.
Employee Retention Credit Deadline
The Infrastructure Investment and Jobs Act changed the dates for the 2021 credit. It is now for qualified wages paid between March 2020 and September 2021.
If you did not apply for aid in 2020 or 2021, you still can for qualified wages in this date range. Contact a tax expert today for more information about how to apply for aid from previous years.
What Is Employee Retention Tax Credit?
The ERTC is a refundable payroll tax credit for qualified wages. You can claim up to $5,000 per employee in 2020. The credit can be used to offset a portion of the costs associated with retaining an employee, such as wages and benefits. This can be helpful for employers who are looking to keep their workforce stable and reduce turnover. The ERTC is important for employers because it helps them to keep their costs down and allows them to focus on their business instead of having to worry about recruiting and training new employees.
What Are the Requirements?
The requirements changed in 2021. The changes specified you can claim up to $7,000 per employee per quarter for the employee retention credit.
Businesses that were partially or fully suspended during the COVID-19 pandemic are eligible. If your gross receipts decreased by 50%, you’re also eligible.
Get Help With Your Application
Are you unsure if you qualify for pandemic aid? Do you need help submitting your application? Or maybe you’d just feel better having an expert handle the process?
Whichever reason you have, ERC Today is here to help. We are tax experts who are flexible and quick. We have processes in place to help you submit your application in five days or less.