An overview of the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act)
Congress passed the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) on March 27, 2020, a bill with a $2 Trillion budget that aims to blunt the impact of the sharp and sudden recession the Covid-19 pandemic injected into the American economy. In a matter of weeks, scores of Americans lost their jobs, many more shuttered their businesses, and students nationwide hit pause on their education, plunging the country into scary and uncharted waters as the nation continues to battle the pandemic.
Unemployment Assistance
Millions of Americans became unemployed already as a direct result of the Covid-19 pandemic. That number portends to rise before it falls. The CARES Act calls for major temporary changes to unemployment assistance programs in response to the expected stark disruption to the livelihoods of the nation’s most economically vulnerable individuals and families.
These are very strange and difficult times for everyone. There is absolutely no shame in asking for help. If you lose your job, please file a claim with the unemployment office. In North Carolina, please click this hyperlink for instructions on how to apply. There is no penalty for submitting a claim for unemployment benefits as long as you answer questions truthfully. So, even if you’re not sure if you’re eligible, please apply and do not wait.
Self-Employed Individuals and Independent Contractors
Self-employed individuals and independent contractors are traditionally left out of unemployment benefit programs. That’s not the case with the CARES Act. The Act will afford coverage to the following individuals who are available and able to work but are unemployed or partially unemployed as a result of Covid-19.
· A person who is diagnosed with Covid-19, a person who is symptomatic and is seeking a diagnosis of the same, or a person who has been advised to self-isolate due to Covid-19 concerns.
· A person who cannot work because someone in that person’s household has been diagnosed with Covid-19.
· A person who cannot work because of caretaking responsibilities for a family member or household member diagnosed with Covid-19.
· A person who is the primary caregiver for a child or other person in the household who cannot attend school or another facility as a result of Covid-19.
· A person who cannot work because a quarantine imposed as a direct result of Covid-19 prohibits that person from reaching their place of employment.
· A person who was scheduled to commence a particular job but cannot reach the job because of Covid-19.
· A person who becomes a household’s major support provider because the head of household dies as a direct result of Covid-19.
· A person who has to quit their job as a direct result of Covid-19; or,
· A person who cannot work because their place of employment closed as a direct result of Covid-19.
If you fall within those categories, then you are eligible for unemployment assistance even if you are self-employed or you are an independent contractor. Please check back regularly, too, as the federal government reserved the right to add criteria to the list depending on the continuously evolving circumstances of the pandemic. To prove lost income, it will likely be necessary to show proof of existing contracts and/or expected workflow that became void or limited as a result of Covid-19. Please don’t hesitate to contact a lawyer for help and guidance on proving that to state officials.
The Stimulus Check
The headline of the CARES Act is the stimulus check. The federal government will issue a check to all taxpaying individuals and families.
Moreover, the CARES Act reduces a stimulus check of the taxpayer’s AGI (Adjusted Gross Income) for single individuals with no dependents who reported income between $75,000 to $150,000 by 5% of the AGI that is in excess of $75,000. For example, a person who reported AGI of $85,000 will receive $700. Here’s how that works: the difference is $10,000 from the $75,000 limit; 5% of $10,000 is $500; that amount subtracted from $1,200 totals $700.
A person who owes back taxes to the IRS will still receive the checks. The CARES Act instructs the IRS to distribute the refund checks as soon as possible; many experts estimate that it will take several weeks to process them. Direct deposit will be available for individuals who have a bank account on file with the IRS.
Relief from Student Loan Repayments
Individuals with student loans held by the Department of Education may request a suspension of loan payments through September 2020 from their loan servicer. In addition, no interest will accrue on loans during this time period; however, it does not apply to privately held student loans. Please contact the loan holder, as opposed to the servicer, for help on the repayment of privately held student loans while impacts are felt due to the pandemic.
Relief from Mortgage Payments
A borrower who can prove that hardship caused by Covid-19 makes it necessary to delay mortgage payments can request forbearance on federally-backed mortgages; however, forbearance will not be available at this time to borrowers who still earn their regular wage and cannot demonstrate additional expense or economic impact. Lenders will not automatically enter homeowners into this forbearance program; a homeowner hoping for forbearance must contact their lender to utilize this option.
The Use of Retirement Funds
Ordinarily, there is a 10% early withdrawal penalty for early distributions from retirement funds. The Act waives those penalties for disbursements up to $100,000 as long as a person withdraws the funds for Covid-19 related purposes. The withdrawals will still be taxed under the Act; however, the IRS will spread taxation over the course of three years and/or permit the taxpayer to roll it back over during the course of those three years.
Small Business Relief
Small business companies continue to provide the backbone of the American economy and lifestyle. These are companies with fewer than 500 employees, and the ability for them to operate at this time is in serious jeopardy. The CARES Act allots funding for small businesses for up to 8 weeks of cash-flow aid for small business employers who maintain a payroll.