Update: some of what is detailed below continues on, but as of late December, a 2nd COVID relief bill was passed, H.R. 133, which authorized new $600/person stimulus checks, expanded unemployment, new PPP funding, and more. And in March of 2021, President Biden’s American Rescue Plan Act of 2021 (summarized), which provides the largest direct assistance for COVID to date, was also passed into law and includes even larger stimulus checks, a Child Tax Credit expansion in 2021, emergency rental assistance, a new $50 per month broadband subsidy through the FCC, and much more.
Due to a lack of preparation and delayed action in response to the quickly spreading coronavirus (COVID-19) pandemic, the United States is not only now in the midst of a public health crisis (exponentially growing, and already with more confirmed cases than any other country), but it is surely now in the middle of a cascading economic crisis as well.
This past week, jobless claims totaled nearly 3.3 million people – a 5X increase over the previous weekly record from 1982. As a comparison, jobless claims totaled 665,000 in the worst single week during the Great Recession. Meanwhile, U.S. markets have shaved trillions in wealth, dropping 37% in less than a month, and it’s been predicted that GDP could decline 24% year-over-year.
With the alarming negative economic impacts, there has been a flurry of new bi-partisan Congressional legislation and executive actions to help stem the negative impacts. So much so, that it’s been hard to keep up. I do find it interesting (and kind of ironic) how everyone – from all political persuasions – turns to massive government action, rescue, and financial bailouts in the throes of a crisis. Just don’t call it the dreaded “S” word! Limited government is the best government, I thought? (until a pandemic punches you in the mouth) ;-)
So what I thought I’d do here is try to consolidate a thorough list of key coronavirus relief measure details (along with resources if you want to dig in to the minutia) on U.S. federal policy, legislation, and actions. There may also be additional state components that you will want to look into separately (e.g. unemployment policy differs by state). I’ll keep updating this post as new details and policies emerge, in order to help make this a one-stop shop for you to stay aware of the key basics. This is all fast moving, and new policy and details are emerging daily, so check back often. Feel free to add suggestions in the comments for areas I’ve missed.
Here is what is covered in this post:
Coronavirus relief checks (aka “recovery rebates” or “stimulus checks”) to Americans will surely be one of the most memorable components of the “Coronavirus Aid, Relief, and Economic Security Act” or the “CARES Act” – the massive $2 trillion relief package passed by Congress this past week. Here are the relief check amounts and other details:
- If you filed as “individual” or “married filing separately” and your adjusted gross income (AGI) on your last tax return was under $75,000, you’ll get $1,200.
- If you filed as “married filing jointly” and your AGI is under $150,000, you’ll get $2,400.
- If you filed as “head of household” and your AGI is under $112,500, you’ll get $1,200.
- For each dependent age 16 or younger, in your household, you’ll get $500.
- Adult dependents or students in college do not qualify for additional funds and you can’t get a payment if someone claims you as a dependent, even if you’re an adult.
- There are phaseouts: if individual or married filing separately, and your AGI was between $75,000 and $99,000, you’ll get get a smaller payment. This is also true of married joint filers with an AGI between $150,000 and $198,000 and heads of households with an AGI between $112,500 and $146,500.
- If you had an AGI of more than $99,000 (individual), $198,000 (married filing jointly), or $146,500 (head of household), you won’t get a check.
- Here is a coronavirus stimulus check calculator, if you want to precisely calculate the check amount.
- Number of payments: just 1 payment (for now), unless future payments are authorized in new legislation.
- Payment format – check or direct deposit: the payment will come via how you selected to see your most recent tax refund.
- Payment timeline: has been projected to be anywhere from 1-month (direct deposit) to 2-months (via check) at the earliest.
- Application process: The IRS has stated that there is no need to apply or sign up – it will send the checks based on your most recent tax return.
- Eligibility & amount: to check eligibility and amount, you can look at your your AGI, which will be line 8b on your 2019 1040 form (if you’ve filed already) or line 7 on your 2018 1040 form, and compare to the amounts above. You must have a valid Social Security number in order to be eligible (with exception for members of the military).
- What if you’re not eligible, but income is expected to decline in 2020? You could get a tax credit when filing your 2020 tax return.
- Are the check amounts taxable? The relief checks are non-taxable.
Expanded Unemployment Insurance Benefits
The expanded unemployment insurance benefits included in the CARES Act will certainly get less publicity than the relief rebates, but will likely end up being much more impactful for millions of Americans.
The CARES Act primarily does 3 noteworthy things to expand unemployment insurance benefits:
- Creates Pandemic Unemployment Assistance (PUA) through December 31, 2020. PUA will provide federally funded unemployment benefits to many workers who lose their jobs, but are ineligible for the state’s regular UI benefits. It also covers workers that typically are ineligible for unemployment benefits, including those lacking an extensive work history, self-employed workers, freelancers, independent contractors, part-time job seekers, and those who have exhausted regular UI benefits. Many states already provide 26 weeks of benefits, but PUA increases that to 39 weeks (may be shorter in some states).
- Provides eligible workers with an extra $600 per week in federal unemployment benefits (through July 31).
- Gives benefits to those who quit their job or cannot get to their place of work as a “direct result of COVID-19″. Typically, those who quit their jobs don’t normally qualify for unemployment.
Other noteworthy details:
- How much unemployment pay will you receive? It really depends on your state, but the extra $600 per week applies to all that are eligible.
- What if I was already unemployed? Individuals newly eligible under the CARES ACT that have been unemployed since the week of January 27, 2020, will be able to receive the additional $600 weekly benefit and 13-week period extension.
- How to apply for expanded coronavirus unemployment benefits: visit your state’s unemployment website to apply, or call by phone. You may have trouble getting through, due to overwhelming demand at the moment, but keep at it. The U.S. Department of Labor website should also be updated with more details shortly.
Qualified Medical Expense Expansion for OTC, Menstrual Care, Telehealth, Virtual Mental Health, & COVID-19 Testing
As part of the CARES Act legislation, OTC medications and feminine hygiene menstrual care products are qualified medical expenses, retroactive to January 1, 2020 (and without an expiration date). This means that you can use HSA, FSA, or HRA funds to use income-tax free contributions to pay for these items.
Additionally, telehealth and virtual mental health services are now listed as qualified medical expenses too, as is testing and treatment of COVID-19, per IRS Notice 2020-15. That means that you can use your tax-preferred Health Savings Account (HSA) funds to pay for expenses incurred for these purposes.
FSA Carryover Rule Changes for 2021 and 2022
As part of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, Congress and the IRS approved new FSA rule changes for 2021 and 2022 that allow up to the maximum FSA contribution to be carried over into the subsequent year (2020 contributions to 2021 and 2021 to 2022). This rule is voluntarily implemented by employers (not mandatory). There are additional FSA and dependent care assistance programs that were also approved (see the link for more info).
Another big component of the CARES Act is a 6 month payment pause and interest waiver for specified federal student loans that are owned by the U.S. Department of Education (DOE). The federal government had already waived 2 months of payments and interest, but this extends it further.
- Loan eligibility: Federal Direct Consolidation Loans, Federal Direct Grad PLUS Loans, Federal Direct Parent PLUS Loans, and Federal Direct Stafford Loans are eligible for the payment pause and interest waiver. There are a few other smaller exceptions and some private lenders may be offering separate leniency plans (you’ll have to research on your own).
- Timeline: now through September 30, 2020 (6 months), unless extending further.
- Application & process: If your student loans are eligible, the payments pause and interest waiver will automatically occur. There is no need to apply or re-start payments after September 30, 2020.
- How to confirm: log in to your account within the next month to confirm that interest and payments have stopped.
If you own a small business, the CARES Act includes more than $370 billion in government-backed loans. Businesses would not have to repay loans that were used to cover up to 8 weeks worth of payroll expenses.
- Amount of loan: equal to 250% of an employer’s average monthly payroll, up to $10 million per business.
- Eligibility: loans are limited to businesses with 500 employees or less. It also includes self-employed and “gig economy” workers.
- How to Apply & More Info: visit the U.S. Small Business Administration’s (SBA) website.
You are now able to withdraw up to $100,000 in 2020 without the usual 10% penalty, as long as the funds are needed due to coronavirus. If you withdraw money from a Traditional (pre-tax) retirement plan, you must still pay income tax on the withdrawal, however you will be able to spread out taxes owed over 3 years from the date of distribution.
- Eligible plans: IRA’s and employer-sponsored retirement plans (e.g. 401K, 403B, etc.).
- Eligibility: if you, your spouse, or a dependent test positive for coronavirus or you experienced other negative economic consequences related to the pandemic (e.g. loss of job).
- Amount: up to $100,000
- Can you re-contribute Withdrawn Funds? Yes, even if this causes you to go over the standard maximum contribution amounts.
- How to withdraw funds: contact your plan provider.
- Should you do this? In my view, only as a last resort. Raiding retirement contributions is rarely a good idea.
Deferred Self-Employment Taxes
Self-employed workers are required to pay both the “employee” and “employer” portion of their payroll taxes.
Under the CARES Act, for the remainder of 2020, the “employer” portion can be deferred. 50% of the deferred amount will be due on Dec 31, 2021, and 50% will be due on Dec 31, 2022.
New Charitable Deduction Benefits
This hasn’t gotten much attention, amongst the rest of the goodies, but there are 2 new charitable deduction benefits that were worked into the CARES Act:
- A new charitable deduction on up to $300 of annual charitable contributions. What is notable about this new $300 donation tax deduction, is that you can claim the deduction even if are claiming the standard deduction. Previously, you had to itemize your taxes to claim the deduction, and with tax reform, the standard deduction had doubled, so few did. Update: with the 2nd COVID relief bill passed in December, this was continued for 2021 and increased to $600 for “married filing jointly” households.
- Those who itemize taxes can deduct up to 100% of adjusted gross income in 2020. Post tax-reform, itemized filers could make a maximum charitable donation deduction of up to 60% of AGI on cash donations, but that increases to 100% in 2020, when made to a public charity. If you give more than your AGI, the excess deduction amount can roll over to next year, as previous.
The Families First Coronavirus Response Act provides coverage for free coronavirus testing for anyone with private insurance, Medicare, Medicaid, CHIP, Tricare, VA, or Indian Health Service coverage. The legislation also provides funds for those who get tested, but are uninsured. I would recommend calling ahead to see if eligible for free testing, if uninsured. Additionally, many hospitals and health care providers are still short on tests, so you should call ahead to get pre-screened before visiting.
Paid Sick Leave & Expanded Family Medical Leave
The Families First Coronavirus Response Act also provides expanded paid sick leave and family medical leave for employees of companies with 500 or fewer employees. According to the U.S. Department of Labor, this includes:
- Two weeks (up to 80 hours) of paid sick leave at the employee’s regular rate of pay where the employee is unable to work because the employee is quarantined (pursuant to Federal, State, or local government order or advice of a health care provider), and/or experiencing COVID-19 symptoms and seeking a medical diagnosis; or
- Two weeks (up to 80 hours) of paid sick leave at two-thirds the employee’s regular rate of pay because the employee is unable to work because of a bona fide need to care for an individual subject to quarantine (pursuant to Federal, State, or local government order or advice of a health care provider), or to care for a child (under 18 years of age) whose school or child care provider is closed or unavailable for reasons related to COVID-19, and/or the employee is experiencing a substantially similar condition as specified by the Secretary of Health and Human Services, in consultation with the Secretaries of the Treasury and Labor; and
- Up to an additional 10 weeks of paid expanded family and medical leave at two-thirds the employee’s regular rate of pay where an employee, who has been employed for at least 30 calendar days, is unable to work due to a bona fide need for leave to care for a child whose school or child care provider is closed or unavailable for reasons related to COVID-19.
Affordable Care Act (ACA) Special Open Enrollment Period
A new ACA special enrollment period, beyond the typical 6-week end-of-year registration was started in February. Following ACA subsidy enhancements that were added to the American Rescue Plan to make plans more affordable, President Biden then extended the ACA open enrollment period through August 15.
IRS Tax Deadline and Payment Date Extension
- New tax deadlines: both the 2021 tax deadline, extension, and payment dates for the 2020 tax year were extended from April 15 to May 17.
- IRA & HSA contribution deadlines: were extended to May 17.
- Estimated payments: 2021 estimated tax payments were not extended.
- Note your state deadline: most state tax deadlines were extended – but not all.
Last year’s tax deadline was previously extended, with the following details:
More to Come – subscribe to comments to follow… and stay healthy out there!