What you should know:
Coronavirus has shown us firsthand what a once in a lifetime catastrophe looks like.
Whether you’ve been a longstanding client or a newcomer to our site, we understand that most likely, COVID-19 has had a toll on you too.
After the recent passing of The CARES (Coronavirus Aid, Relief, and Economic Security) Act, many parts of the bill have helped alleviate millions of Americans blighted by this crisis. And although there isn’t quite a universal blanket that can help everyone, the act definitely has some pieces you should consider in helping you get back on your feet. Here’s what we’ve learned:
The $1,200 Stimulus Check Isn’t Taxed
Our first piece of good news is that the widespread $1,200 check isn’t taxed. Expected to hit bank accounts by April 17th if you have direct deposit with the IRS, the Economic Impact Payment is a staple part of The CARES Act. Although there’s no immediate word on if another stimulus check is coming after the one-time payment, people can sign up for direct deposit here, as well as verify their eligibility. As it currently stands, the income brackets for the full $1,200 are as follows:
- Individuals who make less than $75,000 and married couples who make less than $150,000 are fully-eligible for the $1,200 payment.
- The payment is reduced to $5 per $100 earned over those thresholds.
- The program caps at individuals above $99,000 for individuals and $198,000 for couples, declaring them ineligible.
If you happen to owe money to any state or federal tax agency, don’t sweat, as the payments aren’t going to count against anything or be garnished. Instead, this money will safely hit your account if you sign up correctly for direct deposit with the IRS.
Unfortunately, Unemployment Benefits Are Still Taxed
One change we’re disappointed in not seeing any action on is that unemployment benefits are still taxed. Although there isn’t that level of temporary relief The CARES Act does enable you to get a $600 per week payment under unemployment insurance (upon approval from your state agency). If you’ve lost work from Coronavirus, this is still a great opportunity to have some residual money coming in depending on your eligibility for benefits.
These stressful times are only temporary.
The Paycheck Protection Program is a Lifesaver (even if you’re self-employed)
One of our favorite pieces to come from The CARES Act is the Paycheck Protection Program. Essentially, this is a rare opportunity for anyone that owns a business or is self-employed to apply for a forgivable loan. Here’s how it works:
- Individuals or businesses can apply for a loan with everyone getting the same terms. Payroll costs are capped at $100,000.
- The amount of your loan is determined as your average monthly income times 2.5 over the course of two months. So, if your business was bringing in $10,000 per month, you would be eligible for a $50,000 loan (($10,000 x 2) x 2.5).
- The loan must primarily be used for payroll purposes if you want the full-forgiveness. For self-employed individuals, this means essentially paying yourself a wage. Outside of wages and payroll, things like rent aren’t quite guaranteed.
- Applications began April 3rd for small businesses and sole proprietorships, as well as April 10th for independent contractors and self-employed individuals through approved SBA lenders.
As we stated above, the loan can be completely forgiven if you follow the rules and work with a good SBA lender. Check in to the guide above for the full details, and don’t hesitate to reach out if you want to learn more.
The Tax Deadline Is Extended
The IRS has extended the tax deadline from April 15th to July 15th. A good opportunity to use if you still need to get your finances in order, this delay can give you a chance to catch up on some other alternative solutions you might need to work out for your federal and state tax liability.
Garnishments Are Put On Hold
As we mentioned above, garnishments on the federal level have been put on hold, including for unpaid tax liability, student loans, and unpaid healthcare dues. With the break, perhaps consider saving up for an offer in compromise on what you might owe, giving you a chance to knock out a lot of debt over your head in one swoop.
Be On The Lookout for Private Benefits Too
Finally, private companies are starting to foot the bill for Coronavirus losses too. For example, according to the LA Times, Airbnb hosts are getting up to $250 million from the company for lost income. If you find yourself in a similar gig work or side-hustle situation, it might not be a bad idea to check-in and see what might be available for you, as benefits like these are an excellent opportunity to add to your relief package.