04/01/2020
‼️CARES ACT SUMMARY‼️
**Updated 3.31.2020**
LUMP SUM PAYMENT:
- The package includes direct payments of $1,200 per adult and $2,400 per couple
- If you have children, your payment will increase by $500 per child. However, payments could be reduced if you have adjusted gross income over a certain threshold.
The thresholds are:
• $75,000 for single filers.
• $112,500 for single heads of household.
• $150,000 for married couples filing jointly.
(For example, say you’re a family of four and your adjusted gross income in 2019 was $135,000 - assuming you filed your 2019 tax return — the IRS will use your 2018 tax return if you haven’t yet filed this year - You qualify for a payment of $3,400: $2,400 as a couple + $500 times two for each dependent child)
UNEMPLOYMENT BENEFITS:
- The plan wraps in far more workers than are usually eligible for unemployment benefits, including self-employed people and part-time workers
- Those who are unemployed, are partly unemployed or cannot work for a wide variety of coronavirus-related reasons will be more likely to receive benefits
- How much will I receive? It depends on your state
- Benefits will be expanded in an attempt to replace the average - The average worker earns about $1,000 a week, and unemployment benefits often replace roughly 40 to 45 percent of that. The expansion will pay an extra amount to fill the gap.
- Under the plan, eligible workers will get an extra $600 per week on top of their state benefit. But some states are more generous than others.
BUSINESS LOANS:
- Generally, the plan will provide $350 billion in federally guaranteed loans to businesses with 500 or fewer employees - This program is available to sole proprietors and self-employed individuals, too
- The Small Business Administration will oversee this Paycheck Protection Program, which will distribute the loans via banks to small businesses
- The plan provides an expedited origination process and loans will be available during an emergency period ending June 30
- All or a portion of the loan can be forgiven, based on a formula related to the percentage of employees the employer keeps on the payroll
- Each business can receive a loan up to $10 million. The actual amount is related to your payroll costs tested over different time periods
- The loans have an interest rate cap of 4 percent.
RETIREMENT ACCOUNTS:
- The law will waive the current 10% penalty on early withdrawals from IRAs and qualified plans for people who have been impacted by the coronavirus. In addition, it increases the ceiling on loans (401k loans i.e.) against a qualified plan to $100,000
- This no-penalty withdrawal applies to those who have been diagnosed with COVID-19 or have experienced financial hardship from being quarantined, laid off or furloughed, or having their hours reduced between now and the end of the year
- Distributions will still be included in gross income and subject to regular income tax, but you can spread the amount of tax you will owe over a three-year period
- Distributions also may be re-contributed within three years of withdrawal
- While this opens up a source of funding for many people, this might be considered as a last resort
REQUIRED MINIMUM DISTRIBUTIONS (RMDs):
- If you are subject to RMDs, you are not being forced to take them out this year.
STUDENT LOANS (Through September 30, 2020):
- No federal student loan payment;
- No interest on your federal student loan payments
Thank you to my colleagues and Northwestern Mutual for putting this together for our friends, family and clients.
