The unprecedented $2 trillion coronavirus relief package Congress signed by President Trump on Friday, March 27, has a lot to unpack in it.
The stimulus package, officially named the Coronavirus Aid, Relief and Economic Security (CARES) Act, includes funding to prop up industries like airlines, which have been hit hard by travel grinding to a near-halt, and to shore up financial lending markets. But the act also has a number of provisions designed to help out ordinary Americans and small business owners struggling with their finances as the COVID-19 virus upends normal life as we know it.
Here are the key parts of the CARES Act you’ll want to keep on your radar in the coming weeks and months — because you’re bound to benefit.
Receive a $1,200 Stimulus Check
The most talked-about part of the $2 trillion CARES Act is its provision to issue cash payments to millions of Americans. Taxpayers earning up to $75,000 a year will get $1,200 for each adult ($2,400 for married couples who file jointly and earn up to $150,000), plus $500 for each child under the age of 17. The payment amount has an income-based phase-out; if you earn $99,000 or more — or if a couple earns $198,000 or more — with no dependents, the payment drops to $0.
Most stimulus checks will be sent via direct deposit, and the IRS began issuing payments in mid-April. The first paper check payments were in the mail starting the week of April 20. However, the issuing and mailing of millions of paper checks may take some time to complete, so your payment might not arrive for weeks or even months. In order to get the stimulus check, you need to have filed tax returns for 2019 or 2018, or draw Social Security benefits, or register with the IRS portal — where you can also track your payment status.
File for Unemployment and Get an Extra $600 a Week
In addition to bumping up unemployment benefits by as much as $600 a week (depending on your state and how much you earn), the stimulus package includes unemployment insurance provisions for part-time and gig workers, as well as people who are self-employed. What’s more, those eligible can receive unemployment for up to an additional 13 weeks thanks to coronavirus relief measures. To file for unemployment, go directly to your state’s program and follow its guidelines.
Suspend Your Mortgage Payment
If you have a federally-backed mortgage and you’ve lost income due to the COVID-19 outbreak, you can get a 60-day forbearance on your mortgage payments, with the option to extend that for up to four additional 30-day periods. To do so, you must contact your lender and explain your situation; your lender can’t charge you penalties or fees during this time. The legislation also includes a 60-day moratorium against starting foreclosure proceedings against borrowers with federally backed mortgages.
Also, tenants living in buildings whose owners have federally-backed mortgages cannot be evicted for failing to pay rent for 120 days, and can’t be charged penalties or fees for nonpayment.
Catch a Break on Student Loan Interest
The CARES Act builds on previously announced student loan relief that would have given borrowers with federal student loans a 60-day forbearance and 0% interest accrual for that period. Now, the Department of Education says forbearance will last through the end of September, and interest is being held at 0% for that time period.
The one caveat is that this doesn’t apply to private student loans, only to loans held by the federal government — that is, loans that list the U.S. Department of Education as the lender. If you’re not sure if your loan qualifies, you can go to http://www.studentaid.gov to find out.
Get a Small Business Loan
The bulk of the $367 billion the stimulus package allocates for small business assistance was a $350 billion “Payroll Protection Program.” It aims to give small business owners a cash infusion to cover employee compensation — including salaries or hourly wages along with benefits — for up to two and a half months, along with other overhead expenses like mortgage payments and utility bills. Small businesses contribute most of the country’s economic activity, and lawmakers said this aid could potentially help more than 30 million small businesses stay afloat.
These funds are structured as forgivable loans with an interest rate cap of 4% and available to businesses with 500 or fewer employees. The maximum amount is $10 million, which will be forgiven if the business keeps its workers on the payroll rather than furloughing them or firing them. Small businesses can apply for emergency grants of up to $10,000 after applying for a loan to help ease an immediate cash crunch.
You can get more details from the Small Business Administration website, and apply for an SBA disaster loan here (warning: the estimated time for completing an application is over two hours). Officials said that the program was supposed to be operational starting on Friday, April 3, and that small business owners will be able to apply for loans and be approved by banks on the same day.
Paycheck Protection Program loans were available via Bank of America on Friday, April 3, but not all banks were ready right away. Soon enough, though, Chase, Bank of America, TD Bank, Wells Fargo, and other major banks announced their PPP application requirements — and within two weeks, all of the PPP money ran out. A second small business loan package is in the works as of April 24.
The U.S. Senate Committee on Small Business & Entrepreneurship and the U.S. Chamber of Commerce have resource guides to help small business owners understand their options and the ramifications.
Take Advantage of a New Tax Deadline
The CARES Act bumped the deadline for filing and paying federal income tax on your 2019 income from April 15 to July 15. If you’re anticipating a refund (which is the case for most taxpayers), it’s still a good idea to go ahead and file by April 15 or soon thereafter, so you can get that money faster.
On the other hand, if you know you’ll owe Uncle Sam, you get an extra three months to hang onto that money and use it for more pressing needs. (FYI, if you file for an extension, it will only give you until October 15, or six months from the regular filing deadline, as in any normal year.)
Make Penalty-Free 401(k) and IRA Withdrawals
The stimulus bill temporarily waives the age threshold of 59 ½ for making retirement account withdrawals without having to pay a 10% penalty. The stipulation is good for withdrawals up to $100,000 and covers IRAs, 401(k)s and 403(b)s. You also get three years to pay off the associated income tax on the distribution, or three years to pay yourself (that is, your account) back.
While it could be a lifeline if you’re strapped for cash — and you’re either ineligible for or have already tapped the other assistance options listed here — withdrawing money from your 401(k) shouldn’t be your first choice. Why? For one thing, withdrawing that money now (when the stocks are low and highly volatile) could make it hard to play catch-up later once the market recovers.
Waive the Mandatory IRA Distribution
On the other side of the coin, if you’re above the age of 70 ½ and ordinarily would be required to take a required minimum distribution from your retirement account, you can suspend that for 2020. While many Americans might welcome the extra infusion of cash at this point, retirement savers who can afford to will probably want to want to wait out the current stock market volatility and hold off on mandatory distributions this year. The amount of your required distribution is based on how much your account is worth at the end of the previous year — and stocks are down by roughly 20% from where they were at the end of 2019.
Take an Extra Tax Deduction for Charitable Donations
The new legislation lets you deduct an additional $300 to donations made to a qualified 501(c)3 nonprofit organization. This move to encourage people to give back is an above-the-line deduction, meaning that even people who don’t itemize and take the standard deduction when filing taxes will be able to take advantage of it.
Correction: A previous version of this story said that required minimum distribution requirements were delayed under the CARES Act. In fact, they are waived completely; there is no need for retirees to take an RMD for 2020.