The Federal CARES Act and You

The government recently approved a $2.2 trillion relief bill to help aid with the effects of COVID-19 on our economy. The relief bill is called the CARES (Coronavirus Aid, Relief and Economic Security) Act. This bill will help millions of people in this critical time.

This sweeping legislation is unprecedented in the history of our nation and provides significant economic assistance to address the impact of COVID-19. The CARES Act is over 800 pages long, but here are some of the economic provisions most relevant for you.

 

For Individuals – Recovery Rebates

Most individuals earning less than $75,000 can expect a one-time cash payment of $1,200. Married couples would each receive a check and families would get $500 per child. That means a family of four earning less than $150,000 can expect $3,400.

Tax credits are provided for individuals in the amount of $1,200 for single returns and $2,400 for joint returns, plus $500 for each child (under age 17 and qualifying for the child credit);
Credits are reduced by 5% of the excess of adjusted gross income (AGI) over these thresholds:
  • $75,000 for a single return;
  • $150,000 for a joint return; and
  • $112,500 for a head of household return:
Thus the credits would be fully phased out for income higher than the following amounts:
  • $99,000 for a single person with no qualifying child;
  • $198,000 for a couple filing a joint return with no qualifying children;
  • $218,000 for a couple filing a joint return with two qualifying children;
  • $146,500 for a single parent with one qualifying child:
    • in all cases,the level of income before the phase out is complete increases by $10,000 per child.
  • For limitation purposes, AGI is based on the 2019 tax return, if filed. If not, then AGI on the 2018 return would be the limit.
The credits are not available to anyone who can be claimed as a dependent on another’s return.
If a tax return has not yet been filed for 2019, the 2018 tax return will be the point of reference. If no tax return was filed for either year, rebates can still be sent based on information on Social Security benefit statements.
The rebates are fully available to residents of U.S. Territories, including Puerto Rico.
The IRS will send out the payments electronically if any tax refund was sent in such a manner for the 2018 or 2019 tax return – also there will be a notice by mail to the last known address that the payment has been made electronically. If not, a paper check will be sent.

 

For People who lost their Job or Can’t work Right Now

States will still continue to pay unemployment to people who qualify. This bill adds $600 per week from the federal government on top of whatever base amount a worker receives from the state. That boosted payment will last for four months. 
Typically, self-employed people, freelancers, and independent contractors can’t apply for unemployment. This bill creates a new, temporary Pandemic Unemployment Assistance program that provides unemployment coverage through the end of the year to freelancers and independent contractors and also provides an additional $600 per week for 4 months in addition to regular state benefits. Here are some of the details for freelancers and independent contractors:
  • Self-employed individuals, independent contractors, and other individuals who are unable to work as a direct result of COVID-19 public health emergency, and would not qualify for regular unemployment benefits under state law may be eligible to receive “Pandemic Unemployment Assistance.”
    • This excludes individuals who have an ability to telework with pay or individuals who are receiving sick leave or other paid leave benefits
  • The unemployment assistance is available to individuals who are unemployed, partially unemployed, or unable to work for the weeks impacted as a result of COVID-19 between Jan. 27- December 31, 2020.
  • These benefits will be administered by the states, in accordance with this new Federal law.
  • There is a maximum of 39 weeks of assistance, where the amount is equal to what is authorized under the state unemployment compensation law, plus an additional $600 per week for up to four months.

 

For Property/Homeowners

Borrowers of federally-backed mortgage loans can request a loan forbearance on their payments (without penalties, fees, or interest). Multi-family borrowers may request a similar forbearance. 
In addition, foreclosures on similar mortgage loans are prohibited for at least 60 days and evictions from properties related to several federal programs are also prohibited for a 120 day period. Here are some of the details:
  • Mortgage Forbearance – Borrowers of government-backed mortgages ((Fannie Mae, Freddie Mac, HUD, VA and USDA) can request up to 360-day payment forbearance without proof of hardship. No additional fees, interest, or penalties can be assessed for the forbearance. Except for abandoned or vacant property, there may be no foreclosure actions for 60 days from 3/18/2020.
  • Owners of multifamily properties who were current on their mortgage payments as of February 1, 2020, and have federally insured, assisted, or supplemented loan (Fannie Mae, Freddie Mac, FHA or any loans backed or assisted by any branch of the federal government, including LIHTC) may request forbearance for 30 days due to financial hardship, with extensions of up to a total of 90 days. Borrowers receiving the forbearance may not evict or charge late fees to tenants for the duration of the forbearance period.
  • Moratorium on eviction filings, or fees or penalties for tenants for nonpayment of rent for 120 days on properties insured, guaranteed, supplemented, protected, or assisted in any way by HUD, Fannie Mae, Freddie Mac, the rural housing voucher program, covered by the Violence Against Women Act of 1994.

 

For Small Businesses – Economic Injury Disaster Loans (EIDL) and 7(a) Payroll Protection Plan

The bill provides $10 billion for grants of up to $10,000 to provide emergency funds for small businesses who qualify for the Economic Injury Disaster Loan to cover immediate operating costs.
There is $350 billion allocated for the Small Business Administration to provide loans of up to $10 million per business. Any portion of that loan used to maintain payroll, keep workers on the books, or pay for rent, mortgage and existing debt could be forgiven, provided workers stay employed through the end of June.
The two main vehicles for these relief efforts are the SBA 7(b)(2) loans – Economic Injury Disaster Loans – and the SBA 7(a) loan program. Both loans are available to businesses with 500 or fewer employees that have been negatively impacted by the crisis.

 

Emergency Economic Injury Disaster Loan (EIDL) Grants (Section 1110)

  • Businesses with 500 employees or fewer, including sole proprietors, independent contractors, and cooperatives are eligible for Economic Injury Disaster Loans (EIDL) during the covered period of January 31st to December 31, 2020 in response to COVID-19.
  • The business must show hardship due to the Coronavirus.
  • During the covered period, SBA can determine loan eligibility based solely on the applicant’s credit score or use of an alternative appropriate method for determining an applicant’s ability to repay.
  • The SBA must waive any personal guarantee on loan advances or loans under $200,000.
  • Economic Injury Disaster Loans may be used for the following:
    • Paid sick leave to employees impacted by COVID-19
    • Payroll
    • Rent/Mortgage Payments
    • Debt obligations due to loss revenues
    • Increased costs for due to chain supply disruptions and materials

 

SBA 7(a) Payroll Protection Program (Section. 1102 & 1106)

  • Businesses with 500 employees or fewer, including sole proprietors and independent contractors, are eligible for SBA 7(a) loans in response to COVID-19 covering expenses for the period of February 15, 2020 through June 30, 2020. The CARES Act appropriates $349 billion to cover these loans.
  • The loan amount will be 250% of the average salary expenditures/month for the year prior to the loan, up to $10 million. For businesses not open yet in that period, the SBA will look at earlier receipts from 2020.
  • 7(a) loans can be used for:
    • Payroll, including for independent contractors and employees who work on commission;
    • Rent/Mortgage interest;
    • Utilities.
  • All or a portion of these loans will be forgivable for businesses that maintain at least 75% of the average payroll levels as in the previous year; forgivable amounts phase out as employers payroll levels drop below that.

 

For People with Student Loans

  • Suspends all payment due on federal student loans for 6 months.
  • Interest shall not accrue on these during this forbearance.
  • For the purpose of loan forgiveness, loans will be deemed paid during the forbearance.
  • Prohibits negative credit reporting or involuntary debt collection during forbearance period.
If you would like to learn more about all the contents in the CARES Act, please see the reference links below. If you have any questions or need some advice, please don’t hesitate to reach out.
Thanks and stay safe 🙂

 

Reference Links:

https://www.nytimes.com/article/coronavirus-stimulus-package-questions-answers.html
https://www.nar.realtor/political-advocacy/coronavirus-aid-relief-and-economic-security-act
https://www.npr.org/2020/03/26/821457551/whats-inside-the-senate-s-2-trillion-coronavirus-aid-package