Your Complete Guide on the Coronavirus Stimulus Package
Posted on: 08 April 2020
By: Daniela Bucay
As we wrote in our recent post on employment during the COVID19 pandemic, Americans regardless of state or income level have been affected by the economic crisis that this health emergency has triggered. Many of our borrowers have mentioned that they're spending more on food and making less money.
To try to improve the situations of working families, Congress recently passed a large stimulus package, called the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Not only are they giving money to different institutions, but the government also wants to give people money for what they can and need to spend on, since this is the only way our economy can keep moving with so many Americans laid off or are earning less.
Here’s a quick breakdown: The CARES Act totals $2 trillion in aid, with $560 billion going to individuals, and another $377 billion going to small businesses. The rest of the money is divided between public health, state and local governments, schools, and big corporations.
Now what do these numbers mean for money in your pocket, when can you expect relief, and what are the ways that we at Fig can help?
- Fast facts:
- You will get cash back if your last year pre-tax income was less than $99,000 (filing single), $136,500 (filing as head of household), and $198,000 (filing jointly) and an extra $500 per dependent less than 17.
- UI has been extended 13 weeks and eligible workers can get $600 extra per week in addition to state benefits. Freelancers and self-employed can apply!
- There are extra benefits for small business owners, those with student loans, and withdrawals from retirment accounts
The money going to individuals like you will consist of: (1) one-time cash payments (aka the stimulus checks you may have been hearing about), (2) extra unemployment benefits, as well as some (3) other bonuses that could help you.
How big a cash payment you get will depend on how much money you made in 2019 (or 2018). It will be helpful for you to look at your latest tax filing if you want to know how much money you will get, since that is what the government will be using when calculating that amount. If you didn't file a tax return, but you got income through Social Security, then the Social Security Administration will give the government the information so they can give you the appropriate amount. The New York Times published a really thorough FAQ sheet, but we’ve summarized the main points below.
If you filed as an individual and made less than $75,000 on your adjusted gross income (line 8b on your recent federal tax return, or form 1040) you will get $1,200. If you made more than that, it goes down by $5 per $100 you made over $75,000 until you hit $99,000 for, after which point you won't get any money. A few examples, if you made $80,000, you will get $950, if you made $90,000, you will get $450.
If you filed as head of household, you'll get the full amount if you made less than $112,500, and it'll waterfall after that. A few examples, if you made $120,000, you will get $825, if you made $130,000, you will get $325.
For families, the rules are a bit different. If you filed jointly and have no kids, you'll get the full amount of $2,400 if you make, combined, less than $150,000. The $2,400 will decrease if your income is over $150,000, and past $198,000, you won't get anything. If you have kids, you get an extra $500 for every kid born after 2019, who is less than 17 years old.
Unfortunately, there are a lot of people who won't get checks at all. This piece by NBC covers a lot of those special cases, but the main takeaway is that you won't get a check if someone claimed you as a dependent on their last tax return or if you don't have a Social Security Number.
The nice thing about this is in most cases, you won't need to DO anything to get this money. The IRS will send it by direct deposit to the bank account information you gave on your 2019 or 2018 return. According to the IRS website, they'll start sending direct deposits to most people in April and encourage you to check back to their site often. If your direct deposit information has changed since you last filed taxes, you can change it via a portal that the IRS plans to roll out.
This is another way that the government wants to put money in your pockets. The CARES Act has not only increased how much money you can get from Unemployment Insurance (UI), but it also allows a lot of people who usually don’t qualify for UI to apply. NPR breaks it down really well, but the key points are below.
Eligible workers will get $600 from the federal government every week in addition to whatever their state gives them. The amount you receive from your state, as well as how long you can receive UI, naturally depends on which state you live in.
The CARES Act also extends UI benefits by 13 weeks, or about 4 months, which will really help a lot of people who have no idea when they’ll be able to return to work.
One major change that this law made, temporarily, to UI is that furloughed employees, gig workers, independent contractors (aka freelancers), and self-employed people will be able to apply. This is not usually the case. You still won’t be able to apply if you’re a remote online worker, but everyone else who has lost income due to the pandemic will be able to apply. It’s really important to remember that you can apply for unemployment benefits even if you’ve only lost part of your income. The UI will help to fill that gap!
There are other helpful extras in the bill, too, like being able to pull from your retirement accounts (IRAs, 401(k)s, 403 (b), and 457 (b) without the usual tax penalties. If you have federal student loans, payments and interest will be deferred through the end of September.
If you work for or own a small business, we’ve written the part below just for you!
There are 2 loan packages that the CARES Act has made available to small businesses through the Small Business Administration (SBA). One, the Paycheck Protection Program (PPP), is new. The other, the Economic Injury Disaster Loans (EIDL) program, is not new. The most important thing to know is that you can apply for both an EIDL loan and a PPP loan.
The EIDL loan is only for small (less than 500 people) businesses that are totally independent and based in the US. Investopedia did a really great job at breaking down the EIDL loan specifically for COVID19 times. The main thing to know is that you can get a $10,000 loan advance for emergency relief that does not need to be repaid. You still have to apply for a loan to get this advance, but you don’t have to be approved for the loan to get the advance or for the advance to be forgiven. Another important thing to note is that you apply for the EIDL directly with the SBA, on their website. The whole application takes a couple of hours!
The new loan package, the PPP, is really exciting because it’s not just a loan that businesses can use however they need. It’s specifically designed to help businesses continue to pay their employees, with a maximum loan amount of 2.5 times your average monthly payroll. Let’s say in 2019, you had 10 employees, with payroll for each totaling $50,000 (payroll includes salary, of course, but also the cost of health insurance, vacation, state and local taxes, and any retirement benefits). This means that you could get a forgivable loan of up to $1.25 million!
Also, if your business employs any independent contractors, or if you’re the sole proprietor of a business, you can include those salaries in payroll costs, too.
Forbes has a great, detailed article if you’re thinking about applying for a PPP loan for your business. The main points are that this loan can be forgiven if you keep your staff on payroll with at least 75% of their regular salary. You can also use up to 25% of the loan money for non-payroll expenses, like your mortgage, and still have the loan be forgiven.
Another important thing to know about the PPP is that you don’t apply directly to the SBA, unlike with the EIDL. For this one, you have to apply through an SBA lender or your local bank, and they’ve already been overwhelmed by applications.
In summary, the government has made a lot of money available to individuals and small businesses to help manage the economic pain caused by the COVID19 pandemic. It remains to be seen if what they have earmarked will be enough, and nobody is really certain about when they’ll start getting this government money.
In the meantime, we encourage people to ask for relief from any lenders, landlords, and so on. Whether they offer relief will depend on state and local laws, as well as their own policies, but it’s always best to try to cut/delay expenses before taking on more debt to deal with them.
We recognize that it can get really confusing to navigate all of these different benefits, so we encourage you to reach out to us in the comments below if you have any questions! Fig has a strong partnership with organizations that offer non-profit financial counseling, and they may be able to help you figure out how to get the benefits you need from the CARES Act. As always, Fig is available at firstname.lastname@example.org, Facebook, Twitter, or text us (832) 803-0990.