 Hello and welcome to this session. This is Professor Farhad in which we would look at the CARES Act of 2020 that deals with the CPA topics. And those topics specifically, they're going to be testable from October 1st, which is starting tomorrow till December 31st, till the end of the year. So those changes are temporary, not permanent. Because in the prior session, what I did, I looked at some temporary and permanent, such as certain aspect of the charitable contribution, as well as NOL, Limitation on Interest Expense. The reason I put Limitation on Interest Expense with NOL because they do affect each other and the qualified improvement property, or QIP, also somehow it's related to NOL. So those, some of them are permanent, some of them are temporary. What I'm going to go over in this session is all of them are temporary in this session. As always, before we start, I would like to remind you to connect with me on LinkedIn if you haven't done so. YouTube is where you would need to subscribe. I have 1,800 plus accounting, auditing, tax, finance, as well as Excel tutorials. If you like my lectures, please like them and share them. Look, if they're benefiting you, it means they might benefit other people as well. And I want you to check out my website for headlectures.com. Especially if you are studying for your CPA exam, I have plenty of resources, lectures, notes, PowerPoint slides, exercises, multiple choice questions, true-false questions that's going to help you succeed on your CPA exam. So check it out. The first thing we're going to start with is the early retirement distribution. So what changes from the past? So what is the past? The past is if you took any early withdrawal from your retirement, you will be subject to a 10% penalty and you'll have to pay taxes. The prior law had some exceptions. And the exception is only for the penalty. So you would still need to pay taxes even though you have an exception. For example, if you're a first-time home buyer, you can take up to $10,000 from your 401k or IRA. I did so when I bought my home, I took a $10,000 first-time home buyer. I was subject to taxes, I paid taxes, but I did not have to pay the 10% penalty. If you buy medical insurance, that's another one. If you were unemployed for 12 consecutive weeks or self-employed eligible for unemployment, if you have medical expenses and access of 7.5 of your adjusted gross income, it means you have a lot of medical expenses. If you are permanently disabled, education, adoption or birth, max to $5,000 and death. And I know a friend of mine is going through an adoption and I told him about this $5,000. Now those were the exception. We're gonna have one additional exception and this is a temporary exception because obviously of the coronavirus, we have what's called coronavirus-related distribution and you can take up to $100,000, not subject to the 10% penalty. It is subject to taxes. You are always subject to taxes but you're not subject to the penalty. And let's assume you took $90,000 out and the reason I made it $90,000 to make it spreadable over three years. So you don't have to pay the taxes on this amount in 2020. So you'll pay $30,000 in 2020, $30,000 in 2021 and $30,000 in 2022 because you still have to pay taxes but the IRS says, the government, obviously the Congress says, look, if you're gonna take this money, we're gonna allow you to, you were gonna allow you to pay taxes on it gradually. Now obviously this amount is not taxable if you repay this amount before you file or by the time you file your taxes. So if you took the money then you paid before April 15th or the extension. If you have an extension, then you don't have to worry about this, okay? And this distribution, this coronavirus related distribution must be a qualified distribution. What do we mean by qualified distribution? The person must be diagnosed with the disease or their spouse, his or her spouse or their dependent experience financial difficulties as a result of economic shutdown. What type of difficulties you would have, you may be forload, laid off or haven't work reduced, your hours reduced or if you're self-employed, your business operation went down in hours and you are getting less money, okay? So basically you are affected negatively by the coronavirus. This is about the early retirement distribution. Couple more new rules, two were suspended. The minimum required distribution by April 1st from your retirement account, if you reach 72, you don't have to take the minimum required distribution, it's suspended. And the access business loss limitation that's also suspended. That's why I'm not gonna, if you don't know what the access business limitation, go to farhatlectures.com. All you need to know if you are testing from October till December, next three month, don't worry about the access business loss limitation, it's suspended. So simply put, you can take more losses, that's what we're saying. And the reason is why is because the IRS, again, Congress wants you to take advantage of prior losses or your losses. So this way you can survive this coronavirus. Also something new for also for this year, employers, so if you work for a company and they were generous and they decided to pay on your behalf 5,250 as a student loan repayment assistance, then that money is not included in your income. But however, this cannot be instead of paying you your salary. So if your salary was let's assume 75,000 and your employer told you, look, I'm only gonna pay you 70,000. I'm gonna pay you 5,000 to pay your student loans. That's not acceptable. If your salary is 75, they have to pay you that additional 5,250. That's in addition to your regular salaries. It cannot be like disguised as a tax free. So if your employer is generous and they want to help you, they can pay on your behalf 5,250 and it's non-taxable to you. I already paid my business loan. So I'm not affected by this at all, but just FYI. The payment must be made obviously before the end of the year. Not obviously, it has to be made by the end of the year. So when you file your return, you qualify for it. One more thing we want to look at is the employee retention credit. If the business was partially or fully shut down by the order of the government or if you lost 50% of your revenue, what's gonna happen is this, the government it's gonna give you what's called employee retention credit. So the credit, first of all, it's a refundable credit. It means you're gonna get money back for employers equal to 50% of the qualified wages that are eligible employer pay their employees. So if you retain your employees during this crisis, what's gonna happen is this, 50% of their wages, taxes on their wages, it's a qualified. And let's talk about the employee retention credit. So this is a credit is giving to employers, to employers, what for? Well, guess what? Because we had a government shutdown. The government says you have to shut down your business either partially or fully. As a result, they want to compensate you because you're losing revenue. So how would they compensate you through some type of credit if you retain your employees? So partial or full shutdown by the government order due to coronavirus or if you lost 50% of your revenue, you qualify for this credit. And this credit is refundable. It means you can get it back. And maybe you're gonna have a question like, employee retention credit, refundable, not refundable or something else. Just know it's refundable. It means you're gonna get money. You're gonna get money back. Although you don't owe any money, you can get some money back. It's fully refundable for employers equal to 50% of the qualified wages that eligible employers paid their employees. So basically you can get 50% of the qualified wages, but there's a limit obviously up to 5,000 per employee. And what do you mean by 50% of qualified wages? It means you are paying payroll taxes on behalf of your employer. You're gonna get 50% of that up to $5,000. The refundable payroll credit of eligible wages is from what you pay them from March till December. March, if you remember that date, I'm pretty sure everyone listening to this recording in the US at least remember that where were you March 13 when the president said we're gonna shut down the country. So this is the date from December 13 till December 31st. Again, the reason for this credit is to help businesses survive the coronavirus. Give them credit. Give them credit so they pay less taxes or give them some money back so they would survive this coronavirus. As always, I'm gonna re-invite you again to visit my website farhatlectures.com especially if you are studying for your CPA exam. Your CPA exam is a lifetime investment in your career. This is not two, three, four year investment. This is a lifetime investment. Once you pass your CPA exam, it's gonna determine your neighborhood, where you live, what car you drive, what house you live in. Take it seriously. Don't short change yourself. My subscription is pretty nominal. It's practically nothing, but it's a long-term investment. Think about it. What's less than a dollar per day for you? And it's gonna be a lifetime investment. Study hard, good luck. And of course, stay safe.