COVID-19 Financial Assistance: What is the CARES Act and What Does it Mean for You?

COVID-19 Financial Assistance: What is the CARES Act and What Does it Mean for You?

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The world has changed unrecognisably over the last couple of months. International travel has all but ground to a halt, we’ve lost access to leisure facilities we previously took for granted, and some of us have lost our jobs or seen huge disruption to our businesses.

Thankfully, the government passed the CARES (Coronavirus Aid, Relief and Economic Security) Act on March 27th 2020, bringing over $2 trillion in economic relief to help workers and business owners to weather the storm. But it’s complicated. At first glance, it’s really hard to pick apart just what the CARES Act is and what it means.

As far as individuals are concerned, financial assistance through the CARES Act is already trickling in. Make sure you’re fully informed and not missing out on any of the help you’re able to get – have a look to see which of these apply to you and your family.

For business owners, things are a bit up in the air at the moment. We’ll be covering this side of things in detail though as soon as plans have been confirmed. As of now, the SBA announced loans to help businesses survive the pandemic, but applications have been halted.

It seems that any day now we’ll get an announcement about new measures for small businesses but until then, check the SBA website for the remaining options, temporary debt relief and the Express Bridge Loan program.

If Your AGI was Below $75,000 or $150,000 for Joint Filers…

If your adjusted gross income was below $75,000 as a single person, or $150,000 if married and filing jointly then you may qualify for a check for up to $1,200 (single) or $2,400 (MFJ) and up to $500 for children younger than 17. If your income was above that threshold but under $99,000 ($198,000 MFJ), you’ll receive a payout too – the payment is reduced incrementally.

You do not need to do anything – deposits will be made into your bank account that the IRS has details of from your tax filing.

If you have more questions about these payments, you’ll hopefully find the answer you need here.

If Coronavirus Has Prevented You from Working…

If you work for a small employer (with under 500 employees), you may be eligible for 10 days of sick leave and up to 50 days of partially-paid family leave for workers caring for children due to school closures. This is emergency paid leave – it’s added on to your existing leave allowance. Ask your employer for more information, or your local unemployment insurance program.

More people are now eligible for unemployment benefits, and those eligible are now receiving up to $600 more per week and extended the benefits period by 13 weeks. Unemployment programs have been expanded too – if you now find yourself unable to work, contact your local unemployment insurance program, check your eligibility and apply for financial help.

If You Own a Mortgaged Home or Pay Rent…

If COVID-19 has affected your ability to pay your mortgage, under the CARES Act you can get help either through forbearance (pausing your payments) or by preventing foreclosure on your property. Find more information here.

For those in residential rental properties, while the CARES Act does not mean you do not have to still pay your rent, it stops landlords from initiating eviction proceedings over the next few weeks (currently until July 25 2020).

What the CARES Act Means If You Have Student Loans…

If you have federal student loans, the CARES Act granted a 60-day suspension of payment and no interest will accrue on your loan during this time either. You may pause payments on your federal student loans until September 30, 2020.

Your employer can pay up to $5,250 of your student loan on a tax-free basis until the end of 2020 and this isn’t going to count towards your wages as an employee so it’s a win-win for employers and employees.

If You Need Cash from Your Retirement Accounts…

Coronavirus-Related Distribution

Under the CARES Act, if you, your spouse or a dependent have been diagnosed with COVID-19, or have been financially impacted by it, you can have access to up to $100,000 of your retirement savings without paying the usual 10% penalty for early withdrawal or the mandatory withholding.

The income from this distribution can then be reported over a three-year period, easing the tax implications on it. You can also put the distributions back into the account over the same three-year period.

Loans from Retirement Plans

Under the CARES Act, it will be possible to take a loan of up to $100,000 (if it does not exceed the balance) from a 401k retirement plan, and repayments on such loans taken during this period or before can be delayed for up to one year.

How the CARES Act will Affect Your Money If You are Subject to an RMD in 2020…

Under the CARES Act, 2020 RMDs are waived. This is to give the accounts more time to recover from the stock market plunges that we’re seeing at the moment. It’s also going to have a knock-on effect on tax bills as no tax will be due on the money that can now stay in the account.

If you’ve taken your 2020 RMD within the last 60 days, you may be able to return it. There are complications though, so you might want to get in touch to talk it through if you’re in this position. If you have met the criteria for a coronavirus-related distribution, you have more room here – with a rollover, you can return any distributions within three years of them being made.

Finally, at least as far as RMDs are concerned, if you have a trust or estate that is a non-designated beneficiary of a retirement account and is subject to the 5-year rule, under the CARES Act you can disregard 2020 completely, extending the distribution timeframe to six years.

If You Need to Delay Filing Your Federal Income/Gift Tax Return…

Under the CARES Act, all tax filings that were due on April 15, 2020 have been granted an automatic extension until July 15 2020.

If You Need to Delay Payment of Your Federal Income/Gift Tax Liability…

2019 tax payments and 2020 estimations that were due on April 15, 2020 have been granted an extension until July 15, 2020. However, any estimated income tax payments for 2020 Q2 are still due on June 15, 2020.

If your state offers individual income tax filing or payment relief, see if you will be eligible. If you’d benefit from help to work out what that means for you, get in touch – we can talk it through.

If You Plan to Make Charitable Gifts…

The CARES Act now allows a non-itemized charitable deduction of up to $300 when contributions are made to certain charities. In addition, itemizers will face no annual limit on their 2020 charitable deductions, meaning you can deduction contributions of up to 100% of your AGI – for 2020 only.

Helping You Navigate These Uncertain Times

Emotionally, the effects of living through this dreadful episode of history are hard to bear – financially, it’s a different matter again. If COVID-19 has disrupted your work, your business or your finances, it’s doubtless a very unsettling time – it might feel as if it’s thrown your financial plans completely off course.

But there is help out there, either through the CARES Act and the financial assistance that it’s offering at this time of emergency, or through a quiet sit-down and review of your financial picture. Don’t forget, we’re here if you need a helping hand to make sense of what your new situation might mean, in the long and the short term.

Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. While familiar with the tax provisions of the issues presented herein, Raymond James financial advisors are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional.
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Tanya Nichols, CFP®
Tanya Nichols is a fee-based CERTIFIED FINANCIAL PLANNER™ professional located in Duluth, MN and serving clients across the country. Align Financial takes a simple but deeply impactful approach to wealth management, connecting your money to your life in a way that feels right to you.

Because Align Financial is independent of Raymond James, the expressed written opinions above are our own and not necessarily reflective of Raymond James’ opinions. Read our full disclosure here.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and CFP® in the U.S.