Stimulus Bill Update

A $2 trillion stimulus bill (CARES Act) was signed into law to address the economic crisis caused by the coronavirus pandemic. This bill includes direct payments to many Americans, an unprecedented expansion in unemployment benefits, student loan payment relief, and $350 billion in small business loans.

Here is a basic summary of the bill’s provisions:

Direct Stimulus Payments:

• How much money will be received?
  • Depending on your income, individuals will receive up to $1,200 and couples will receive up to $2,400 – plus $500 per child. However, these payments start phasing out for individuals with adjusted gross incomes of more than $75,000 and those making more than $99,000 do not qualify to receive any payments. The income threshold doubles for couples.
  • Income determination is based on individual’s tax filings for 2019, but if you have not filed for 2019, then your filing for 2018 applies. Those who made too much to qualify in the 2018 and 2019 tax years, but see their income fall in 2020, would receive a tax credit when they file their tax return for 2020.
  • Those who make more in 2020 than they did in 2019 do not have to pay back any stimulus money they receive if they end up exceeding the thresholds.
  • These stimulus payments are not subject to tax, and those who owe back taxes will still receive a payment.
• When will the money be received?
  • The bill simply calls for these payments to be issued "as rapidly as possible." For reference, in 2008 it took three months after a stimulus package was signed into law.
• How will the money be received?
  • The money will be deposited directly into individuals' bank accounts -- as long as they've already authorized the IRS to send their tax refund that way over the past two years (2018 and 2019). If not, the IRS will send out checks in the mail.

Expanded Unemployment Benefits:

• Unemployed workers are able to receive up to an extra $600 a week on top of their state benefits through July 31, 2020.
• Self-employed workers and independent contractors can qualify for up to 39 weeks of federal unemployment through the end of 2020.

Student Loans:

• An option allowing individuals to stop paying federal student loans from now through September 30, 2020.
• Student loan interest waived on federal student loans through September 30, 2020.
• A stop of involuntary debt collection on student loans during this period, including garnishment of wages, tax refunds and Social Security benefits.

Retirement Account Loans and Early Withdrawals:

• Borrow up to $100,000 from IRA’s, 401(k)’s, 403(b)’s and other retirement accounts with no federal income tax consequences if repaid within three years.
• You can take one or more borrowed amounts up to the $100,000 limit, and it can be borrowed from different retirement accounts.
• Make early withdrawals from retirement accounts without paying the typical 10% penalty.

Small Business Benefits:

• An economic aid package of roughly $350 billion in new loans for small business owners with at least a portion of which will be forgiven so long as the business continues to employ and pay its workers.
• Business owners would need to apply for the loans at a lender approved by the Small Business Administration. The forgiven amount would be equal to 8 weeks' worth of payroll obligations (e.g., wages and benefits), plus rent or mortgage bills and utilities. The forgiven debt would not be treated as taxable income to the owner.
• Possible deferment of payroll taxes.