Coronavirus Crisis: Financial Resources That Can Help You Stay Afloat
As of April 2, 38 states had shelter-in-place or stay-at-home orders in place, affecting at least 297 million people. While the specifics vary from place to place, the orders typically require businesses considered “non-essential” to close their physical offices in an effort to keep COVID-19 from spreading and overwhelming hospital and healthcare facilities.
In some cases, employees are working from home. In others, employees have been furloughed or laid off. The displacement of workers is the reason almost 6.6 million Americans applied to receive unemployment benefits last week – doubling from the 3.3 million from the prior week.
If you have found yourself without an income or with a greatly reduced income, there are resources available to help you get through the coronavirus crisis intact. Here are six resources and opportunities that may help you stay afloat financially during these difficult times.
1. Sources of income. Congress passed the $2.2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES Act) on March 27, 2020. It is intended to provide relief to individuals, workers and businesses that are facing financial challenges created by measures to impede the spread of COVID-19. The relief package provides:
- Checks from Uncle Sam. Individuals with a social security number (SSN) and who are not dependents may receive a one-time cash payment of $1,200 (for single filers with an adjusted gross income under $75,000), or $2,400 (for joint filers with an adjusted gross income under $150,000), plus an additional rebate of $500 per qualifying child. Payments would start to be phased out for individuals who make more than $75,000, while individuals making more than $99,000 won’t receive a check at all. For joint filers, that threshold is $198,000. Social Security benefit recipients also are eligible to receive checks, even if they don’t file taxes.
- Higher unemployment benefits. The CARES Act created Federal Pandemic Unemployment Compensation, which adds $600 a week to standard state funded unemployment benefits through July 31, 2020. If your state’s normal weekly unemployment payment is $350, you’ll receive $950 a week. From now through December 31, 2020, those who would typically not qualify for unemployment compensation benefits – including the self-employed, those seeking part time work, and those not having sufficient work history – may be eligible for unemployment. The time period for benefits has been expanded from 26 weeks to 39 weeks.
2. Payment and debt relief. Banks and financial institutions are offering various types of financial support to Americans who find themselves working fewer hours or without work. Call your bank and ask what they can do to help you weather the crisis. They may offer to:
- Defer mortgage, auto and personal loans payments
- Waive overdraft, expedited check and debit card fees
- Waive various fees and penalties
- Postpone foreclosures, evictions and repossessions
If you have savings in certificates of deposit, banks may be willing to waive fees and penalties for early withdrawals.
3. Tax relief. The Department of the Treasury and Internal Revenue Service has postponed Tax Day. The deadline to file 2019 taxes is extended to July 15, from April 15, 2020. You can hold on to any taxes you may owe until then. Anyone who has a refund coming is encouraged to file as soon as possible. The IRS announced that most tax refunds will be issued within 21 days.
4. Student loan debt relief. Employers have the option to provide up to $5,250 in tax-free student loan repayment benefits to each employee. That means the money would not count as income, reported NPR.
In addition, payments due for federal student loans are suspended through September 30, 2020. Interest on the loans will not accrue during the period of suspension and loan collectors cannot garnish wages, tax returns or Social Security benefits to collect overdue payments.
5. Paid sick leave. The Families First Coronavirus Response Act was enacted into law on March 18, 2020, and is effective April 1, 2020. Under this new law, employers with fewer than 500 workers are required to provide up to two weeks of paid sick leave to employees affected by COVID-19. If you are sick or quarantined, you may qualify to receive full wages, up to $511 per day. If you are caring for children or someone who is ill with coronavirus, you may qualify to receive two-thirds of wages (up to $200 a day).
6. Retirement contribution and withdrawal relief. Though not as highly publicized, the CARES Act includes provisions that provide relief in 2020 for those who own a qualified retirement account, such as an IRA.
- Extension of contribution deadline.The IRS has extended the deadline for individuals to file their federal income tax returns until July 15, 2020. The IRS has clarified that this automatically extends the due date for contributions to IRAs for 2019 until July 15, 2020.
- Waiver of 2020 required minimum distributions. Once an individual who owns a qualified retirement account reaches a certain age, the account owner must begin taking required minimum distributions (RMDs).
The CARES Act waives the requirement to take an RMD in 2020. The 2020 waiver also applies to beneficiaries of inherited IRAs.
- Tax-advantaged distributions of up to $100,000 for affected individuals. A qualified retirement account owner affected by the COVID-19 pandemic may take a “coronavirus-related distribution,” or CRD, from his or her account of up to $100,000 that will be entitled to special tax benefits. The loan limit for 401(k) accounts is increased from $50,000 to $100,000 or 100% of the participant’s vested balance, whichever is less. The coronavirus related distribution must occur in 2020.
Be sure to talk to your financial advisor or tax professional for more information about your particular situation. The new law provides relief for businesses, too. We’ll have more on that next week, and you can subscribe to our blog for updates.
The material in this blog is presented for informational purposes only. Millennium Trust Company performs the duties of a directed custodian, and as such does not sell investments or provide investment, legal or tax advice.