A record number of American workers filed for unemployment in March. One in three says they or an immediate family member has been laid off as a result of the coronavirus. Half say they’ve experienced cuts in pay and work hours, according to a poll from ABC News/Washington Post.
On March 27, the president signed a $2 trillion plan to stimulate the economy: the Coronavirus Aid, Relief, Economic Security (CARES) Act. The relief package provides lump-sum checks to many Americans, defers payroll taxes for eligible small businesses, and expands unemployment coverage to self-employed workers.
Stimulus payments for everyone
United States residents who have Social Security numbers and an adjusted gross income of $75,000 or less will receive a stimulus payment of $1,200. Married couples earning $150,000 or less, with no children, will receive a total of $2,400. These adults will also receive an additional $500 for qualifying children 16 years or younger.
The payment amount decreases for recipients making more than $75,000 per year. Payments dissolve entirely for single adults earning $99,000 or married people earning $198,000.
The payment amount is based on your adjusted gross income, which you can find on line 8b of your 2019 1040 federal tax return. If you haven’t prepared your 2019 tax return yet, you can use your 2018 tax return or a 2019 Social Security statement. If you haven’t filed taxes in 2018 or 2019, it could affect your stimulus payment.
You should see the money in your bank account within three weeks, according to Treasury Secretary Steven Mnuchin. If the IRS has your bank information, it will transfer the funds based on the income tax figures it already has via direct deposit. You will get a paper notice in the mail after the IRS disburses your payment, telling you where the payment went and what form it took. If you can’t find your payment, contact the IRS using the information on the notice.
Everyone with a Social Security number and qualifying income level will receive payment. Recipients include veterans and unemployed workers and those on Social Security retirement or disability pay. For now, expect just one payment. Future legislation could provide additional payments, depending on the status of the economy.
Payroll tax relief for business owners
More than $300 billion of the $2 trillion rescue plan is designated to help small businesses stay afloat and keep workers employed amid the coronavirus. Part of that budget applies to payroll tax relief for small business owners.
The stimulus plan grants small business owners tax credits and defers payroll taxes through 2020, so they can continue paying employees. Employers will be eligible for the payroll tax credit as long as they keep workers employed amid coronavirus-related shutdowns. Employers who apply for small business loans do not qualify for payroll tax credits.
This plan gives employers financial flexibility. Business owners will have to pay back deferred payroll taxes—likely 50% in 2021 and 50% in 2022.
Small business payroll loans
The stimulus plan provides loans to business owners with 500 or fewer employees, who continue to employ and pay workers. The loans are intended to prevent employee layoffs and cover payroll costs.
Individual loans will cover six weeks of payroll, up to $1,540 per week, per employee. The maximum loan amount is based on the total monthly payroll cost in 2019, multiplied by 2.5. If you weren’t in business in 2019, your loan amount will be calculated based on payroll in January and February 2020.
Eligible businesses must verify six weeks of employee payroll to receive the loan and verify eight weeks of employee payroll after receiving the loan. The Small Business Association (SBA) will work with banks to distribute these loans. Businesses with existing SBA loans will have principle and interest waived for six months.
Expanded unemployment benefits for self-employed workers
The relief bill holds good news for self-employed workers—a group that makes up nearly a third of the American workforce. The bill extends unemployment benefits to part-time and self-employed workers who wouldn’t be eligible usually.
The unemployment pay you receive depends on your state’s unemployment program. In most cases, unemployment benefits replace 40-45% of a worker’s average weekly income. Under the new plan, unemployed workers will receive $600 for every week they do not make an income, in addition to state benefits.
Many states provide 26 weeks of unemployment pay. Under the new bill, eligible workers can receive a total of 39 weeks. How long your unemployment benefits last also varies by state. The additional $600 payments will last up to four months.
Who is eligible for unemployment benefits?
If you have lost your job or are unable to work due to the coronavirus, you’re likely eligible for unemployment benefits. You are eligible for unemployment benefits if you:
- Cannot work as a result of being diagnosed with COVID-19, are experiencing symptoms, or are seeking a diagnosis.
- Cannot work because you are caring for an immediate family member or member of your household who has been diagnosed with COVID-19.
- Cannot work because your child’s school or daycare has closed, and you don’t have alternative care.
- Cannot work because a care facility has closed, and you do not have alternative care for an elderly or disabled family member.
- Cannot work due to being placed on quarantine, or your company has shut down due to quarantine.
- Were about to start a new job but have not started due to the coronavirus outbreak.
- Were laid off from a new job and did not have sufficient work history to qualify for benefits under normal circumstances.
Who is not eligible for unemployment benefits?
You may not be covered if you left your job voluntarily over fears of contracting the coronavirus. You may not be eligible for unemployment benefits if you are:
- Able to work from home.
- Receiving paid sick leave or paid family leave.
- A new entrant to the workforce and cannot find a job.
For more information or to apply for unemployment online, visit your state’s labor department website.
Federal student loan relief
Under the CARES Act, the Department of Education has suspended federal student loans through Sept. 30, 2020. During these six months, the Department will suspend involuntary collections, such as wage garnishments, related to the loan. And suspended loan payments will not accrue interest. Borrowers can continue to make payments towards their principal balance.
Keep an eye on your federal student loan accounts in the coming weeks. Borrowers should see loan suspensions reflected in their current amounts due. Borrowers will also receive a paper notice, informing them of federal loan suspension. Loans from private lenders are not eligible for suspension under the CARES Act.
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