by Rob Britton CFA, CFP & Nicole Albrecht EA, CTC
The Senate passed the anxiously awaited relief bill aimed at providing emergency relief to individuals, businesses and institutions in order to prop up the US economy in this time or crisis.
The Senate passed the legislation 96-0 and the bill now heads to the house for a vote tomorrow. If passed the bill would be the largest aid package in US history.
The key points of the bill are as follows:
- The most anticipated piece of the legislation is the direct payments to individuals which will be distributed as soon as possible by the IRS and includes:
- $1,200 check for individuals who make up to $75,000. That amount would scale down until it reached an annual income threshold of $99,000, where it would phase out altogether. Income is based on your 2019 filing, if you haven’t filed for 19 yet it will be based off your 2018 filing
- Couples who file a joint tax return are eligible for a payment of up to $2,400, plus and an additional $500 per child. However, that amount decreases for couples whose adjusted gross income is more than $150,000 in a year at the same rate of 5 percent of every dollar above that mark.
- If you have direct deposit set up with the IRS payments will be made by direct deposit and payments will likely be received approximately 3 weeks after passage of the bill. If you are not set up for direct deposit checks mailed out and may take from 5 to 8 weeks to be received.
- Another key provision relates to unemployment benefits. Currently unemployment benefits last between 12 and 28 weeks the bill provides for an additional 13 weeks of coverage and is set to increase the maximum unemployment benefit by $600 per month; further benefits are expected to those that are partially employed meaning those subject to reduced work hours. These new provisions could be a win-win for both workers and employers and make the difficult decision to lay off employees easier, as many folks may take home more in unemployment benefits than they might with reduced work hours. The proposed legislation also would extend benefits to those who are self-employed, independent contractors and potentially gig workers (think Uber and AirBnb) who do not ordinarily qualify for benefits in certain states. https://fortune.com/2020/03/25/uber-airbnb-lobby-congress-bailout-idled-gig-workers/
- The bill would waive the required minimum distribution (RMD) requirement from your IRA for 2020 if you would have been normally subject to the requirement.
If you are younger than 59 ½ years old early distributions penalties of 10% from IRA’s up to $100,000 are also being waived and income taxes due on the distribution can be spread out over 3 years instead of being due in the year of withdrawal. If funds are replaced before the 3-year period is up, no income tax would be due. This provision is only applicable to coronavirus related hardships.
- You may now take a loan from your 401K of up to the lesser of $100,000 or 100% of your 401K balance essentially doubling the loan threshold.
- The Treasury department is set to increase the amount of money in the system by providing more loans, loan guarantees and direct investment in certain industries.
- $350 billion in the form of loans for small businesses impacted by coronavirus. Loans are expected to include a 6-month grace period, where no payments will be due. There is talk that some of these loans could be forgiven in certain cases, but details are unclear. Companies that take out these loans will not be allowed to buy back their own stock for one year after paying back the loan as certain institutions did during the financial crisis. In addition, businesses that take loans must retain 90% of employment levels except in certain situations, which are still unclear. Loans will be for terms not longer than five years.
- $150 billion to the healthcare system to supply hospitals with equipment and supplies for treatment and increase research efforts to stop or slow the disease.
- $150 billion will go to state and local governments to make sure critical services are not interrupted and that funds are available as the crisis potentially worsens.
- The bill provides $450 million for the Emergency Food Assistance Program, which supplies food banks. The deal also includes $200 million in food assistance for Puerto Rico and other US territories and $100 million to American Indian Reservations.
- Student loan payments employers can pay up to $5250 annually toward an employee’s student loan and will not count as compensation to the employee as it would be normally. Further, student loan payments will be suspended through September 30 with no late payment penalty interest accrual is also expected to be halted for a period of at least 60 days and potentially longer.
- Homeowners affected by the coronavirus will be given a 60-day break from mortgage payments on federally backed loans, which can be extend by 30 days four additional time for a maximum deferment of 180 days.
- The deadline to obtain a Real ID in order to board an airplane, which was scheduled for October 1st of this year, will be delayed until at least September of 2021.
Regulatory change is happening at an extremely fast pace. If you have questions or are looking for guidance in making difficult decisions for your family or business in these unprecedented times, please don’t hesitate to contact us here at Financial Accounting Services for help at 951-719-1515.