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The Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law on Friday March 27, 2020. Whether you are still in college studying communication sciences or a retired speech language pathologist, there is something for everyone in this act. The act contains five key areas of economic relief for SLPs…
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Recovery Rebates
To help stimulate the economy and your bank accounts, the government wants to help by issuing you a one-time $1,200 payment. Depending on your 2019 tax return status, (or 2018 return if you have not filed your 2019 tax return yet) you will be entitled to additional money in your check
- If you’re married and file a joint tax return, you will receive an additional $1,200
- For EACH child who qualifies for the child tax credit (they must be under the age of 17) you get an additional $500 per child.
So a married couple with 3 children (ages: 12, 9 and 7) will earn a stimulus check of $3,900. ($2,400 for the married couple and $1,500 for the children)
Unfortunately, there are stipulations attached to determining the size of your check. Your payment will be reduced if your Adjusted-Gross Income (AGI) is above certain levels.
The AGI threshold depends on how you filed your tax return.
| Tax Filing Status | Full Stimulus Check if AGI is below… | Reduced Stimulus Check if AGI is in between… | No Stimulus Check if AGI is above… |
|
Married Filing Jointly |
$150,000 | $150,001 – $197,999 | $198,000 |
| Head of Household | $112,500 | $112,501 – $136,499 | $136, 500 |
| All Other Filers | $75,000 | $75,001 – $98,999 |
$99,000 |
It’s important to note that for every $100 of additional income, your stimulus check will phase out $5.
Kiplinger has a calculator to estimate your rebate.
You can take a coronavirus-related distribution in 2020 of up to $100,000 if you are impacted by COVID-19. Some examples of being impacted include…
- If you, your spouse or a dependent have been diagnosed with COVID-19
- You experience adverse financial consequences from being furloughed, laid off or hours reduced
- Unable to work because of a lack of childcare
- Own a business that has closed or operate under reduced hours
If you decide to take a distribution from an IRA, there are many tax benefits for taking this distribution…
- Exempt from the 10% early withdrawal penalty if you are under age 59.5
- Not subject to mandatory withholding requirements of 20%
- This distribution can be repaid over a 3 year period in either a single payment or multiple partial rollovers
- While you are still subject to paying income tax on the distribution, this can also be spread over a 3 year period. **Reminder, I am not an accountant or a CPA, but this is a key instance where planning comes into play. Determining if you pay the income tax in 1 year or stretch it out over 3 years can make a big difference in the amount of tax you pay as a result of taking the distribution.
If you decide to take a loan from an employer sponsored-plan like a 401(k) or 403(b), two things to note…
- The maximum loan size is $100,000, compared to the standard maximum amount of $50,000
- You can delay you first repayment of the loan for up to one year
Required Minimum Distributions (RMDs) are waived for 2020
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Unemployment Benefits & Insurance
Unemployment benefits have been expanded to cover workers who would not traditionally be eligible. This includes part-time employees, independent contractors and the self-employed.
Learn more about your state’s process and policies in filing for unemployment benefits.
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Student Loans
Federal Student loan payments will be suspended until September 30, 2020. Required payments are suspended, but voluntary payments are not. If you choose to stop making payments, make sure to contact the lender directly.
If you have a privately-held student loan, you should speak with your provider about additional repayment options.
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Small Business Owners
CARES Act Payroll Protection Program provides relief to business owners who want to maintain current payroll. Some important things of note…
- Unlike traditional SBA loans, there is no personal guarantee or collateral requirement
- You must complete a “Good Faith” Certification with the following elements
- Current economic uncertainty makes the loan necessary to support ongoing operations
- The funds will be used to retain works and maintain payroll or make mortgage/lease and utility payments
- You must complete a “Good Faith” Certification with the following elements
- You are eligible for a loan of up to 2.5x your monthly payroll costs, not to exceed $10 million
- The loans will be governed by the following terms…
- interest rate shall bear an interest rate not to exceed 4 percent
- origination fees: lender will be reimbursed by the SBA
- payment deferment: 6-12 month of deferment, including principal, interest and fees
- The loan will be forgiven so long as you meet specific criteria…
- You must have the same number of employees from 2/15/2020 – 6/30/2020 as you did when compared to either the same period in 2019 or 1/1/2020 – 2/15/2020
- For all employees earning <$100,000, you cannot have reduced their pay by more than 25% compared to the most recent quarter
- A sample application can be found on the SBA website
- Small businesses and sole proprietorships can apply starting April 3, 2020
- Independent contractors and self-employed individuals can apply starting April 10, 2020
In addition to a Paycheck Protection Plan loan, you may be eligible to apply for an additional SBA Disaster Recovery loan
If you have any questions about the information discussed in this episode, Click the start here button below and schedule an introductory consultation to have your questions answered.
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