How The CARES Act Impacts Workers, Retirees and Small BusinessesSubmitted by Reby Advisors | Certified Financial Planners | Danbury, CT on April 2nd, 2020
From Reby Advisors, April 3, 2020
Congress just passed the largest stimulus package in American history, the Coronavirus Aid, Relief, and Economic Security Act (CARES). This was done in an effort to combat some of the pandemic’s harmful economic effects. Since the bill in its entirety is more than 800 pages long, we wanted to summarize some of the important areas that might impact you and give you direction on any actions you may need to take.
Below, we have summarized the key aspects of The CARES Act for workers, retirees and small businesses. To skip to the section most relevant to you, select an option below:
Three Ways The CARES Act Impacts Workers
One of the largest concerns clients are struggling with is the impact unemployment may have on their ability to make ends meet. While The CARES Act may not prevent workers from being laid off, it does provide assistance in helping many Americans to pay bills and feed their families through cash payments, tax filing/payment extensions and boosts to unemployment benefits.
Here are three ways this bill impacts workers:
1) Stimulus Payments
What? Most Americans will receive a stimulus payment of $1,200 plus an additional $500 for every child 16 or under.
Who? Individuals with an adjusted gross income below $75,000 and married couples below $150,000 will receive a payment of $1,200 or $2,400, respectively. Some may get a little more or a little less, depending on income. For every qualifying child age 16 or under, parents get an additional $500. Also, people who don’t normally owe taxes (seniors, low-income individuals and people with disabilities) are eligible for a stimulus payment as well.
How? The IRS says it will use your 2019 tax return (or 2018 if you haven’t filed your 2019 yet) to determine eligibility and automatically send the money to those that qualify. If the IRS already has your bank account information from direct deposits on previous tax returns, you don’t need to do anything. If your direct deposit information has changed or you’ve never given it to the IRS, you’ll need to provide your banking information through a web-based portal that is currently being created. Those who don’t typically file or pay taxes will need to file a ‘simple tax return’ providing banking information, filing status and number of dependents.
More information on the stimulus payments can be found on the IRS Economic Impact Payments page.
2) Expanded and Extended Unemployment Benefits
What? The stimulus bill increases the duration of unemployment benefits, guarantees a $600 boost to weekly checks for the next four months and extends jobless benefits to previously ineligible workers.
Who? Anyone laid off or furloughed, or anyone who quit their job as a direct result of COVID-19 is eligible. Unlike before, this legislation also extends to contractors, gig workers (like Uber and Lift drivers), freelancers and the self-employed.
How? File an unemployment claim as soon as possible in the state where you worked.
More information on how to file for unemployment in your state can be found on the Career One Stop website.
3) Federal Tax Deadline Extension
What? The IRS is extending the federal income tax filing due date to July 15, 2020, instead of the usual April 15, without penalty or interest. While many states are following suit in delaying their state tax deadlines, not all deadlines have been moved to July 15, 2020. Check here for a list of the state-by-state deadlines.
How? This is an automatic extension. Taxpayers are not required to file any additional forms or notify the IRS to qualify.
More information on this IRS tax payment and filing relief effort can be found on the news release section of the IRS website.
Provisions of The CARES Act That Impact Retirees
While many American investors are feeling financially overwhelmed, retirees may be in an even trickier situation. Not only are you caught in this economic crunch, but you’re doubly burdened by the greater health threat this virus may have on older people. Because of that, Congress passed portions of The CARES Act to positively impact the health and well-being of retirees, as well as provisions that benefit those still significantly invested in the markets.
Here are the portions of the stimulus bill that will likely have an impact on financial decisions you’ll be facing in the near future:
Stimulus check. One of the most talked about benefits of the stimulus package is the $1,200 stimulus payments for individuals who earned $75,000/year or less and $2,400 for married couples filing jointly that earned $150,000/year or less. This also includes seniors who don’t normally owe taxes and those claiming social security benefits, including retirement and disability. If you don’t need the extra money to make ends meet right now, consider tucking this check away in an emergency fund.
IRS tax deadline extension. The IRS is extending the federal income tax filing due date of April 15 to July 15, 2020 instead, without penalty or interest. This is an automatic extension that applies to all taxpayers, regardless of the amount owed, including individuals, trusts and estates, and those who pay self-employment tax.
IRA contribution extension. Along with the tax filing extension of July 15, 2020, comes an extended deadline for contributing to last year’s IRA. If you get a stimulus check and haven’t yet reached the $6,000 max (or $7,000 if you’re older than 50) for 2019, consider adding it there.
Required minimum distribution (RMD) suspended for 2020. Retirees will not be required to withdraw any amount from their retirement accounts, and no penalties will be assessed.
Nursing home and senior living attention and funding. Both the Centers for Medicare and Medicaid Services will get additional funding with the intention of providing safer, cleaner facilities to prevent the spread of the coronavirus.
Enhancements to Medicare and Medicaid services. There are numerous ways in which this law will assist in getting health services to retirees more quickly, including “telehealth" coverage, 90-day prescription refills and the extension of existing community-based, long-term care programs.
Many of these changes provide extra funding for unavoidable hardships, given the state of the economy and the state of global health. If you have any specific questions on how the coronavirus crisis will impact your retirement, please do not hesitate to contact Reby Advisors.
The Paycheck Protection Program for Small Businesses
Since many small businesses have been rocked by the widespread isolation orders forcing Americans to stay home, it’s important to have a solid understanding of the federal small business loan program now being referred to as the Paycheck Protection Program. In short, the legislation seems to be giving lenders the ability to forego the Small Business Administration’s (SBA) typically stringent approval process to allow for faster loan approval. Lenders will have the power to instantly grant any qualifying small businesses a potentially forgivable loan to help cover payroll, rent and utility expenses during this Coronavirus crisis.
So what do you need to know to qualify for cash to help keep your employees on payroll and your business operational?
What is the Paycheck Protection Program? The CARES Act legislation earmarks funds to supply non-collateral loans to small businesses in order to help cover payroll expenses. Loan forgiveness may be offered as an incentive for small business owners to keep their employees on payroll or to continue to pay bills throughout this Coronavirus crisis.
Who’s eligible for a loan? Generally speaking, any business, start-up, veterans organization, tribal business concern or non-profit with 500 or fewer employees is eligible. Sole proprietors, independent contractors and self-employed individuals are eligible as well. For businesses in the food industry, the cap of 500 employees is applied on a per-physical-location basis.
How much can you borrow? If your business is eligible for the loan program, your business can borrow up to $10 million, or 2.5 times your average monthly payroll costs (using salary amounts capped at $100,000 annually per person) – whichever amount is lower.
What does the loan cover? This type of loan can be used to cover rent, interest on mortgage payments, payroll costs, employee health benefits (including paid sick leave) and interest on other debt obligations incurred prior to the loan.
What portion of the loan might ultimately be forgiven? If you’re able to keep employees on payroll or continue to pay the company bills, the amount of the loan forgiveness may include payroll costs (capped at $100,000 annually per person), interest on mortgage payments, rent obligations and utility payments. The total amount forgiven will be reduced if you reduce wages or if your workforce decreases.
When would your loan payment be due? While repayment dates will be determined on a loan-by-loan basis, typically each loan will have an automatic deferment of both principal and interest of at least six months, with the full loan due after two years. The interest rates on loans start as low as 0.5%, and cannot exceed 4%.
When should you apply for a loan? The earlier you apply, the faster you can get relief. If you think you’ll need the help, start now.
For more information on the Paycheck Protection Act Program, the Treasury Department has released its own summary on its CARES Act resource page, and the U.S. Chamber of Commerce has a guide and checklist available as well.
Get Personal Advice
If you would like advice on how to navigate the current volatility, please do not hesitate to contact Reby Advisors. We can review your current portfolio, financial plan, and risk profile and decide if any changes are necessary. We're here to help.