What You Need to Know About the Coronavirus Aid, Relief, and Economic Security (CARES) Act

A $2.2 trillion economic aid package — the Coronavirus Aid, Relief, and Economic Security Act (CARES) — has been signed into law. The CARES Act follows two measures: an $8.5 billion stimulus bill, and the Families First Coronavirus Response Act, aimed at providing financial assistance to Americans impacted by the coronavirus pandemic. It covers standard, freelance, contract, and self-employed workers and outlines key provisions for current and future home buyers and sellers.  

 

ASSISTANCE FOR HOMEOWNERS & RENTERS

  • Loan Forbearance for Homeowners
    Permits borrowers with a federally backed mortgage loan experiencing financial hardship because of COVID-19 to request forbearance up to 1 year on the loan, regardless of delinquency status. The borrower will not accrue any additional fees or penalties beyond the regular amounts. If you are granted forbearance under the CARES Act, servicers are prohibited from reporting the resulting late or missed payments that could impact a borrower’s credit. However, forbearance is not forgiveness. The borrower is expected to repay any delayed or reduced payments in the future. This restriction does not apply to vacant or abandoned properties.

    Repayment is an area that has caused a good deal of confusion so far. It appears that different lenders are requesting varying repayment plans from borrowers once the forbearance period has ended; some homeowners are reportedly being asked to repay the amounts in one lump sum, rather than modifying their monthly payments or tacking on the suspended payments to the end of their loans. As some observers have noted, the CARES Act does not provide guidelines on how borrowers are expected to repay what they owe after the forbearance period ends—so homeowners should be sure to know their servicer’s stance on the matter.
  • Loan Forbearance for Owners of Rental Properties
    Those with mortgages backed by federal loans can request 1 year of mortgage forbearance. For 120 days from the enactment of the Act (March 27, 2020), lessors of all properties backed by federal mortgage loans can neither evict tenants nor charge fees or penalties for the nonpayment of rent.
  • Rental Assistance Protections for Low-Income Americans
    $3 billion is included for housing providers to help individuals currently assisted by HUD to safely remain in their homes or access temporary housing assistance in response to economic and housing disruptions caused by COVID-19. This funding will help low-income and working-class Americans avoid evictions and minimize any impacts caused by loss of employment, and childcare, or other unforeseen circumstances related to COVID-19.

 

FINANCIAL ASSISTANCE OPTIONS

  • Direct Payments
    Americans who earn up to $75,000 in adjusted gross income will receive direct payments of $1,200 each. This allows earning up to $112,500 in income for a head of household return and $150,000 on joint returns. An additional $500 will be allotted per child under the age of 17. The payment amounts are reduced with increased income up to $99,000 for individuals and $198,000 for couples. Payments will be sent electronically or by paper check. Incomes above the threshold amounts are not eligible. 
  • When and How to Get Payments
    It is estimated that the Department of Treasury will begin sending out payments the week of April 13. The payments will be through direct deposit to your bank account with the information submitted with your last tax return. If the IRS doesn’t have your information, the best way to receive the benefit would be to file your 2019 taxes. However, if you receive Social Security benefits the check will come automatically to you.

    In order to be in the first round the IRS has to have direct deposit information from your 2019 tax filing—or 2018 tax filings if the 2019 filing has not been submitted yet. About 3 weeks after those deposits are made (the week of May 4th), the IRS will begin issuing paper checks to individuals. The paper checks will be issued at a rate of about 5 million per week, which could take up to 20 weeks to get all the checks out. These checks will be issued in reverse “adjusted gross income” order—starting with people with the lowest income first.

    The IRS expects to create a portal by the end of April/early May that will allow taxpayers, once they have been authenticated, to find out the status of their rebate payment and update direct deposit information.
  • Early Withdrawal of Retirement Funds
    People of any age with retirement accounts, including IRAs, can take early withdrawals—if related to the coronavirus, of up to $100,000 without having to pay the 10% early-withdrawal penalty. This is something only to be considered in an extreme situation, as retirement money is meant to be left untouched, and aid in funding your retirement years.

    People 70.5 or older do not have to take the required minimum distributions from retirement plans in 2020 or pay taxes on those distributions.
  • Student Loan Suspension
    Requires lenders to suspend payments on federal student loans through Sept. 30. Interest will not accrue and nonpayment during the six-month period won’t affect credit scores or an individual’s qualification for loan forgiveness.
  • Additional Tax Deductions
    Allows individuals (who don’t itemize their deductions) to make a cash donation of up to $300 to certain qualifying charities. The additional contribution can be deducted “above the line,” so the taxpayer would receive the deduction on top of the standard deduction.
  • Paid time off
    Two weeks of paid sick and family leave is covered for those affected by the Coronavirus.

 

UNEMPLOYMENT ASSISTANCE & INFORMATION

“Pandemic Unemployment Assistance” will be provided to those, including independent contractors, who are unable to work, as a direct result of COVID-19, and don’t qualify for regular unemployment benefits. Individuals who are able to telework or receive sick leave or other paid leave benefits aren’t eligible. In addition to state aid, an additional $600 per week is allocated to eligible individuals for a period of up to four months through July 31, 2020. State-level unemployment benefits are extended 13 weeks. The extension runs through December 31, 2020.

Learn more about unemployment options, questions and answers {{HERE}}

 

HELP FOR BUSINESS OWNERS & SELF-EMPLOYED INDIVIDUALS

Businesses and self-employed individuals, independent contractors, “gig economy” workers, and individuals who were unable to start a new job or contract due to the pandemic are eligible for assistance with unemployment, deferred payments, loans, deferrals, tax credits, and much more.

Learn more about the details involving business owners and self-employed individuals {{HERE}}

 

ASSISTANCE FOR OUR COMMUNITY

The bill includes a total of $48.5 billion geared towards assisting our communities. Targeted resources are directed to help the 11 million low-income Americans living one paycheck away from homelessness by providing assistance to prevent eviction, to help the over half a million homeless individuals living on the streets find shelter or temporary housing, and for the most vulnerable, to self-quarantine and gain access to supportive services in order to diminish the risk of exposure.

Learn more about community assistance {{HERE}}

 

FEDERAL TAX DEADLINE EXTENSION

Reminder: The U.S. Department of the Treasury and the Internal Revenue Service has extended the filing deadline to July 15, 2020.