The CARES Act and What it Means for You

Margaret Atkins MunroLet's Talk About MoneyLeave a Comment

The Coronavirus Aid, Relief, and Economic Security Act of 2020, the “CARES Act”, was signed by President Trump on Friday, March 27, 2020. This is the third major piece of legislation signed into law since COVID-19 burst onto our radar, and it contains many Band-Aids™ to put on the open wound that is this novel coronavirus.

There is a great deal crammed into a mere 335 pages; I will only concentrate on two items: the individual payments, and the unemployment provisions. This is not intended as an exhaustive discussion; there will be corrections and additional guidance to address the many unanswered questions.

Individual Payments

You’ve probably heard by now that every taxpayer is going to get a one-time payment for $1,200, or $2,400 for a married couple, plus $500 for each dependent child shown on your tax return who is under age 17 by the end of tax year 2020.  There is no payment for older children who are still your dependents, or for other dependents you may have, such as parents or grandparents. Ouch! And dependency rules are no longer transferrable – if you fail to claim someone as your dependent who legally is your dependent, they still won’t be entitled to their own payment.

While an already filed 2019 (or 2018, if you haven’t filed for 2019 yet) income tax return will be the primary determinant for eligibility, payments will also be made to retirees who have no obligation to file because they only receive Social Security or Railroad Retirement benefits. The payments are phased out if you have Adjusted Gross Income (AGI) between $75,000 and $99,000 for an individual, between $112,500 and $136,500 for a head of household, or between $150,000 and $198,000 for a married couple filing together.

If the IRS or the Social Security Administration already has banking information for you, your payment will be direct deposited into that account without you taking any additional steps. These payments should happen relatively seamlessly, and in pretty quick order, at least for the federal government. It’s not unreasonable to think that the cash could be in your bank account within the next 2-3 weeks.

Some Payment Caveats

If you are still receiving tax refunds or Social Security by check, it gets a little stickier. It could be months before the IRS is able to mail out checks, long after the worst of the crisis has passed (hopefully). You’ll still get your money, but it’s going to take a whole lot longer.

If you haven’t filed tax returns in either 2018 or 2019, or aren’t receiving Social Security, you need to file a tax return, and fast. Since the IRS doesn’t have current information for you, they can’t send you money.  No return, no check. It’s as simple as that. Whether you’re not earning enough to have a requirement to file, or filing gives you an allergic reaction, if you’re not on the IRS’s radar (for whatever reason – no judgments here), there will be no check from Uncle Sam. And the only way to put yourself back on the radar is to file a 2019 tax return. You may not owe any tax, but if you do, the payment deadline is now July 31, 2020; if the virus doesn’t abate by then, a further extension of time to pay may be in the offing.

Unemployment Provisions of the CARES Act

Cares Act Breakdown

via Committe for a Responsible Federal Budget

Now, onto unemployment. If you’ve been attempting to get through to your state’s unemployment office to open a claim, you’re probably more than a little frustrated at the wait times, and the “courtesy” hang-ups (when the wait time is too long, they disconnect the call). If you’ve managed to break through the logjam, and there’s someone with a pulse on the other end of the phone, keep calm and just give your information. Try your best not to get upset at delays, at real or perceived rudeness, at answers you don’t want to hear; these people are just the messengers, and they’re working under insane amounts of stress.

At the same time, PERSIST! In addition to whatever unemployment benefits your state normally provides, the CARES Act adds an additional $600 per week onto your regular benefit, courtesy of the federal government; this additional relief is good for 4 months, through July 31, 2020. If you’re still out of work on August 1, 2020, your payment will revert back to your state-mandated benefit. Benefits are also now extended to 39 weeks instead of the normal 26 weeks, and it seems clear that, if COVID-19 continues past these dates, Congress will push out unemployment compensation accordingly.

Good News for Self-Employed

But wait, there’s more! For the first time in U.S. history, self-employed people are eligible to apply for unemployment if they’ve lost their livelihood due to the coronavirus. Retroactive to January 27, 2020, if you’ve lost all, or a substantial portion of your income from self-employment, whether you’re an Uber driver or painting houses, you should make contact with your state’s unemployment office.

Whether you’re a long-term employee, a very recent hire, or have accepted a job offer that is now postponed or even eliminated due to COVID-19, you are likely eligible for unemployment compensation, but you’ll only receive benefits if you apply. Apply! The worst-case scenario is they reject your application. But if you don’t apply, you will certainly receive nothing.

Final Thoughts

I have lived, and worked, through recessions in the 1980s, 1990s, 2000s and this current situation will be the one in the history books. The CARES Act doesn’t solve the economic crisis that is accompanying the public health catastrophe of the novel coronavirus, but it does scratch away a bit at it. More relief will be coming, and the longer this downturn lasts, the more we will all look to the federal government for answers. For now, though, this is a start.