5 Takeaways From The Coronavirus Stimulus Package
As you may know, Congress recently passed the largest stimulus package in American history, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Since the bill in its entirety is more than 800 pages long, we wanted to summarize five areas that may impact you and actions you will need to take.
1. Stimulus Payments
What? Many Americans will receive a stimulus payment of $1,200 plus an additional $500 for every child 16 or under.
Who? Individuals with an adjusted gross income below $75,000 and married couples below $150,000 will receive a payment of $1,200 or $2,400, respectively. Some may get a little more or a little less, depending on income. For every qualifying child age 16 or under, parents get an additional $500. Also, individuals who don’t normally owe taxes (seniors, low-income individuals and individuals with disabilities) are eligible for a stimulus payment as well.
How? The IRS says it will use your 2019 tax return (or 2018 if you haven’t filed your 2019 yet) to determine eligibility and automatically send the money to those that qualify. If the IRS already has your bank account information from direct deposits on previous tax returns, you don’t need to do anything. If your direct deposit information has changed or you’ve never given it to the IRS, you’ll need to provide your banking information through a web-based portal currently being created. Those who don’t typically file or pay taxes will need to file a ‘simple tax return’ providing banking information, filing status and number of dependents.
More information on the stimulus payments can be found on the IRS Economic Impact Payments page.
2. Expanded and Extended Unemployment Benefits
What? The stimulus bill increases the duration of unemployment benefits, guarantees a $600 boost to weekly checks for the next four months, and extends jobless benefits to previously ineligible workers.
Who? Anyone laid off, furloughed, or who quit their job as a direct result of COVID-19 is eligible. Unlike before, this legislation also extends to contractors, gig workers (like Uber and Lyft drivers), freelancers and the self-employed.
How? File an unemployment claim as soon as possible in the state where you worked. More information on how to file for unemployment in your state can be found on the Career One Stop website.
3. Federal Tax Deadline Extension
What? The IRS is extending the federal income tax filing due date to July 15, 2020, instead of the usual April 15, without penalty or interest. While many states are following suit in delaying their state tax deadlines, not all deadlines have been moved to July 15, 2020. Check here for a list of the state-by-state deadlines.
Who? This deferment applies to all taxpayers, regardless of the amount owed, including individuals, trusts and estates, and those who pay self-employment tax.
How? This is an automatic extension. Taxpayers are not required to file any additional forms or notify the IRS to qualify. More information on this IRS tax payment and filing relief effort can be found on the news release section of the IRS website.
4. IRA Changes
IRA contribution extension. Along with the tax filing extension of July 15, 2020, comes an extended deadline for contributing to last year’s IRA. If you get a stimulus check and haven’t yet reached the $6,000 max (or $7,000 if you’re older than 50) for 2019, consider adding it there.
Required minimum distribution (RMD) suspended for 2020. Retirees will not be required to withdraw any amount from their retirement accounts, and no penalties will be assessed.
5. Small Business Loans
The CARES Act established several new temporary loan programs to provide relief to small business owners. One such program is the Paycheck Protection Program, which offers non-collateral loans to small businesses to help cover payroll expenses. Loan forgiveness may be offered as an incentive for small business owners to keep their employees on payroll.
Who is eligible for a loan? Generally speaking, any business, start-up, veterans organization, tribal business concern or non-profit with 500 or fewer employees is eligible. Sole proprietors, independent contractors and self-employed individuals are eligible as well.
How much can you borrow? If your business is eligible for the loan program, your business can borrow 2.5 times your average monthly payroll costs (using salary amounts capped at $100,000 annually per person) up to a maximum of $10 million.
What does the loan cover? This type of loan can be used to cover rent, interest on mortgage payments, payroll costs, employee health benefits (including paid sick leave) and interest on other debt obligations incurred prior to the loan.
What portion of the loan might ultimately be forgiven? If you’re able to keep employees on payroll or continue to pay the company bills, the amount of the loan forgiveness may include payroll costs, interest on mortgage payments, rent obligations and utility payments.
When would your loan payment be due? While repayment dates will be determined on a loan-by-loan basis, typically each loan will have an automatic deferment of both principal and interest of at least six months, with the full loan due after two years. Interest rates start as low as 0.5%, and cannot exceed 4%.
When should you apply for a loan? The earlier you apply, the faster you can get relief. If you think you’ll need the help, start now.
For more information on the Paycheck Protection Act Program, the Treasury Department has released its own summary on its CARES Act resource page, and the U.S. Chamber of Commerce has a guide and checklist available as well.
While no one truly knows just how extensive the impact of this economic downturn will be or how long it may last, the CARES Act is essential in leading us toward a healthy path to recovery.
As always, please reach out with any questions you may have. Let’s get through this together.
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