As you have likely heard, the government passed the CARES Act on March 27th, 2020, to provide relief to the many Americans who are faced with financial uncertainty due to the fallout associated with the COVID-19 pandemic. The $2 trillion bill is designed to help both individuals and small businesses by providing economic support, tax relief, and more. However, conflicting reports can make understanding the details of the CARES Act confusing, so we have broken down the most relevant information into an easy-to-understand format.
Here are the key takeaways from the newly instated CARES Act:
Economic Impact Payments
Economic impact payments, also being referred to as stimulus payments or checks, are being issued to the majority of Americans. Under the CARES Act taxpayers are being granted a one-time payout in the form of an economic stimulus payment.
How Much Money Will You Get?
The amount of money you will receive depends on your filing status, income, and whether you have children. Each qualifying taxpayer earning under $75,000 will receive a lump sum of $1,200. Married couples earning $150,000 or less will receive $2,400 ($1,200 for each individual). Those who have children will receive an additional $500 per child.
For those who are over this income threshold, you may still receive a stimulus check, but the payment you qualify for will be less. If you are a single filer and earn over $99,000, or married filing jointly and make over $199,000, you will not receive a stimulus payment.
When Will Stimulus Payments Be Received?
Stimulus payments are scheduled to be sent out at the beginning of April. Those who have direct deposit should receive their payment within the standard 3-week turnaround used for tax refunds. If you have not set up direct deposit, it is strongly recommended but you can also receive your check by mail, it may just take longer.
If you have questions about how your taxes will impact your stimulus payment or other tax implications of coronavirus, you should speak with a tax expert, like the professionals at Community Tax. A tax preparer can review your personal circumstances, answer any outstanding questions, and help you file your 2018 or 2019 taxes if you need to do so in order to get your economic income payment.
Based on the most recent reports, there are 67 million Americans who are working jobs that are at high-risk of layoffs and the national unemployment rate is expected to surpass 32% in the near future. Reaching record-levels of unemployment, more and more Americans are going to be in need of unemployment benefits.
Fortunately, in addition to direct relief payments, unemployment benefits have been bolstered to help Americans survive during these uncertain financial times. The main initiatives of the updates to unemployment benefits through the CARES Act are to expand the eligibility of these benefits, increase the support provided to those who are using the program to survive, and extend the timeline to receive benefits.
Who Qualifies for Unemployment Benefits?
Thanks to the stipulations in the CARES Act, more Americans can qualify for unemployment benefits. This now includes:
- Self-employed workers
- Independent contractors
- Gig economy workers (such as Uber or Lyft drivers)
If you are unsure whether your profession qualifies, you may want to follow up with your state’s unemployment office. You can submit your application for unemployment on their website.
How Much Unemployment Can You Qualify for?
Unemployment benefit amounts vary from state to state. However, in addition to the normal unemployment benefits you would receive from your state, you may also be able to receive an additional $600 per week.
Understandably, many individuals have been stressed about being able to make their tax payments and pay for filing by April 15th. The CARES Act has addressed this concern by providing an automatic extension for filing and paying income taxes. The new income tax deadline is July 15th, 2020.
In addition to federal income taxes, state income taxes have also been pushed back to July 15th, 2020, or even later in some cases. Check your state’s government website to find out when your state income tax deadline is. These tax filing extensions are automatic, but if you find yourself needing even longer to file or pay, you can submit a further extension which should give you until October 15th, 2020 to sort your tax obligations out.
Above and beyond filing your taxes, you can also breathe a sigh of relief if you owe tax debt. Tax debts including both penalties and interest will be suspended until after the extended deadline.
Withdrawing Retirement Funds
You may be finding yourself considering the possibility of supplementing your income loss by dipping into your retirement savings. If you need to, you can do so without the typical penalties.
While there has previously been an early withdrawal fee for retirement savings accounts, the CARES Act has waived this fee for withdrawals of up to $100,000 in 2020. This applies to withdrawals from 401(k), 403(b), or governmental 457(b) plans.
That said, funds taken from your retirement accounts are still subject to tax. However, the taxes can be spread out over the course of three years.
The majority of federal student loan repayments have been temporarily paused. Based on the stipulations in the CARES Act, interest will stop accruing and payments will be deferred until September 30th, 2020 for qualifying loans.
This six-month grace period is intended to give those experiencing financial hardship a reprieve from these often high payments. It will also temporarily suspend involuntary collections for those who have defaulted on their loans.
It is important to note that not every federal student loan qualifies so it is essential to check with your loan provider before your next payment is due.
It has been top of mind for many Americans that, if they become ill with COVID-19 (more commonly referred to as coronavirus), they may not be able to afford testing. Under the CARES Act, COVID-19 testing and vaccinations will be covered at no cost to patients.
The CARES Act is hundreds of pages long, so of course every detail has not been covered here. However, the topics we’ve covered are likely the ones that will immediately impact you most. Hopefully, this guide has brought you some peace of mind and clarity as to what your next moves need to be in order to figure out your financial situation.
Alexis Maness has a Bachelor of Science in Integrated Marketing Communications and is a contributing editor for 365businesstips.com. As a professional content writer, she has over five years of experience and is a contributing writer for several San Diego magazines. Alexis specializes in topics related to business, marketing, finance, and hospitality and tourism.