The government has sought to cushion the population from the effects of the coronavirus pandemic.
President Trump has signed an unprecedented stimulus package.
This stimulus package is known as the Coronavirus Aid, Relief and Economic Security(CARES) Act. It has a $2 trillion price tag on it. It seeks to financially protect the populace, and the economy, from the staggering effects of the coronavirus.
How Stimulus Payments Work?
The government, through the Department of finance, is sending cash directly to most Americans. This, it hopes will provide relief during this crisis.
- Adults who earn up to $75,000 in modified/adjusted gross income. They should have an up-to-date social security number. They are eligible to receive $1,200.
- Adults that earn less than $75,000 annually will be eligible to receive a one-time payment of $1,200. If you have income that is up to $99,000, you will receive payment. Individuals earning more than $75,000 are not eligible to receive the full $1,200.
- Couples that are married but don’t have kids are eligible to receive $2,400. This is if their combined income is less than $150,000. Couples that earn as much as $198,000 will receive the said amount. Couples that earn more than $150,000 will not receive the full $2,400.
- Homes with kids will be eligible to receive $500 each for every kid. They only qualify if the kid is below 17 years old.
- Heads of households are to receive $1,200 only if they earn less than $112,500. Heads of households with a single child, the benefit will reduce at $112,500. It will flat out to $0 at $136,500.
- Those with government programs such as social security can receive a check. If someone claims you as a dependent, you are not eligible for a check. Everyone must have a social security number to be eligible. An exception to this is members of the armed forces.
Who Is Not Eligible?
- People with a high income.
- People without a valid social security number.
- People that can be claimed as dependents on another person’s tax returns. These might include, adult children or students.
- People who fill the IRS forms 1040-PR or 1040_SS aren’t eligible. These are forms filled by self-employed people in Puerto Rico.
What Happens To People Who Don’t File Taxes?
People who don’t file their taxes are still eligible to receive the money. This may include low-income earners or former armed forces members. People in this group need to do is to file a simple tax return and they’ll be eligible.
The IRS has opened a free Webpage for these groups to submit their information to the organization. The organization says, it is easier and faster to direct deposits than mailing the checks. As a result, the IRS is asking people to submit their direct deposit information. People who for one reason or another can’t do this will receive mailed checks.
Special groups such as veteran beneficiaries and Supplemental security income(SSI) recipients, should utilize the new page. Citizens without a tax liability in 2018 or 2019 should do too. These groups should do so to get paid much faster. The government is also working on ways to give checks to people who benefit from the veterans’ department or SSI.
Beneficiaries of the social security program do not need to fill out tax returns. They will receive payment either way.
Will Getting The Check Affect Tax Refunds?
It will not. The Stimulus Package is not a tax refund. Taxpayers are expected to get their full tax refund this year and next year too. For this to happen they must file their returns.
The check-in itself will be like a tax credit. It will reduce an individual’s tax bill. It will work like when you have a store credit. When you apply it, it will reduce your total bill.
A tax credit can’t be claimed until taxes have been filed. This is because you have to know what you owe and that is done at the end of the year. As a result of the ongoing pandemic, qualifying taxpayers are receiving credit early. This will be in cash and won’t affect the taxpayers refund this or next year.
How Will The IRS Knows Where To Mail The Checks?
The government will take direct debit information or an address where they can mail you. They get this information from your most recent tax return filing. Some people don’t have enough earnings to file taxes. In such instances, the government will use information from the social security program.
The program isn’t without its kinks with scammers taking this opportunity to steal people’s money or identity. In some extreme cases, both are stolen. The scams may include, stimulus checks that are fake. These arrive with unusual denominations and ask the taxpayers to give their information online. They ask for a fee to process your payment faster. The government does not call, email or message people about their checks. Any call you receive pretending to do so should be treated as a scam.
The government, more specifically the IRS uses snail mail to get in touch with taxpayers. In the case of stimulus checks, the IRS processes the information automatically and sends the checks to any American who qualifies.
The CoVid-19 Stimulus Program – Main Aspects
The program has many aspects apart from personal stimulus checks. These include :
1. The Unemployment Insurance Program
Federal law legislates laws to provide unemployment insurance to a larger group of people. Seeking to also extend the length of time for that insurance. The government is trying to increase benefits amounts awarded to include part-timers, self-employed and gig-workers.
These benefits have been extended to several people whose lives have been impacted either directly or indirectly by the Coronavirus. Including :
- Foughloured or workers who have been laid off without it being their fault.
- Workers whose hours have been slashed due to the Coronavirus.
- Workers who have left their jobs due to extreme circumstances caused by the ongoing pandemic.
- Workers whose jobs are on a short term basis like gig-workers.
- Self-employed workers and freelancers too.
- The benefits are also extended to people suffering from the virus themselves or are taking care of relatives who may have it.
- People told to self-quarantine.
- Parents of children that belong to shut down daycares or schools.
Different states have different lengths for unemployment. It ranges from 12-28 weeks with most states allowing up to 26 weeks. Due to the unprecedented nature of coronavirus, workers can receive unemployment for 39 weeks.
This is 13 weeks longer than the norm. The government has added groups such as the self-employed and freelancers to be eligible for this. They have also added $600 a week in benefits until the 31st of July, 2020.
2. The Payment Protection Program
The federal government has set aside $500 billion to be able to facilitate loans, investments and loan guarantees.
The details of which include:
- $25 billion for passenger airlines.
- $4 billion given to cargo airlines.
- $17 billion for businesses in the national security sector.
- $454 billion has been spread out over a myriad of sectors, municipalities and states.
Measures have been put in place as to which businesses can receive government loans. These businesses are not allowed to issue dividends up to a year. Depending on if the loan is outstanding. Another caveat is that the businesses have to retain 90% of their employee base as of March 24th to September 30th. However, these loans aren’t meant to last past five years.
A major provision of the program is for direct loans. They are targeted at mid-sized enterprises, described as businesses with 500-10,000 employees. It also includes non-profit organizations. The payment of loans for these organizations will be due 6 months after issue.
3. $350 Billion For Small Enterprises
The Stimulus package, overseen by the paycheck protection program is to inject $350 billion into small businesses. These loans are administered by the Small Business Administration. They are targeted at small enterprises and can be partially forgiven if these companies meet certain criteria.
The goal of this program is to increase money for these companies. Since small companies have 500 or fewer employees, they are incentivized to hire more people.
Businesses that keep a full workforce and payroll will have their loan partially forgiven. The part that is forgiven is for 8weeks of the company’s payroll expenses. This includes a part of wages above $10,000 for employees earning above that. It also includes rent on a lease, mortgage and insurance.
Organizations are eligible for loans for up to $10 million. The criteria are, how much said organizations paid their employees between 1st January and 29th February. Interest rates on these loans are at 4%.
The organization must use the loan for pre-approved purposes. It must also maintain an average workforce based on when it received the loan. By doing this the principle of the loan will be forgiven. This means only interest will be owed.
Self-employed workers, sole proprietors, and independent contractors are targeted for these loans. These loans are made to be easy to get. As a result, no collateral is required and you don’t need to have been denied credit elsewhere.
The process of applying is simple. You need to contact an existing SBA 7(a) lender. You can also contact any federally insured lending institution.
Here is a list of organizations that qualify for the PPP program
These small enterprises have been allowed to submit applications since 3rd April. Independent contractors and self-employed workers have been able to apply from 10th April.
The PPP program will come to a halt on 30th June. Interested individuals or companies should apply early. The program was capped at $350 billion. Treasury Secretary, Steve Mnuchin has asked Congress for an additional $250 billion. This he says is to expand the program. As of now, his proposal hasn’t been accepted yet.
4. Extension For Federal Income Filing
The deadline for filing tax returns for 2019 has been moved from April to July 15th, 2020.
This extension is being applied to tax payments owed for 2019. It also applies for tax estimates for 2020. People using this extension won’t incur late fees and other penalties.
5. 401(k) and Penalty-Free IRA Early Withdrawals
Early withdrawals normally come with a 10% surtax added to taxes. During this unprecedented period, the government is allowing some exceptions. These are extended to people suffering from the virus themselves or a spouse. They can take up to $100,000 from these accounts’ penalty-free.
This distribution is counted as income though. This means that you have to pay taxes for over 3 years. This program does not apply to pension plans.
The federal government has in turn stalled the required minimum distributions(RMDs). This affects all retirement accounts for 2020.
6. Federal Student Loan Relief
The government has put in place the program to aid students financially during this period. The secretary of education has introduced the CARES Act. It seeks to suspend the payment of student loans till 30th September 2020.
The program introduces some major changes. The 3 main ones are:
- Suspension of student loan payment.
- Suspension of federal student loan payments.
- Wages, social security, and tax refunds belonging to students will not be deducted for defaulters.
The obligation to pay will stop immediately from 13th March to 30th September. It includes borrowers with automatic payment plans.
Students who pay during this forbearance period are eligible for a refund. Includes automatic or manual payments.
The student loans will not accrue any interest during this six month period. The borrower is, however, still allowed to make payments during this period. These will go directly towards reducing the principal amount.
Students who default on their loans during this period are exempt. This means that no financial institutions are allowed to seize their tax refunds or social security income. They also cannot deduct wages.
7. Billions Given to Hospitals
The government has provided $117 billion to hospitals estimates the American Medical Association. This money is distributed as follows:
- $100 billion for reimbursement to the public health and social emergency fund. This fund seeks to reimburse expenses and lost revenue due to COVID-19.
- $20 billion afforded through the CARES Act towards veteran health care.
- The strategic National stockpile of ventilators and other respiratory equipment has received $16 billion.
- $11 billion towards diagnostic evaluation and treatment.
- The law also gives a boost of reimbursement by 20% for coronavirus patients. Removes $8 billion planned to be removed for Medicaid for uninsured patients.
- It temporarily removes a 2% cut for the treatment of Medicare.
Spokespersons to the American Medical Association and American Nurses Association have asked for $100 billion worth of personnel. This they hope will enable them to contain the outbreak.
8. Rent and Mortgage Payment Relief
Homeowners with these mortgages ( Fannie Mac, Freddie Mac, FHA, VA, HUD or USDA loans), which are federally backed. They are expected to request for forbearance if they are suffering any coronavirus related hardships. To qualify for this forbearance, you must have lost your job. This was clarified by the Treasury Secretary, Steve Mnuchin.
Borrowers won’t incur costs such as fines for late payment. For a borrower to receive this deferral they don’t have to prove it. The borrower only has to attest to their financial position.
They have to get in touch with their provider though. They may also ask for an added 180-day loan relief according to their needs.
This does not apply to private lenders. These borrowers should seek information from their private lenders. They will tell them if they have mortgage relief. Banks such as Fifth Third Bank, Marcus ( Goldman Sachs), and TD Bank have offered.
These include suspension of payments or special terms of payments. Borrowers should check if their governors have legislated any mortgage-related relief programs.
An example is New York, where the governor is suspending mortgage payment for 90 days. States have also called for a moratorium on all evictions and also foreclosures.