The CARES Act: What You Need To Know
There has been a myriad of recent media buzz regarding the coronavirus stimulus package, or the CARES (Coronavirus Aid, Relief, and Economic Security) Act. Social media is regularly flooded with comments, memes, and news articles about the infamous $1,200 relief checks adults will supposedly be receiving in the near future.
But how is this $2 trillion bipartisan relief package broken down exactly? StratGrow is here to assist you.
LUMP SUM PAYMENT:
This stimulus package includes direct payments of $1,200 for every adult, and $2,400 for every married couple, plus an extra $500 per child. Note: these payments may be affected if your gross income is over a certain threshold:
- $75,000 for single filers
- $112,500 for single heads of household
- $150,000 for married couples filing jointly
If you’re a college graduate burdened by student loan debt, you may be in luck. All federal student loan payments have been suspended until September 30th, 2020. This is optional, and you can still continue to pay your loans if you so choose. However, there will be no late fees or other penalties if you don’t pay them through September. Please note that this does not include private student loan borrowers. If you have any private loans, you’ll want to check on the status of those separately.
It’s no secret that many small businesses have been greatly affected in the wake of the coronavirus. Due to social distancing protocols, many have had to close their doors, leaving employees uncertain about their financial future.
Fortunately, of the $2 trillion stimulus bill, $350 billion has been allocated for small businesses. This provision has been dubbed the Paycheck Protection Program. Until June 30th, 2020, small business owners can apply for a loan to cover 2.5 times the cost of their average monthly payroll. This money can also be used toward debt obligations and other expenses such as rent, mortgage, utilities, etc. If the business keeps all of its employees, the loan will be forgiven. If they still have to lay off employees, then the loan forgiveness will decrease by the percentage reduction in overall staff.
Any business with under 500 employees can apply, as well as sole proprietors and self-employed individuals. The loan amount that businesses are able to receive is maxed out at $10 million, and the interest rates are capped at 4% as well.
This measure is a comprehensive step towards keeping our country’s diverse small business environment afloat during this chaotic time period.
The international coronavirus outbreak has also wreaked havoc in the American marketplace over the past few months, causing many people’s retirement savings and other investments to suddenly dwindle overnight.
So, if you’re looking to cash out your 401k, you may also be in luck. The CARES Act has also waived the infamous 10% penalty fee associated with cashing out your 401k too early (before the age of 59 and a half). This penalty fee waiver applies if you’ve experienced financial hardship due to being either diagnosed with COVID-19 or been out of work because of it.
Note that these distributions of funds will also be reflected in your gross income, and subject to regular income tax. These funds can also be re-distributed into your account within three years.
While this sudden 401k withdrawal may be a financial lifeboat for some, it should be seen as a last resort to avoid crippling your hard-earned retirement savings.
If you are subject to RMDs, you are not being forced to take them out this year.
As of April 2020, a record 6.6 million Americans have applied for unemployment during this crisis. This relief bill expands unemployment benefits by adding up to $600 per week on top of state benefits. The specific rules and other guidelines vary from state to state. This will help keep workers afloat during this period of uncertainty. By spending this money on essentials, they’ll be directly contributing back to our economy, as well.
HOW TO APPLY:
In most cases, no action is required in order to receive your check. If you’d like, there is a direct deposit option instead of just receiving it in the mail. They will be sent out over the next three weeks.
However, if you have not filed your 2019 taxes, then you should do so immediately, as that may affect the amount you receive. As stated before, if your income eclipses a certain financial threshold, you may not be eligible for this economic relief check.
There are already several coronavirus therapies in development as we speak. There’s a broad focus on the separate areas of diagnostics, treatment, and vaccines. Researchers, scientists, and other experts are breaking new ground every single day.
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