As a result of these unprecedented times, many Americans experience financial stress and the unemployment rate continues to rise. Fortunately, the legislation has been working towards lessening the economic impact inflicted upon people during this pandemic. On March 27, 2020, President Trump signed a new bill, the (CARES) Coronavirus Aid, Relief and Economic Security Act; the CARES act offers financial assistance to American workers, families, and small businesses. Along with that, this two trillion dollar relief package is intended to stabilize the economy as well as help healthcare workers and patients. The core benefits of the CARES Act include:
As a result of the CARES Act, people can borrow up to 100,00 dollars from their 401(k) balance; however, they must repay their loan within a six year period.
Retirement Plan Funds
Through the CARES Act, it allows employees to access their retirement account and withdraw cash that can be up to 100,000 dollars without a 10% penalty if they are under the age of 59 ½ . If an individual withdraws from their 401(k), he or she will be given a three year time frame to repay the coronavirus-related distribution.
A few months ago, stimulus checks were sent to individuals that make less than $75,000 and household incomes that make $150,000 or less. Congress plans to send a second round of payments to those who were eligible but never received a stimulus check by the end of July.
Hospital and Health Care Support
The bill initially provided a fund of 100 billion dollars towards the Department of Health and Human Services; however, a month after the CARES Act was signed, there were several provisions made to the CARES ACT related to helping medical professionals save their patients’ lives. CARES Act offers hospitals reimbursements towards lost revenues or any expenses for COVID-19 related care.
All testing sites and locations offer free of charge coronavirus testing.
Paycheck Protection Program
Towards the end of March, roughly 350 billion dollars were distributed to small businesses (500 employees or less) in the interests of preventing lay-offs and businesses shutting down. CARES Act created a small business loan program called Paycheck Protection Program, which is a loan that helps small businesses keep their staff on the payroll. If all employees remain on the payroll in a 24 week time frame, the loan will be forgiven. As of June 22nd, the PPP has $130 billion left in fundings. If you’re interested in becoming a recipient for PPP, the deadline is June 30. The SBA loan is also tax free and accepts applications from reopening businesses. Below are the modifications recently made for PPP.
Pandemic Unemployment Assistance (PUA)
This program offers 39 weeks of benefits targeted towards unemployed workers and also provides an unemployment weekly compensation for those who qualify (unemployed, partially unemployed, unable to work, unavailable to work related to COVID-19). Although the weekly $600 checks are scheduled to expire by the end of July.
Questions Regarding CARES Act:
Q1. Are these new benefits taxable?
Yes! The unemployment benefits insurance and stimulus payments are in your income, thus it is taxed on tax returns.
Q2. Can PPP loans only be used for employee payroll?
No, it could be used for a few other business functions that include any costs related to healthcare benefits (i.e. family, medical leave), rent and utility payments, mortgage interest payments, and interest payments on any other debt obligations that happened before February 15, 2020.
Q3. For PPP, would the loan still be forgiven if I fired an employee or gave bonuses to employees?
Yes! PPP does not restrict an employer from giving bonuses to employees nor does it restrict firing an employee for poor performance.
Q5. Where can I receive more information?
The IRS website has a list of frequently asked questions. If your question(s) isn’t listed on the IRS website, please call or email us and we’d be more than happy to help answer your questions or concerns.