CARES Act: Simple Answers to Complex Questions

The coronavirus has had a detrimental impact on the American economy, and a recent FinanceBuzz survey revealed that more Americans are worried about their finances than they are about catching the virus. The economic downturn has brought financial troubles for gig workers and full-time employees alike. If you've been affected and you don't know how to manage your money during this time, you may be able to get help under a couple new federal stimulus bills, including the CARES Act.

The CARES Act stands for the Coronavirus Aid, Relief, and Economic Stimulus Act. It's a $2 trillion federal stimulus bill that provides support for both individuals and businesses. Figuring out what help is available can be confusing though.

This guide will answer the most frequently asked CARES Act questions and help you make sense of the benefits you're entitled to receive.

The CARES Act and your stimulus check

How do the stimulus checks work?

One of the best-known provisions of the CARES Act is the rebate payment that will be sent out starting in April 2020. But most Americans are confused about the stimulus checks. When it comes to the amounts most of us will be receiving, these payments start at:

• $1,200 per individual
• $2,400 per couple
• $500 per eligible child

The full amount is available if you have an income up to $75,000 for singles and $150,000 for married couples filing jointly. The amount is reduced by $5 for every $100 in additional earnings. Singles with incomes of $99,000 or higher will not receive any funds, nor will married couples with incomes above $198,000.

When will I get my rebate check?

Direct deposits will begin as early as April 9, 2020 if the IRS has your bank information on file. The IRS will begin sending paper checks the week of May 4 and will issue up to 5 million paper checks weekly. Unfortunately, it could take up to 20 weeks for all paper checks to be mailed, so the fastest way to get your funds is to make sure the IRS has your direct deposit information.

Who qualifies as a dependent and how many can I claim?

The CARES Act entitles you to an additional $500 stimulus payment for each qualifying child. Only children who are dependents count for purposes of qualifying for this additional $500; adult dependents do not qualify either for their own rebate or for the additional $500.

The definition of an eligible child is the same as the one used for the Child Tax Credit. The child must be under 17; must have lived with you for at least six months; and at least half of the child's financial support must have been provided by you. You may claim the money for every qualifying dependent you have — there is no limit.

If I have not filed taxes for 2019, can I still get a stimulus check?

If you have not filed taxes for 2019, you can still qualify for a stimulus check if you filed for 2018, if you have a Form SSA-1099 from Social Security on file, or if you are a railroad retiree and have a Form RRB-1099 on file with the IRS.

If you do not have a 2018 or 2019 return and are not receiving Social Security or railroad retirement benefits, you will have to submit your payment information to the IRS through a special page set up for non-filers.

Is there a minimum income amount to qualify for the rebate check?

There is no minimum income to qualify for the stimulus payment. However, many lower income Americans do not normally file a tax return, which means the IRS may not have the info it needs to send you your check. If you have not filed a return for 2018 or 2019 and you do not receive Social Security, you must submit a return to get your check or submit your payment information to the IRS through its special page for non-filers.

Will those receiving Social Security benefits or disability benefits receive a rebate check?

Individuals receiving Social Security benefits, including disability benefits, can receive a rebate check as long as they are not claimed as a dependent on anyone else's tax return. You do not need to file a tax return to get your rebate check as the IRS will obtain your information from your Form SSA-1099.

The CARES Act and unemployment

How has the CARES Act changed unemployment benefits?

The CARES Act has made unemployment benefits more widely available, expanded the time you can receive benefits, and expanded the amount of benefits available to you above the customary amount you'd receive under your state's benefits formula. The act also incentivized states to start benefits for workers right away, though many states customarily make workers wait a week after losing a job before their benefits begin.

Are gig workers, freelancers, and independent contractors eligible to receive the enhanced unemployment benefits?

Gig workers and the self-employed are now able to qualify for unemployment benefits. This wouldn't normally be available if you did not have W-2 income within a traditional employment relationship. Up to 39 weeks of benefits are now available to you.

To qualify for expanded benefits, you must be unable to work due to health or economic consequences of COVID-19. Applying for this benefit is just one of the strategies recommended for gig workers dealing with the economic downturn.

Can people who were not laid off also qualify?

If you are not able to work for any reason related to COVID-19, you may be able to qualify for benefits. That includes people who must provide care to children who no longer have school or daycare due to closure resulting from the pandemic, as well as people who have to serve as a primary caregiver for a family member with COVID-19. If you are under a quarantine order, you can also qualify for benefits.

How much do unemployed workers get?

States set the formulas for determining the amount of compensation you can receive, and it's typically based on a percentage of earnings. The CARES Act also provides for unemployed workers to receive an additional $600 in weekly unemployment benefits until July 31, 2020. The Act also expanded the maximum duration of benefits, adding an additional 13 weeks to state limits.

The CARES Act and retirement funds

Can I take money out of my IRA early?

The CARES Act allows you to withdraw up to $100,000 from an IRA, 401(k), or similar retirement plan without incurring the 10% penalty you'd normally owe for early withdrawals (withdrawals made before you are 59.5 years old). Withdrawals are still subject to income tax at your standard rate, but you're allowed to pay those taxes over three years.

Can I borrow from my 401(k)?

The CARES Act has also provided accommodations for increased borrowing from your 401(k). You can now borrow up to $100,000 or 100% of the vested amount. This is double the normal limit for 401(k) loans.

The CARES Act and housing

Will the CARES Act help me pay my rent?

The CARES Act doesn't provide rental assistance, but it does put a moratorium on evictions for 120 days starting March 27, 2020. This moratorium applies only to covered dwellings, which includes properties that receive federal housing funds, such as Low Income Housing Tax Credits or Section 8 vouchers, as well as properties with federally guaranteed mortgages.

If you're already receiving federal rental assistance, you can also request an income recertification if you've lost income. This could potentially increase the amount of help you're entitled to.

We also recommend that you reach out to your landlord to discuss your options as your landlord may also be dealing with multiple tenants who can’t pay rent and may be amenable to coming to an agreement with you that works for both parties.

Will the CARES Act help me pay my mortgage?

The CARES Act does not provide help paying mortgages, but it does provide a moratorium on foreclosures for 60 days starting March 18, 2020 if you have a government-guaranteed mortgage, such as Federal Housing Administration loans, Department of Veterans Affairs loans, Freddie Mac Loans, and Fannie Mae Loans.

You also have the right to request forbearance to pause mortgage payments for up to one year total, but must make your requests six months at a time. When your loan is in forbearance, your lender also can't charge interest or fees above what you'd have owed if you were making payments on schedule.

The CARES Act and student loan debt

How does the CARES Act impact my student loans?

The CARES Act suspends payments on Direct Loans, Perkins Loans, and Federal Family Education Loans. Payments are suspended beginning March 13 and will remain suspended through September 30, 2020.

During the time payments are suspended, interest won't accrue. And, if you don't make payments during this time, each suspended payment will still count toward becoming eligible for Public Service Loan Forgiveness as long as you otherwise meet the guidelines for forgiveness, such as working for an eligible employer.

Is the suspension of federal student loan payments automatic?

The suspension of federal student loan payments is automatic, and you do not need to do anything to apply for it. If you want to keep making payments, you can. Any payments you make will be applied entirely toward reducing the principal on your loan, so this could actually be a good opportunity to reduce your student debt if you are financially able to.

Does the CARES Act provide any relief for private student loan borrowers?

The CARES Act doesn't offer any help to borrowers with private student loans, but you should talk with your loan servicer as it may be willing to work with you. You may also wish to consider looking into student loan refinance opportunities, as interest rates are currently relatively low. However, you will need to qualify for a private refinance loan, which may be difficult if your income has been affected by COVID-19.

The CARES Act, your bills, and your credit score

How will forbearance or deferment impact my credit score?

Under the CARES Act, lenders must report your loan as current if they make an accommodation for you, such as putting your loan into forbearance. However, if you simply stop making payments or fail to fulfill your obligations without entering into an agreement with your lender, you can still be reported as delinquent. This will negatively impact your credit score.

Will not paying my credit cards or bills affect my credit report and credit score?

If you do not work out a plan with your creditor, you could see your credit score damaged by a failure to pay your bills. Always call your creditors and speak with them directly to find a solution if you can't make your full payment. Many credit card companies are changing policies due to coronavirus.

Also, be aware that some scammers will try to take advantage of people during the pandemic so be wary of any third parties offering help for a fee or making promises about their ability to protect your credit. Always communicate with any lenders or credit card companies directly.

The CARES Act and small businesses

What types of assistance does the CARES Act offer small businesses?

The CARES Act offers many different kinds of help, much in the form of SBA loans for small businesses. The support being offered includes:

• Economic Injury Disaster Loans: Low-interest loans of up to $2 million from the SBA
• Emergency Economic Injury Grants: A grant for up to $10,000 that does not have to be repaid and can be used to pay operating expenses
• Small Business Debt Relief: Businesses with non-SBA disaster loans will be covered for six months, including principal, interest, and fees
• Paycheck Protection Program: Loans up to $10 million, which are forgiven if the employer uses the funds to cover payroll expenses. Up to eight weeks of payroll expenses are forgiven, and employers can defer payments on the loan for up to six months
• Employee retention credits: A refundable payroll tax credit valued at up to 50% of wages paid to employees during the COVID-19 crisis (note: this credit is not available if you receive PPP funds)

Beyond the CARES Act, there are also a number of other ways you can help your business during this crisis, including contacting your lenders directly, checking with your insurance provider to see whether this is a covered emergency, and finding ways to serve your customers online.

What is the Paycheck Protection Program?

The Paycheck Protection Program is a loan program administered by private lenders and guaranteed by the federal government. Companies can borrow up to $10 million and defer repayment for up to six months.

Up to eight weeks of payroll expenses will be forgiven for borrowers if they retain their employees. Forgivable expenses include compensation, vacation pay, parental leave pay, sick leave, allowances for separation or dismissal, group health insurance premiums, employee retirement benefits, and taxes assessed on employee wages.

What size business can qualify for a PPP loan?

Businesses with no more than 500 employees per physical location are eligible to qualify for a PPP loan.

Can independent contractors qualify for PPP loans?

Yes, independent contractors and sole proprietors can qualify for PPP loans.Your loan can be used to cover wages, commissions or income or net earnings from self-employment.

The amount you can obtain is capped at $100,000 on an annualized basis. If at least 75% of borrowed money is used to cover these costs and you don't reduce payroll for eight weeks, you will not need to pay back the PPP funds.

What can a PPP loan be used for?

PPP Loans can be used for:

• Payroll expenses over an eight week period, but not for more than $100,000 in compensation to employees/owners
• Group health insurance premiums
• Paid leave, including sick leave, medical leave, and family leave
• Paying interest on mortgages
• Paying rent
• Utilities
• Interest on other debts incurred prior to February 15, 2020

Will I have to pay back my SBA loan(s)?

If you had an SBA loan prior to the COVID-19 pandemic, you will not have to worry about your payments for six months, but you will still have to repay your loan. If you take out certain SBA Loans offered in response to the coronavirus crisis, you may not have to repay them. You can apply for forgiveness of loans taken under the Paycheck Protection Program (PPP) if you use the funds for payroll expenses. You do not have to repay the $10,000 Emergency Economic Injury Grant if you receive one.

Can I have both a PPP loan as well as an Economic Injury Disaster Loan from the SBA?

You can have both a PPP Loan and an EDIL loan as long as you don't use the money for the same purposes.

Bottom line

The CARES Act provides ample help to individuals and businesses struggling with budgeting. Hopefully, this guide helped you better understand the assistance available as you cope with unprecedented economic stress as the country comes together to stop the spread of an insidious virus.