What do the New COVID-19 Laws and Regulations Mean for Your Personal Finances?
April 9, 2020
The novel coronavirus (SARS-CoV-2) has suddenly and radically changed how Americans live, work, and do business. From learning the dos and don’ts of social distancing to coping with new kinds of job insecurity, many of us have had to make uncomfortable — even painful — adjustments over the past month.
Looking to the future, much remains uncertain. But we do know that, right now, our nation is mobilizing its considerable resources to help those most impacted by COVID-19. A vital weapon in this fight is the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
President Trump signed the CARES Act into law on March 27, 2020. His doing so created a $2 trillion relief fund for major industries (such as travel and hospitality), small businesses, and individuals.
How is this $2 trillion being divvied up? How will the CARES Act benefit the average American and their family? What does the CARES Act mean for your wallet, your bank account, your retirement fund, and your financial peace of mind? Read on the get the answers to your most pressing CARES Act questions.
Does The CARES Act Provide Direct Financial Assistance To Individuals?
Yes. Stimulus checks — otherwise known as economic impact payments — are a pillar of the CARES Act and will be issued to individual American taxpayers.
How Much Will My Stimulus Check Be?
Individuals who reported an adjusted gross income (AGI) of no more than $75,000 on their most recent tax return will receive $1,200. Married couples with an AGI of $150,000 will each receive a $2,400 payment. Parents who qualify for either a $1,200 or $2,400 stimulus check will also receive an additional $500 for every child claimed as a dependent on their tax return.
What If I Make Over $75,000? Will I Still Get A Stimulus Check?
Yes. Taxpayers reporting an AGI over the specified thresholds — again, $75,000 for individuals, $150,000 for married couples, and $112,500 for heads of households — will receive reduced payments. Check totals will decrease $5 for every $100 in AGI over those thresholds.
However, high earners may not qualify for an economic impact payment. Individuals reporting an AGI of $99,000 or more, married couples reporting an AGI of $198,000 or more, and heads of households reporting an AGI $136,500 or more will not receive a stimulus check.
I Haven’t Filed My 2019 Federal Income Tax Return Yet. Will I Still Get a Stimulus Check If I Earned Less Than $75,000 Last Year?
As the COVID-19 pandemic has coincided with the middle of tax season, many Americans have yet to file their 2019 returns. The federal government has therefore agreed to qualify individuals for stimulus checks based on their most recent return: 2018 or 2019.
Do I Still Have To File My Taxes By April 15 To Receive A Stimulus Check?
No. The IRS has extended the federal income tax filing deadline to July 15, 2020.
When Will I Get My Stimulus Check?
The most reliable projections indicate that the U.S. Department of the Treasury and the Internal Revenue Service (IRS) will begin sending payments via direct deposit (ACH transfers) in mid-April. Physical checks will likely not be mailed until the beginning of May. According to the IRS, “a web-based portal for individuals to provide their banking information” is being developed for individuals who wish to “receive payments immediately as opposed to checks in the mail.”
As of April 8, 2020, low-income taxpayers are expected to receive their economic impact payments first.
Update, 4/15/2020: The portal allowing individuals to provide their banking information and expedite their stimulus payments is now accessible. Visit the IRS website, https://www.irs.gov/coronavirus/economic-impact-payments for more information.
I’ve Lost My Job. Does The CARES Act Offer People Like Me Unemployment Benefits?
Jobless claims have spiked since many states across the U.S. imposed shelter-in-place orders in mid-March. Best estimates suggest that the unemployment rate may already be as high as 15 percent.
In response, the CARES Act includes two provisions specific to unemployment benefits. These provisions are officially known as Federal Pandemic Unemployment Compensation (FPUC), Pandemic Unemployment Emergency Compensation (PUEC), and Pandemic Unemployment Assistance (PUA).
What Is Federal Pandemic Unemployment Compensation (FPUC)?
FPUC is a federal supplement to the unemployment benefits administered by individual states. Via FPUC, those claiming unemployment benefits between April 5, 2020, and July 31, 2020, will receive an extra $600 per week.
What Is Pandemic Unemployment Emergency Compensation (PUEC)
The PUEC provision of the CARES Act extends the standard eligibility period for unemployment benefits up to 13 weeks. In Texas, those filing for unemployment insurance may now take these benefits for up to 39 weeks (up to December 31, 2020). Prior to the passage of the CARES Act, unemployment benefit eligibility in Texas expired after 26 weeks.
Additionally, should any portion of this extension period fall between April 5, 2020, and July 31, 2020, beneficiaries will also receive $600 per week in FPUC.
What Is Pandemic Unemployment Assistance (PUA)
PUA offers unemployment compensation to independent contractors (1099 employees), freelancers, and “gig workers” — all individuals who have not historically qualified for these benefits.
Individuals seeking PUA must be able to show that they are unemployed or unable to work for reasons directly related to COVID-19. For example, if the individual filing for benefits is the full-time caretaker of a family (or household) member who has been diagnosed with COVID-19, they may file for PUA.
PUA benefits are retroactive to January 27, 2020, and are available for 39 weeks, as specified in the rules for PUEC. Through July 31, 2020, PUA recipients are also eligible for the $600 FPUC supplement.
Can I Get Help With My Mortgage Through The CARES Act?
Yes. If your mortgage is federally backed — for example, insured by the Federal Housing Authority (FHA) or guaranteed through the Department of Veterans Affairs — you may be eligible for mortgage forbearance. The CARES Act requires lenders managing these home loans to suspend collections from borrowers who have lost income because of COVID-19. This suspension of mortgage payments may last up to 1 year: 180 days, followed by a possible 180-day extension.
During this forbearance period, borrowers will not accrue additional fees, penalties, or interest. Foreclosures are also prohibited until May 18, 2020.
What About My Student Loans? Does The CARES Act Forgive Student Debt?
The CARES Act has placed a temporary moratorium on repayments of federal student loans. That includes the involuntary collection, such as wage garnishment or tax refund deductions. Additionally, federal student loans will not accrue any interest during this period.
The moratorium will last through September 30, 2020.
Borrowers participating in the Public Service Loan Forgiveness (PSLF) program or an income-driven repayment (IDR) plan should also note that this moratorium will not affect their good standing or eligibility.
What About My 401(k)? How Does The CARES Act Help Me Protect My Retirement Savings?
Wall Street’s historic bull-market run came to an end in mid-March of 2020. Since then, many Americans have watched in alarm as the stock market has piled up losses — and their 401(k) balances have followed suit.
In response, the CARES Act includes two provisions that make retirement savings more liquid for those under the age of 59.
First, the new law permits individuals under the age of 59 to access up to $100,000 in COVID-19 emergency funds via their retirement savings accounts (401(k), IRA, etc.). Although these hardship disbursements are still taxable, the IRS is waiving the 10-percent penalty it typically levies on early withdrawals.
The CARES Act also doubles the amount individuals can borrow against their retirement savings. The total loan amount cannot exceed your account balance, or $100,000, whichever figure is lower. This loan program is available for the next six months and applies only to 401(k)s, not IRAs.
I’m Over 65 And Already Living Off My Retirement Savings. What Do I Need To Know About The CARES Act?
Retirees over the age of 70 can decline their required minimum distributions (RMDs) for all of 2020. According to the American Association of Retired Persons (AARP), these distributions “will reduce your 2020 tax bill... [i]f the 2020 RMDs had not been waived, you likely would have had to withdraw a greater percentage of your IRA or plan balance and pay a big tax bill on the value that no longer exists.” Additionally, Catherine Brock of The Motley Fool observes that “by keeping your money invested, you are better positioned to benefit from a market recovery.”
For more information about RMD rules, regulations, and calculations, visit the IRS website.
Is More Help On The Way?
The CARES Act is not the first offensive the federal government has launched against COVID-19, and it’s unlikely to be the last. Members of both the House of Representatives and the Senate have hinted at issuing additional direct payments to individuals. Congress may also revive a stalled infrastructure bill, creating job opportunities for hundreds of thousands of Americans eager to get back to work. You can follow all these developments and more at USA.gov.
Here at Guaranty Bank & Trust, we understand the severity of the present crisis. We also realize that our customers need our expertise, compassion, and commitment to growing together more than ever. If you have additional questions about what COVID-19 means for your personal finances, call our Customer Care Center at 888-572-9881 today. Our team members look forward to talking with you.