(Updated April 13th, 2020)
The Coronavirus Aid, Relief, and Economic Security (or CARES) Act was recently passed to help the many families and businesses affected by COVID-19. Here are the top highlights you'll need to understand what’s included and what may be available to you.
Stimulus Checks and Unemployment
Yes, the government really is sending out money to families below adjusted gross income limits.
Adults will get $1,200 each, and an additional $500 per child.
Income limits are $75,000 for singles, $112,500 for heads of household, and $150,000 for couples married filing jointly.
Eligibility is based on your most recently filed tax return, and begins decreasing at a rate of $5 for every additional $100 of income above the limits. The stimulus checks are completely phased out for individuals filers with AGI above $99,000 and married filers above $198,000.
Checks will be sent to the direct deposit information you have on file with the IRS.
Quick Note: If the IRS doesn’t have your direct deposit information on file, then the checks will be mailed, so it’s important to make sure it’s up to date (you can update your address with Form 8822).
The Treasury is also in the process of setting up a web portal for you to provide where to direct your money. Check here for the latest updates.
Unemployment benefits have also been enhanced. In addition to the 26 weeks you’re eligible for through your state, the federal government will provide an additional $600 per week, and will extend those payments for four months.
Eligibility will also include self-employed independent contractors, freelancers, gig workers, temporary and part-time workers, which is huge.
The federal tax deadline has been delayed from April 15th, 2020 to July 15th, 2020. New York has also delayed its deadline to mirror the federal level.
The Treasury Department has also moved the deadline for making IRA and HSA contributions to July 15th, 2020, providing three extra months to take advantage of saving for the 2019 tax year.
For retirees, there will be no required minimum distributions (RMDs) for 2020. This also applies to inherited/beneficiary retirement accounts.
If you’ve already taken your RMD, and are now wishing you hadn't, there are a couple of options you can explore here.
For pandemic-related distributions, you can now access money from your IRA or 401(k) without paying the 10% early withdrawal penalty. You’ll still need to pay the tax on the withdrawal amount, but can spread it over three years if needed.
The maximum loan amount you can take from an employer retirement plan was also increased from $50,000 to $100,000. As a financial planner, it’s my obligation to now say to please consider only using either of these as a last resort option.
Borrowers can suspend mortgage payments for up to 12 months if their mortgage service provider holds federally-backed mortgages and if the borrower has lost income due to coronavirus.
If you’ve been affected but your mortgage is held by a private lender, it’s still worthwhile to look into what relief options are available. An increasing number of banks are suspending payments or offering special terms.
For additional information, here’s a good summary of what mortgage relief options are available.
All federal student loan payments can be deferred until September 30th. No interest will accrue on your outstanding debt during this period, and missing payments will not affect any loan forgiveness eligibility.
Important note: The Department of Education recently announced that most student loans will be automatically placed in forbearance.
That means if you have payments scheduled or still plan to pay, you’ll most likely have to do so manually until (at least) September 30th. Not a bad tradeoff for 0% interest.
The CARES Act includes significant relief for small businesses. If you’re a small business owner or self-employed, there are three main programs you’ll want to make sure you know about: the Paycheck Protection Program (PPP), Economic Injury Disaster Loans (EIDLs), and the Families First Coronavirus Response Act (FFCRA).
There’s too much detail to list here, and the information around each has been evolving daily.
Here are some of the best resources I’ve seen regarding each program:
There are many details to the CARES Act, and this is meant to a summary of the highlights most likely to be of interest to readers. We encourage you to speak with your advisor or tax professional to determine the best steps for your situation.
If you or someone you care about has been impacted by COVID-19, I'd like to help. I have been and will continue to be offering pro bono financial planning to families facing financial challenges due to the pandemic. This is a genuine offer to relief some of the hardship families are facing, with no strings attached.
To pick my brain with your questions about the stock market, your finances, current events, or anything in between, you can schedule a 30-minute phone conversation during my weekly pro bono hours by clicking here.
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Brett Koeppel is a fee-only Buffalo financial advisor, CERTIFIED FINANCIAL PLANNERTM , and the Founder/President of Eudaimonia Wealth. Eudaimonia Wealth is a fee-only, fiduciary Buffalo financial planner and wealth management firm dedicated to helping families prepare for and transition into retirement by providing independent, objective financial planning and investment management advice.