The CARES Act: What You Need to Know

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Our nation’s lawmakers have agreed and passed a $2 trillion stimulus bill called the CARES Act. The legislation provides relief to American citizens and businesses who have been negatively affected by the COVID-19 pandemic. Here’s what you need to know.

For Individuals

Direct Payments

Firstly, the Act stipulates that all Americans will receive a one-time rebate of up to $1200 ($2400 for married couples.) Additionally, parents will receive an additional payment of $500 per child. However, the rebate will be reduced for individuals making between $75,000 and $100,000 ($150,000 and $200,000 if married.) No checks will be issued to those with incomes above these thresholds. 

Unemployment

The CARES Act provides $250 billion for an extended unemployment insurance program. The act dramatically expands eligibility, and the program will pay individuals $600/week for 4 months on top of state program payments. Even more, the act extends state benefits from 26 to 39 weeks. Additionally, the act makes eligible the self-employed, gig economy workers, and contractors for this benefit.

Retirement Funds

The CARES Act waives the 10% penalty on early withdrawals. However, the amount withdrawn is still subject to tax, but that tax burden can be spread across three years. Optionally, citizens may repay the amount withdrawn over the same three years, allowing for contributions in excess of the typical annual limits. Additionally, 401k participants may take loans up to $100,000. Previously, the limit was $50,000.

COVID Testing/Treatment

The Act covers the costs of testing for COVID-19, as well as any potential vaccine or treatment developed.

Student Loans

The act allows for the suspension of payments, interest, and garnishment on federal student loans through September 30, 2020.

For Businesses

Small Businesses

The Act dedicates $350 billion to small businesses (under 500 employees) to prevent layoffs and closures. However, the portion of a company’s loan used for payroll, interest, mortgage, rent, and utilities can be forgiven if employee payroll is maintained. This is the Paycheck Protection Program.

Large Corporations

The CARES Act earmarks a $500 billion stimulus to large corporations. Unlike the small business program, businesses must pay these loans back within 5 years – they cannot be forgiven.

Corporate Tax 

Businesses can choose to delay their quarterly tax payments until October 15, 2020.

Payroll Tax Relief

Businesses can delay the employer half of the payroll tax for 2020. Instead, companies can spread these payments across 2021 and 2022.

At a time of great difficulty, it is refreshing to see our lawmakers put away their differences and come together to create legislation designed to see us through this crisis!

John SpearsThe CARES Act: What You Need to Know

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