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The CARES Act: What You Should Know About the Coronavirus Relief Stimulus Package

Breaking Down the $2 Trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act – What’s Included & How Affects You

The Coronavirus Aid, Relief, and Economic Security Act (a.k.a. CARES Act) was signed into law by President Donald Trump on March 27, 2020.

This historic stimulus package allocates funds for a number of programs – including stimulus checks for many individuals, loan relief for small businesses and students, and expanded unemployment benefits – among other legislative items.

Here’s an overview of the programs that have been affected/created by the CARES Act and who is impacted by these changes:

  • Stimulus checks for individuals
  • Expanded unemployment benefits for workers
  • Student loan relief
  • Withdrawals from retirement accounts
  • Donations to charitable organizations
  • Small business loan programs
  • Loans for big corporations
  • State and local government programs
  • Public health
  • Education/Schools

Stimulus Checks for Individuals

The CARES Act provides economic impact payments for most Americans. The maximum payment amount for an individual is $1,200 (or $2,400 for a married couple filing a joint tax return). Most people who qualify will receive the full amount, however, some will get less. The amount of your stimulus check is based on the most recent federal tax return you filed with the IRS (from tax year 2018 or 2019).

Your eligibility for a stimulus payment depends on your annual income. You will get a check if you earn:

  • Below $99,000 for Single Filers
  • Below $198,000 for Married Couples Filing Jointly
  • Below $136,500 for Head of Household Filers

You do not have to apply to receive a stimulus payment. However, in order to be eligible, you need to have a Social Security Number (SSN) and you must have filed a federal income tax return for years 2018 or 2019. Your stimulus check will be based on the information from the most recent tax return that you filed with the IRS.

Note that if you typically don’t file a tax return, you can file a “simple tax return” if you want to receive a stimulus check. If this applies to you, you can enter your information using the IRS “Economic Impact Payments” online tool for non-filers.

The stimulus payments are not subject to tax (nor will it affect your tax refund) and you are still eligible even if you owe back taxes. Most Americans will receive the money via Direct Deposit to their bank account. If the IRS does not have your bank information on file, they will send you a paper check in the mail.

The IRS has an online tool where you can check the status of your Coronavirus relief payment and see when it will arrive. The IRS will be updating this platform once a day. For information about looking up the status of your stimulus check, visit the “Check Payment Status” site.

For more details about economic impact payments, see this page: Information About Stimulus Payments

Expanded Unemployment Benefits

The CARES Act expands the unemployment benefits program and allows for many more individuals to qualify for aid. Eligible workers can now receive an extra $600 per week in addition to their state unemployment benefits. This extra payment will last up to 4 months.

Americans who are unemployed, partially unemployed, or cannot work because of reasons related to the COVID-19 crisis are more likely to receive unemployment compensation under the CARES Act. Self-employed people are also eligible for benefits thanks to the expanded program.

Qualified jobless individuals are being provided an additional 13 weeks on top of whatever existing unemployment benefits are available to them. For instance, if your state already pays for 26 weeks of unemployment compensation, you are now eligible for 39 weeks total.

The expanded unemployment program is available to people who are newly eligible for benefits for weeks starting on January 27, 2020 and through December 31, 2020. You don’t have to apply separately to receive the additional unemployment benefits – your eligibility depends on whether or not you qualify for your state’s benefits program.

For more details, see this page: Information About Unemployment Benefits

Student Loan Relief

Student loan payments have been suspended for 6 months (until September 30, 2020) thanks to a provision in the CARES Act. Interest will not accrue on these loans during this period. Additionally, the federal government will not garnish wages, Social Security benefits, or income tax refunds as collection for student loan debt. While the CARES Act provides some temporary relief, it does not forgive any student loan debt.

Note that this applies to student loans that are held by the federal government through the U.S. Department of Education. You must have a “direct loan” from the federal government to be eligible for the 6-month payment suspension. You can check if your loan qualifies by logging in to your account on the Federal Student Aid website. If the listed owner of your student loan is the U.S. Department of Education, then you are qualified for the payment suspension.

The CARES Act relief program does not apply to private student loans (held by private lenders such as Wells Fargo, Discover, and Sallie Mae), loans from state agencies, or Federal Family Educational Loans (FFELs) that aren’t owned by the U.S. Department of Education. But keep in mind that these lenders may be offering their own type of student loan relief options, so you should ask them for any assistance available.

For more details, see this page: Information About Student Loan Aid

Retirement Accounts

If you have an individual retirement account or workplace retirement savings plan (e.g., 401(k)), you are not required to take a minimum distribution for the year 2020. This means you won’t be forced to sell any investments that have lost value due to the COVID-19 epidemic.

However, if you do need to withdraw money from your retirement account early for Coronavirus-related reasons, you are allowed to take out up to $100,000 in the year 2020 without incurring the normal 10% penalty for early withdrawal. Furthermore, you can spread out any income taxes due over 3 years after the date when you took the distribution.

You are still permitted to borrow from your workplace retirement plan (such as your 401(k)) during this time. The CARES Act allows you to borrow twice the usual amount – up to $100,000 – if you have certification that you’ve been affected by COVID-19. The normal rule that prevents individuals from withdrawing more than half their balance has been suspended. For people who already have a loan that is due before the end of this year, you will get an extra year to repay it.

Tax Break for Charitable Donations

The CARES Act creates a new tax deduction for taxpayers who donate to a qualified charitable organization that helps people who are suffering from the Coronavirus epidemic. This new rules allows you to deduct up to $300 in yearly charitable contributions. It is available beyond tax year 2020, but you cannot itemize your deductions if you want to claim this tax break.

The limit on charitable deductions has also been changed for 2020. If you donate cash to a qualified charitable organization, you can deduct 100% of your gift (i.e. subtract it from your adjusted gross income). For example, if you donate $50,000 to a public charity, you can deduct that entire amount on your 2020 tax return.

Small Business Loan Relief

The CARES Act provides $349 billion under the Small Business Administration (SBA) to provide loans to struggling businesses. The SBA’s programs include the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) program.

The Paycheck Protection Program is available to businesses through June 30, 2020. The PPP is a loan program designed to help businesses keep their workforce employed during the COVID-19 crisis. PPP loans do not require collateral or personal guarantees. Loan payments are automatically deferred for 6 months and there are no fees to obtain a PPP loan. Your PPP loan will be fully forgiven if all of your employees are kept on the payroll for at least 8 weeks and the funds are used for payroll, interest on mortgages, rent, and utilities bills.

Thanks to the CARES Act, obtaining an EIDL will be easier for businesses. The EIDL Emergency Advance provides up to $10,000 of economic relief to small businesses that are suffering from temporary difficulties and loss of revenue due to the Coronavirus pandemic. Similar to a PPP loan, this loan advance is managed by the SBA and it does not have to repaid if the guidelines are followed.

For more details, see this page: Information About Loan Relief Programs for Small Businesses

Big Corporations

The CARES Act gives approximately $500 billion to big corporations, which will be required to pay back these loans. For instance, the airline industry received money to help airlines stay open and to cover employee wages/salaries and benefits.

A fully refundable tax credit has also been established for businesses of all sizes that are having trouble paying employees. Ideally, the goal is to make companies able to hire back these workers or keep them on paid furlough so there are jobs to come back to. This tax credit is worth up to 50% of a business’s payroll for the first $10,000 of employee compensation.

State & Local Governments

Approximately $400 billion from the CARES Act goes to state and local governments. This funding is intended specifically for programs that deal with COVID-19 response efforts, including direct aid in some cases where localities have run out of money.

Public Health

Since this is a public health crisis, the CARES Act provides funding for a number of health care systems. $100 billion is designated for hospitals that are responding to the Coronavirus crisis. About $1.3 billion is given to community health centers that offer health care services for nearly 30 million people. To help with drug access, $11 billion is provided for diagnostics and treatments, and there is $80 million for the Food and Drug Administration (FDA) to help expedite the drug approval process. The Centers for Disease Control and Prevention (CDC) receives $4.3 billion for its Coronavirus response efforts. Additionally, approximately $16 billion is given to the Strategic National Stockpile to increase supplies and the availability of medical equipment (including masks and ventilators).

Other Education

The CARES Act provides about $13 billion for K-12 schools, $14 billion for higher educational institutions, and $5 billion for family/children programs (such as assistance for child care centers) – as well as funding for many other education programs.

The bill also allows employers to offer up to $5,250 of financial assistance for an employee’s education costs and it won’t count as part of the employee’s income. This new exemption is effective from the date the CARES Act was signed (March 27, 2020) until the end of the year (December 31, 2020).

Additional Coronavirus Relief Programs

There are a few other items that have been affected by the COVID-19 crisis but were not part of the CARES Act.

IRS Extends Tax Deadlines for COVID-19 Relief

The tax deadline for 2019 federal tax returns (Form 1040) would typically be April 15, 2020. However, in light of the Coronavirus epidemic, the filing due date has been moved to July 15, 2020. This also applies to income tax payments that would normally be due by April 15, 2020 – they are now due by July 15, 2020 as well. If you are required to make estimated tax payments for tax year 2020 that are due on April 15, 2020, you have until July 15, 2020 to do so.

This is an automatic tax extension that applies to all federal taxpayers (including individuals, corporations, non-corporate tax filers, and people who pay self-employment tax). It means that taxpayers can defer their income tax without suffering any penalties or interest, regardless of the amount owed. You do not need to file any additional documents or contact the IRS in order to receive this tax relief.

For more information, see this page: IRS Announces Extended Deadlines and New Legislation in Response to the Coronavirus Outbreak

$484 Billion Interim Bill (April 24, 2020)

President Trump recently signed an “interim” coronavirus relief bill on Friday, April 24, 2020. This legislation provides another $484 billion in funding for response and relief programs. It is expected to bridge the gap between the CARES Act and the next upcoming piece of COVID-19 legislation, which is already being discussed by lawmakers.

For more information, see this page: $484 Billion Interim Coronavirus Relief Bill Signed Into Law

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