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The 5 Important Areas where the “CARES ACT” Helps Doctors


By: Chris J. Roe, CPA/PFS


Rx Wealth Advisors wants to keep you informed of recent federal legislative developments that may affect you, as an employed physician, an independent contract physician or your physician practice.

As a physician, there are key provisions of the Coronavirus Aid, Relief and Economic Security Act of 2020, (the “CARES Act”)[1] that may help you through this difficult time.

The Act passed on March 27, 2020 and is a COLOSSAL stimulus bill of $2 trillion dollars.  The Act’s goal is to help American families and businesses who are struggling.

We outline the key areas that may benefit the you, the physician.

Unemployment Benefits

  • Unemployment benefits are expanded for an additional 13 weeks.[2]  Thus, you may receive up to 39 weeks of unemployment versus the traditional 26 weeks.
  • The unemployment benefits include an extra $600 per week for up to 4 months, on top of state unemployment benefits.[3]
  • Unemployment benefits are now expanded to include self-employed and independent contractors, along with the unemployed, partially unemployed or individuals not able to work because of COVID-19 and do not qualify under the traditional unemployment benefits.[4]  With this expansion, self-employed or independent contract physicians are more likely to qualify for benefits.
  • Unemployment will be received immediately versus the prior one-week waiting period.[5]

Individual Taxes

  • Final 2019 Federal income tax and 1st quarter 2020 estimated income tax payments are now due on July 15, 2020.[6]  Moreover, many states are following suit.
  • Advance 2020 recovery rebate checks[7], which are $1,200 per adult and $500 for each qualifying child, are being sent out.  The checks are subject to income phase outs {$75,000 to $99,000 for single filers} and {$150,000 to $198,000 for married filers}.  Most physicians will not receive a check.  
  • A $300 above the line deduction for charitable contributions, if not itemizing.[8]  

Student Loans

  • Federal student loan payments are suspended through September 30, 2020 without penalty.[9]  A proactive call  from the borrower is required to suspend payments.  This does not occur automatically.  
  • The Federal student loan interest rate is reduced to 0% through September 30, 2020.  
  • If planning to take advantage of the Public Service Loan Forgiveness Program, pause payments immediately.
  • The ability to continue making payments on your Federal student loan during this time still exists.
  • Employers are eligible to exclude a certain amount of student loan repayments from compensation.[10]

Retirement Plans 

  1. Withdrawal up to $100,000 without the 10% penalty so long as the distribution occurs in 2020 and relates to the Coronavirus.  
  2. Income tax due on the distribution can be paid in 2020 or spread over 3 years (2020, 2021 and 2022).
  3. The withdrawal can be paid back using a single or partial rollover during the 3-year period beginning in 2020.  This avoids tax on the distribution.  If the tax has already been paid; then, a refund claim can be filed.
  • Retirement Plan Loans[12]
  1. Borrowing from your 401K is now allowed up to the lesser of 100% of your vested account balance or $100,000.
  2. Loan payments owed from the date the Act went into effect through the end of 2020 may be delayed up to a year.
  • Required Minimum Distributions (RMDs)[13]
  1. Account owners, beneficiaries and individuals who are eligible to delay their first RMD from 2019 to 2020, are not required to take RMDs in 2020.
  2. If the RMD is already paid, there are several ways to get it back into the IRA.  If a beneficiary took the RMD, it can not be put back.

Business Provisions

  • Forgivable Loan Program (Paycheck Protection Program)[14]
  1. Provides a loan to the physician or your practice to cover certain wages and business expenses.  You must apply by June 30, 2020, but loans are first come, first serve.  The Small Business Administration[15] administers.
  2. Businesses, including sole proprietorships, with less than 500 employees (including affiliated businesses) qualify so long as you certify that the loan is necessary due to COVID-19 causing an uncertain economic environment.
  3. The loan can be up to the lesser of $10 million, or 2.5 times the average monthly payroll costs over the previous year, with certain exclusions.
  4. The loan‘s maximum interest rate is 4% with repayment time of up to 10 years.  There are no SBA fees.
  5. Funds spent during the loan’s first 8 weeks on payroll (excluding annual compensation of over $100,000 per person), payroll costs, health insurance, rent, mortgage interest, utilities and other business interest incurred before February 15, 2020 are eligible for forgiveness.
  6. Forgiveness is “not” automatic.  To qualify, your practice must maintain the same number of employees (equivalents) from February 15, 2020 through June 30, 2020 as it did during either: 1.) the same period in 2019; or 2.) If not in business in 2019, from January 1, 2020 until February 15, 2020.  Should your practice fail the requirement, the amount forgiven is reduced, ratably.  Furthermore, forgiveness amount reductions occur if your practice cuts employees’ (earning under $100,000) wages by more than 25% as compared to the most recent quarter.
  7. Forgiveness is tax-free.  The loan amount forgiven is not subject to Federal income tax.
  8. Loan payments are deferred for a period of no less than six months.  
  • Employee Payroll Taxes and Credits
  1. Your medical practice is eligible to defer their portion of payroll taxes incurred (from the Act’s date, through the end of 2020), until the end of 2021 and 2022.[16]  Does not apply if you have debt forgiven on certain loans under the CARES Act.[17]
  2. Self-employed physicians also get payroll tax relief.  Accordingly, 50% of the self-employment taxes, from when the Act went into effect through the end of 2020, may be deferred, with half due on December 31, 2021, and the other half due on December 31, 2022.
  3. Your medical practice may qualify to claim an employee retention credit[18] if your practice has been fully or partially suspended during a quarter either as a result of a governmental authority or your practice’s quarterly revenue in 2020 is less than 50% of the revenue from the same quarter in 2019.  
  • The CARES Act modified numerous business tax rules, such as, claiming net operating losses, interest expense deductions, alternative minimum tax credits and trade or business losses for non-corporate taxpayers.[19]  These changes may help to reduce current income taxes and may benefit you by going back to prior years for tax refunds.

The above is meant to include the most relevant CARES Act provisions that may affect you, the physician.  If you need help or have questions regarding the CARES Act, please reach out to us.


Disclaimer:

2020 All Rights Reserved.  This content is developed from sources believed to be providing accurate information, and provided by Rx Wealth Advisors, LLC for general informational purposes only.  It may not be used for the purpose of avoiding any federal tax penalties and in no way is meant to provide specific tax, legal or financial advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

[2] Section 2107 of the CARES Act

[3] Section 2104 of the CARES Act

[4] Section 2102 of the CARES Act

[5] Section 2105 of the CARES Act

[7] Section 2201 of the CARES Act

[8] Section 2204 of the CARES Act

[9] Section 3513 of the CARES Act

[10] Section 2206 of the CARES Act

[11] Section 2202 of the CARES Act

[12] Section 2202 of the CARES Act

[13] Section 2203 of the CARES Act

[16] Section 2302 of the CARES Act

[17] Section 2302(a)(3) of the CARES Act

[18] Section 2301 of the CARES Act

[19] Subtitle C – Business Provisions of the CARES Act