Surviving the Pandemic – What is the Relief Plan? Will it Cost Us Our Financial Future?
Surviving the Pandemic – What is the Relief Plan? Will it Cost Us Our Financial Future?
Created On March 31, 2020
Coronavirus Stimulus Package F.A.Q.: Checks, Unemployment and More
(summary from New York Times, March 27, 2020, plus other resources).
On March 27, 2020, the President signed a $2 trillion economic relief plan to offer assistance to American households affected by the coronavirus pandemic. Titled: Coronavirus Aid, Relief, and Economic Security Act, or CARES Act. This plan includes stimulus payments to individuals, expanded unemployment coverage, student loan changes, different retirement account rules and more.
This summary offers answers to many questions, but please note this is a changing environment and answers may change over time.
Most adults will get $1,200, although some would get less. For every qualifying child age 16 or under, the payment will be an additional $500.
How many payments will there be? one
How do I know if I will get the full amount? It depends on your income, if you have children, no one claims you as a dependent and have a social security number. For instance, a married couple with no children earning $150,000 or less will receive a total of $2,400.
Do college students get anything? No if someone claims them as a dependent on a tax return.
What year’s income should I be looking at? 2019 if you already filed a return, otherwise use 2018.
What if my recent income made me ineligible, but I anticipate being eligible because of a loss of income in 2020? Do I get a payment? No.
Will I have to apply to receive a payment? No.
When will the payment arrive? Supposedly in three weeks (bur I would not assume this is accurate).
If my payment doesn’t come soon, how can I be sure that it wasn’t misdirected? You will get notice in the mail a few weeks after your payment was sent.
What if I haven’t filed tax returns recently or am not required to file a return? Will that affect my ability to receive a payment?UPDATE as of April 1st – If you are not required to file tax returns the Treasury announced that the IRS will use the same method of paying as you receive your Social Security checks. Outdated answer – Yes, so file your returns immediately. The Internal Revenue Service posted a notice on its website instructing Social Security recipients who do not normally send in a return to file a “simple” tax return, which will be available soon.
Will most people who are receiving Social Security retirement and disability payments each month also get a stimulus payment? Yes, if they filed a tax return.
Will eligible unemployed people get these stimulus payments? Veterans? Yes and yes.
Will U.S. citizens living abroad get a payment? Yes, with some requirements.
Do I have to pay income taxes on the amount of my payment? No.
If my income tax refunds are currently being garnished because of a student loan default, will this payment be garnished as well? No.
Who will be covered by the expanded program? Probably anyone who is unemployed, partly unemployed or cannot work because of coronavirus reasons.
How much will I receive? It depends on your state. Under the plan, eligible workers will get an extra $600 per week on top of their state benefit.
Are gig workers, freelancers and independent contractors covered? Yes, self-employed people are newly eligible for unemployment benefits.
What if I’m a part-time worker who lost my job because of a coronavirus reason, but my state doesn’t cover part-time workers? Am I still eligible? Yes, but the benefit amount and how long benefits will last depend on your state.
What if I have Covid-19 or need to care for a family member who has it? You are covered, but with certain requirements.
What if my child’s school or day care shut down? You are covered if you rely on facility to care for a child, elderly parent or another household member so that you can work — and that facility has been shut down because of coronavirus.
What if I’ve been advised by a health care provider to quarantine myself because of exposure to coronavirus? And what about broader orders to stay home? People who must self-quarantine are covered.
I was about to start a new job and now can’t get there because of an outbreak. You are covered.
I had to quit my job as a direct result of coronavirus. Would I be eligible to apply for benefits? It depends on the circumstances.
My employer shut down my workplace because of coronavirus. Am I eligible? Yes.
The breadwinner of my household has died as a result of coronavirus. I relied on that person for income, and I’m not working. Is that covered? Yes.
Whom does the bill leave out? Workers who can work from home, and have paid sick leave or paid family leave are not covered.
How long will the payments last? It depends on the state. The bill provides an additional 13 week on top of the time the state offers. The extra $600 payment will last for up to four months, covering weeks of unemployment ending July 31.
How long would the broader program last? Jan. 27, 2020, and through Dec. 31, 2020.
I’m already receiving unemployment benefits. Will I receive any help? Yes, your state-level benefits will still be extended by 13 weeks, plus you will also receive the extra $600 weekly from the federal government.
My unemployment recently ran out — could I sign up again? Yes, everyone gets at least another 13 weeks, along with the extra $600 payment.
Will this income disqualify me from any other programs? Perhaps.
How long will I need to wait for benefits? States were encouraged to waive the one-week waiting period, but right now are very short of staff.
Mortgage Payments and Eviction:
Mortgages: The foreclosure relief is in Section 4022 and the eviction moratorium is in Section 4024. Mortgage borrowers with federally related loans (FHA, VA, Farmer’s Home, Fannie or Freddie) may request 6 months of forbearance, i.e. no payments required, renewable for another 6 months, during which no late fees or penalties may be imposed, but interest continues to run (unlike student loans.) Homeowners need not provide documentation; a certification that they are affected by the COVID-19 crisis is enough. There is no statutory provision for loan modification after the forbearance period ends, so unpaid payments will still be due, but the agencies will likely be requiring or encouraging servicers to offer workouts when the forbearance ends. Section 4023 provides relief for landlords of multifamily buildings with federally related mortgages, conditioned on no evictions.
April 28, 2020: UPDATE: According to Bloomberg:Fannie Mae and Freddie Mac’s regulator said Monday that borrowers benefiting from programs that let them skip mortgage payments due to the coronavirus pandemic won’t have to make lump-sum repayments when the crisis passes and encourages other lenders to do the same.
Evictions: The eviction relief is limited to tenants in properties on which there is a federally related mortgage loan, and is only for 4 months. In brief, landlords may not send notices to quit or go forward with evictions. Tenant certifications of hardship are not required. An excellent summary of the eviction moratorium is available at the National Housing Law Project site here.Some states are also imposing eviction moratoria covering more tenants.
According to the New York Times, the federal government has already waived two months of payments and interest for many federal student loan borrowers. Is there a bigger break now with the new bill? Yes. Until Sept. 30, there will be automatic payment suspensions for any student loan held by the federal government. Check your account online.
How do I know if my loan is eligible? You are eligible if you have a federal loan in the past 10 years. According to the Institute for College Access & Success, 90 percent of loans (in dollar terms) will be eligible.
But, older loans and private loans are not eligible, but may offer their own assistance programs.
Will my loan servicer charge me interest during the six-month period? The bill says that interest “shall not accrue” on the loan during the suspension period. Once the suspension period is over check your loan – servicer errors are common.
Will the six-month suspension cost me money, since I’m trying to qualify for the public service loan forgiveness program by making 120 monthly payments? No. Your payment count will still go up by one payment each month during the six-month suspension, even though you are not making the payments. This is true for all forgiveness or loan-rehabilitation programs.
Is wage or tax refund garnishment that resulted from being behind on my loan payments suspended during this six-month period? Yes.
Are there changes to the rules if my employer repays some of my student loans? Yes, see the article for an expanded explanation.
Which retirement account rules are suspended? For 2020, no one will have to take a required minimum distribution from any individual retirement accounts or workplace retirement savings plans, like a 401(k).
What if I have to take money out of my I.R.A. or workplace retirement plan early? You can withdraw up to $100,000 this year without the usual 10 percent penalty, as long as it’s because of the outbreak. See the article for more information.
Can I still borrow from my 401(k) or other workplace retirement plan? Yes, and you can take out twice the usual amount. For 180 days after the bill passes, with certification that you’ve been affected by the pandemic, you’ll be able to take out a loan of up to $100,000. Usually you can’t take out more than half your balance, but that rule is suspended.
I want to help people who are suffering from the pandemic. Does the bill do anything about charitable donations? Yes, up to $300 in annual charitable contributions (if you don’t itemize deductions.
I am lucky to have substantial wealth, and I want to give more to charity than I usually do. Have the limits on charitable deductions changed? Yes, up to 100 percent against 2020 adjusted gross income.See article for more information (or your CPA).
Other Features of the Bill
How does the aid for small businesses and nonprofits work?
See Practical and helpful guide for small business owners, prepared by the U.S. Senate Committee on Small Business and Entrepreneurship. The Guide provides information about the new small business assistance programs in the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).
Will there be damage to my credit report if I take advantage of any virus-related payment relief, including the student loan suspension? No. Beginning on Jan. 31 to 120 days after the end of the national emergency declaration, lenders and others should mark your credit file as current, even if you take advantage of payment modifications.
Is there any relief for renters in the bill? Yes. The bill puts a temporary, nationwide eviction moratorium in place for any renters whose landlords have mortgages backed or owned by Fannie Mae, Freddie Mac and other federal entities. This will last for 120 days after the bill passes, and landlords also can’t charge any fees or penalties for nonpayment of rent.
Does this bill change any rules for health savings accounts and health care flexible spending accounts? Yes, menstrual products are now eligible for reimbursement.
Did the legislation make it illegal for any internet provider to cut off service to an individual or small business that can’t pay its bills? No.
Did the legislation make it illegal for utility providers to cut off service? No.
SURVIVING DEBT – From the National Consumer Law Center (excellent resource and free during the pandemic).
Diane is a well respected Arizona bankruptcy and foreclosure attorney. As a retired law professor, she believes in offering everyone, not just her clients, advice about bankruptcy and Arizona foreclosure laws. Diane is also a mentor to hundreds of Arizona attorneys.
*Important Note from Diane: Everything on this web site is offered for educational purposes only and not intended to provide legal advice, nor create an attorney client relationship between you, me, or the author of any article. Information in this web site should not be used as a substitute for competent legal advice from an attorney familiar with your personal circumstances and licensed to practice law in your state. Make sure to check out their reviews.*
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