CARES Act Economic Relief Plan for Individuals and Families

The information below is a summary of the CARES Act recently passed signed by President Trump to mitigate the financial impact of the coronavirus pandemic. This information is subject to change as additional details emerge around how these programs will be implemented. The complete CARES Act is available from the link below.
https://www.congress.gov/bill/116th-congress/house-bill/748/text

DISCLAIMER: Fiona & Colin Theseira and RE/MAX United do not provide tax, legal, financial or accounting advice. The information below is for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, financial or accounting advice. Please consult your own tax, legal, financial and accounting advisors to understand how the new CARE Act applies to your situation.
View CARES Act for Businesses
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For Individuals & Families

Direct stimulus payments to individuals and families:

  • $1,200 for individuals; $2,400 for married couples
    • $500 per child under age 17
    • Head of household also to receive $500 per child under age 17
  • Payments received are not taxable

Eligible Recipients

  • All US residents with a work eligible Social Security number
  • Has an individual adjusted gross income (AGI) of $75,000/year or
    • Income limit for those filing as head of household is $112,500, and for married couples is $150,000
  • Benefits are reduced by $5 for every $100 of income above the category
    • Benefits are entirely phased out for:
      • Individual filers with AGI above $99,000
      • Head of household filers who claim one child with AGI above $146,500
      • Joint married filers with AGI above $198,000
    • AGI calculation is based on the most recently filed tax return (2018 or 2019)
    • For those collecting Social Security payments with income below tax filing threshold, the Social Security Benefit Form SSA-1099 is used to determine eligibility

Timeline

Eligible residents should receive a direct deposit within three weeks. Checks may take a little longer via snail mail.
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Unemployment Insurance 

Eligible Recipients

Employees, freelancers, gig economy workers, and self-employed are eligible for unemployment benefits. In addition, Pandemic Unemployment Assistance will broaden the category of eligible recipients, extend the duration of benefits, and increase the dollar amount of unemployment benefits. 

  • Unemployment benefits is extended to 13 weeks beyond 26 weeks
  • For 4 months, benefits are increased by $600/week 

Some lower-income workers will be able to maintain their full salaries under the program if forced out of work as the result of the pandemic.

Direct link to apply for California unemployment benefits
https://portal.edd.ca.gov/WebApp/Login
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Paid Sick Leave

Phase II of the Families First Coronavirus Response Act, full-time employees of businesses with fewer than 500 employees (and with conditional exceptions for those with fewer than 50 employees) are provided with 80 hours of paid sick leave.

  • Part-time workers receive paid sick leave for a number of hours equal to the average number of hours worked over a 2-week period 
  • Payments are equal to 100% of normal compensation ($511/day maximum) 

Eligible Recipients:

  • US employees of small- and mid-sized firms who have worked for the company for at least one month and are unable to work or telework due to COVID-19
  • Employees are not required to be or become ill to qualify for sick leave
  • Employees instructed to remain at home or comply with company social distancing rules are eligible
  • May be used in addition to paid family leave
  • Parents of minor children who cannot work or telework because of child care duties cause by school closures may qualify for paid sick leave (in addition to paid family leave).

More Information:

The Labor Department has discretion to permit employers with fewer than 50 employees to opt out if complying with the mandate would jeopardize the viability of the business.

  • Employers with 500 or more employees are exempt
  • Employers of healthcare workers and emergency responders may elect to exclude employees

Visit the DOL (Department of Labor) website for additional information
https://www.dol.gov/agencies/whd/pandemic
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Paid Family Leave

Up to 12 weeks of paid family leave at 2/3 of an employee’s usual pay rate with $200/day maximum.

Eligibility:

  • US employees of small- and mid-sized firms who have worked for the company for at least one month and are unable to work or telework due to COVID-19
  • Eligible if need to quarantine, care for a family member, or care for a child at home because of school closure

More Information:

Visit the DOL (Department of Labor) website for additional information
https://www.dol.gov/agencies/whd/pandemic
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Student Loans

  • Borrowers with federal student loans are permitted to defer payments penalty free until September 30, 2020
  • Borrowers must request a forbearance from their loan servicer
  • Borrower who are not in default will automatically have their interest rate set to 0% for at least 60 days
  • All requests for garnishments from paychecks, federal income tax returns, and social security payments for defaulted borrowers have been stopped
  • Garnishments withheld from March 13, 2020 will be refunded
  • Private collection efforts have also been stopped
  • Employer-paid student loan payments up to $5,250 are temporarily excluded from income tax reporting

Eligible Recipients:

  • Federal student loan borrowers in repayment, depending upon standing

More information:

https://studentaid.gov/announcements-events/coronavirus
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Medicare/Medicaid

  • COVID-19 lab tests (with no out-of-pocket costs), medically necessary hospitalizations (including quarantine), qualifying vaccines (if available), and telemedicine

Eligible Recipients:

  • Covered by Medicare or Medicaid

More information:

https://www.medicare.gov/medicare-coronavirus
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Qualified Retirement Plan Withdrawals

The required minimum distribution (RMD) for 2020 may be skipped

  • This includes a 2019 RMD that was delayed to 4/1/2020
  • Awaiting official IRS guidance around rules regarding inherited IRA and inherited 401(k) accounts, so consult with your tax professional before making a withdrawal from those accounts

Up to $100,000 may with withdrawn penalty-free from IRAs, employer-sponsored retirement plans, or a combination of both, for those impacted by COVID-19.

  • By default, the income tax on the distribution is split evenly across the 2020, 2021, and 2022 tax years, or
  • You can choose to elect to include all of the income in your 2020 income, or
  • Funds may be repaid over a three-year period back into a retirement account, and any taxes withheld on the distribution may be reclaimed as a refund by filing an amended tax return

Eligibility:

Anyone with an employer-sponsored retirement plan or IRA who was impacted by COVID-19 or currently taking RMDs. Impact from COVID-19 is defined as:

  • Being diagnosed with COVID-19
  • Having a spouse or dependent diagnosed with COVID-19
  • Experiencing adverse financial consequences as a result of being quarantined, furloughed, laid off, or reduced work hours due to the virus
  • Inability to work due to lack of child care due to virus
  • Owning a business that closed or operated under reduced hours due to the virus
  • Other factors as determined by the IRS

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Employer-Sponsored Plan Loans

Permitted loan amounts from employer-sponsored plans (401(k), 403(b), and 457(b)) have been increased for those affected by COVID-19.

  • The amount employees may borrow has been increased to the lesser of 50% to 100% of the vested plan balance or $100,000

Any existing loan that was to be repaid in 2020 may delay repayment for 1 year

Eligibility:

  • Must be enrolled in an eligible employer-sponsored plan
  • The plan document must already have a provision allowing participant loans
  • The loan must be made by December 31, 2020