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The COVID-19 Stimulus Package: What’s in it for you?

April 16, 2020 by Steven C. Johnson, ChFC®

The $2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES Act) is full of provisions that help individuals, small businesses, and families. No matter your circumstances, there’s likely some part of this act that will benefit your finances and help you stay afloat while we ride out this pandemic. Here’s what you need to know about how the law could help you.

Stimulus Checks, aka “Economic Impact Payments”

The IRS began sending out payments on April 11th, 2020, with over 80 million additional payments going out this week.  Payments are being made via direct deposit using the account information you provided when you filed your 2018 or 2019 tax return.

Most eligible U.S. taxpayers will automatically receive their Economic Impact Payments including:

  • Individuals who filed a federal income tax for 2018 or 2019
  • Individuals who receive Social Security retirement, disability (SSDI), or survivor benefits
  • Individuals who receive Railroad Retirement benefits

Additional payments will continue to go out in waves in the coming weeks. The government is prioritizing the first few waves of payments toward low-income Americans and Social Security beneficiaries.

Individuals who receive Social Security retirement or disability benefits, or who receive Railroad Retirement benefits but didn’t file a return for 2019 or 2018 will automatically receive a payment in the “near future,” according to the IRS.

To check on the status of your payment the IRS recently created an online tool called Get My Payment.

Use the “Get My Payment” application to:

  • Check your payment status
  • Confirm your payment type: direct deposit or check
  • Enter your bank account information for direct deposit if we don’t have your direct deposit information, and we haven’t sent your payment yet

How much will I get?

If your adjusted gross income is…

  • $75,000 or less and your tax filing status is single: $1,200
  • $112,500 or less and your tax filing status is head of household: $1,200
  • $150,000 or less and your tax filing status is married filing jointly: $2,400

For every additional $100 in adjusted gross income above $75,000 ($150,000 for married, filing jointly), the government will reduce your stimulus check by five dollars. As a result, if your adjusted gross income is $99,000 ($198,000 if married with no children, or $218,000 for married couples with two children), you will not receive a stimulus check.

You are eligible for an additional $500 per qualifying child up to age 17. You are not eligible for a stimulus payment if someone claims you as a dependent, even if you’re an adult. Many college students will find they are not eligible for a stimulus check because of this provision.

The stimulus payment is not taxable, nor does it have to be paid back—contrary to the rumors circulating around social media.

If friends and family members have received their checks and you’re qualified to receive one but have not, here are some additional resources to help you track it down.

Not sure how to calculate your adjusted gross income (AGI)?  Here’s how:

AGI starts with your gross income: all your taxable earnings from work, retirement account distributions, Social Security payments, pension distributions, investment income, capital gains, business income, etc. Then it subtracts your “above-the-line” tax deductions, which include contributions to pre-tax savings accounts (such as traditional IRAs and health savings accounts), alimony payments, student loan interest, and one-half of self-employment tax. They do not include the standard deduction or your itemized deductions.

  • On form 1040 for tax year 2018, your AGI appears on p. 2, line 7.
  • On form 1040 for tax year 2019, your AGI appears on p. 1, line 8b.

Your stimulus payment will be based on your 2019 tax return unless you have not filed it yet. If your 2018 AGI is lower than your 2019 AGI and you haven’t filed yet, you may want to wait. If you haven’t filed a tax return for either year, you’ll need to file one to get your payment.

Penalty-Free Retirement Plan Distributions up to $100,000

Normally, distributions from qualified plans taken before age 59½ trigger a 10 percent early withdrawal tax penalty. This penalty won’t apply under special rules for coronavirus-related retirement plan distributions defined in Section 2202 of the CARES Act. These distributions must be made on or after January 1, 2020, and before December 31, 2020.

Not everyone qualifies, however. Qualified individuals include:

  • You, your spouse, or your dependent were diagnosed with coronavirus by a CDC-approved test
  • You are affected financially due to quarantine, furlough, layoff, or reduced work hours
  • You are affected financially because you had to close or cut the hours of your business
  • You can’t work due to lack of child-care

The law, however, gives the Secretary of the Treasury the authority to expand this definition.

If you are a “qualified individual,” up to $100,000 of distributions from your IRA or other qualified retirement plans made in 2020 are eligible for relief. The $100,000 distribution limit is aggregated between your IRA and other qualified plans.

For more information, click here.

Postponed Tax Deadlines

Your federal tax return and any tax you owe for 2019 are now due July 15 instead of April 15. First-quarter estimated tax payments, normally due April 15, are also due July 15, 2020.

State rules may differ, so check to see if your state has extended its filing and payment deadlines as well. As of April 7, 2020, 38 states and Washington, D.C., extended their deadline to July 15. Iowa, Hawaii, Idaho, Mississippi, and Virginia have different extended deadlines.

If you are expecting a refund, you will want to file as soon as possible—unless you’d prefer your stimulus check to be based on your 2018 return.

You also have until July 15 to make your 2019 IRA and HSA contributions.

Tax Changes to Charitable Giving

The Tax Cuts and Jobs Act of 2017 made it more difficult for many filers to lower their tax bill via charitable donations starting in 2018. The CARES Act changes that by allowing a permanent above-the-line deduction for up to $300 in charitable donations. If you’re in a position to give, this deduction helps you save on taxes if you don’t itemize. For example, if your marginal tax rate (tax bracket) is 24%, donating $300 really only costs you $228.

If you do still itemize, you may benefit from the 2020  suspension of the 60% of AGI limit for donations. Instead of being able to deduct donations up to $60,000 for every $100,000 in income, you will be able to deduct donations up to $100,000 for every $100,000 in income.

Donations must be cash to 501(c)(3) public charities to qualify for these provisions. Donations to donor-advised funds and private foundations do not qualify.

Qualified Medical Expense Eligibility

Retroactive to January 1, over-the-counter medications such as acetaminophen and ibuprofen are once again eligible products that you can buy with your health savings account, health reimbursement arrangement, or flexible spending account without a doctor’s prescription.  According to Section 3702 of the CARES Act, menstrual products are now classified as qualified medical expenses, too. HSAs, HRAs, and FSAs can now be used to pay for these purchases.

Increased Unemployment Benefits

If you get laid off this year, you will get an extra $600 a week in unemployment compensation for up to four months through July 31. If you’re still unemployed after that (or if you lose your job after that), you will get an additional 13 weeks of unemployment pay. The length of unemployment benefits varies by state; in many places, it’s 26 weeks, so with the extension, you’d get 39 weeks of benefits. The base amount you’ll receive also varies by state.

Self-employed workers, freelancers, and independent contractors typically aren’t eligible for unemployment benefits, but this year, they are. Also, states that don’t usually cover part-time workers will this year.

States may also waive the usual one-week waiting period, but claims could take longer to be paid since so many people are filing them. However, you will receive retroactive benefits even if there’s an initial delay.

Now, the bad news: If you weren’t in the workforce when the pandemic started and now you can’t find work because of it, you’re probably not eligible.

Payment Relief for Renters

Your landlord cannot evict you or charge you any fees or penalties for nonpayment of rent for 120 days (just over 17 weeks) after the law’s signing on March 27, 2020. That puts you at mid-August before any rent is due.

The big caveat is this: These moratoriums only apply if your landlord has a mortgage-backed or owned by a federal entity such as Fannie Mae or Freddie Mac. How do you even know if your landlord has a mortgage, let alone who backs it?

Check the National Housing Preservation Database, which has a wealth of information for you. That page also has a link to see if your local government has issued a moratorium on foreclosures that would help you even if the CARES Act’s moratorium does not.

The other caveat is that skipping your rent now doesn’t mean you will never have to pay it. It’s unclear how people who miss monthly payments now will be required (or financially able) to make them up later. In the rush to pass the law, some details weren’t worked out.

In a worst-case scenario, if your landlord decides to evict you for nonpayment after the 120-day moratorium ends, they must give you 30 days to vacate.

Other grounds for eviction still apply. You can’t trash your rental without consequences.

Mortgage Relief  for Affected Homeowners

Homeowners with a federally backed mortgage (about 70% of homeowners) are granted an automatic moratorium on foreclosures for the 60 days beginning March 18, 2020.

In addition, you can ask your mortgage servicer (the company you send your payments to) for up to 6 months of forbearance, with an option to later extend that period for another six months. Lenders are not allowed to charge additional fees or interest during forbearance. You will have to make up the missed payments later through a loan modification, which may extend your loan term or increase your monthly payment.

To be eligible, you must attest (but you don’t have to prove) that you have experienced financial hardship directly or indirectly caused by COVID-19.

The foreclosure moratorium doesn’t require any action by the homeowner. However, it might be wise to contact your lender if you’re in or near foreclosure to make sure the CARES Act applies to your mortgage and your lender is abiding by it.

Mortgage Relief for Landlords

You may own properties, and you are wondering how to make your mortgage payments when your renters aren’t paying you. Good news: If you own a single-family (one- to four-unit) property, the same rules that apply to homeowners apply to you. If you own a multifamily unit (five or more units), the relief is less generous: initial forbearance of 30 days, with up to two 30-day extensions. Again, these provisions only apply to federally backed mortgages, but you should contact your lender about the possibility of voluntary forbearance even if your mortgage is not federally backed.

Automatic Federal Student Loan Relief for Borrowers

If you have a federally held student loan, meaning one that the U.S. Department of Education owns, you don’t have to make any payments from March 13 through September 13, and interest will stop accruing on your loans. This relief will help almost everyone who took out a federal Direct loan in the last 10 years, according to The New York Times, but it may not apply to students with older FFEL loans. Private student loans and Perkins loans that your school owns aren’t covered. Contact your lender about other options if your loans aren’t covered, and you need a break.

The Many Benefits of the CARES Act

These are just a few of the provisions in the 880-page CARES Act. If you’re experiencing financial hardship right now, take advantage of any assistance this law offers you. If your circumstances aren’t covered, help may still be available if you ask. In addition, our financial advisors are ready to answer any questions you might have about how to bolster your finances during the pandemic.

 

Source: IRS.gov

The information provided in this article is being provided strictly as a courtesy and is intended for informational purposes only and should not be construed or used as tax, financial, investment, or other professional advice. Finivi Inc. makes no representation as to the completeness or accuracy of information provided. If you have questions regarding your financial situation, you should consult your tax professional, financial planner, or investment advisor.

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Eric C. Jansen, ChFC

Fun Facts About Me

When he is not researching the next great stock to add to client portfolios, you can find him travelling frequently with his family to Jackson Hole Wyoming.

  • Hometown: Chicago, IL
  • Birth Month & Year: November, 1964
  • Favorite Hobby: Goldmining in Nome, AK
  • Favorite Food: Steak at Charley’s Steakhouse in Orlando FL
  • Can't be interrupted when: Watching the Discovery Channel
  • Hidden Talent: Finish Carpenter
  • Something on bucket list: Obtain Helicopter Pilot License
  • Family Pet: Goldfish

Steven C. Johnson, ChFC

Fun Facts About Me

Steve would tell you that one of the best parts of the day is spent talking to clients and relationships that result from it. When away from the office, he loves to travel the back roads of New England enjoying all the great sites that can be found off the beaten path.

  • Hometown: Townsend, MA
  • Birth Month & Year: December, 1967
  • Favorite Hobby: Playing Hockey
  • Favorite Food: Chicken Caesar Salad
  • Can't be interrupted when: Watching the Bruins
  • Hidden Talent: Cooking – Makes a great Thanksgiving turkey
  • Something on bucket list: Travel to Italy and Greece
  • Family Pet: Max – our Pomeranian

Frederick M. Lane, ChFC, CASL

Fun Facts About Me

When not managing client portfolios, Fred can be found relaxing with family and friends.

  • Hometown: Nutley, NJ
  • Birth Month & Year: July, 1954
  • Favorite Hobby: Dog Walking
  • Favorite Food: Italian
  • Can't be interrupted when: Listening to Pink Floyd
  • Hidden Talent: Landscaping
  • Something on bucket list: Space Flight - Tourism
  • Family Pet: None

Catherine M. Gareri

Fun Facts About Me

When not caring for her clients Cathy enjoys relaxing in her yard at home.

  • Hometown: Bellingham, MA
  • Birth Month & Year: July, 1957
  • Favorite Hobby: Cooking and Entertaining
  • Favorite Food: Steak at the Capital Grille
  • Can't be interrupted when: It's family time
  • Hidden Talent: Dog Whisperer
  • Something on bucket list: Spending a couple months on the Almalfi Coast
  • Family Pet: In Between Mastiffs now so a little blue fish “Willy”

Katie E. Moore, CLTC

Fun Facts About Me

When Katie is not busy taking care of her clients, she spends her time being a mom to her two little ones, Owen and Isla.

  • Hometown: Modesto, CA
  • Birth Month & Year: September, 1982
  • Favorite Hobby: Swimming
  • Favorite Food: Mexican Food
  • Can't be interrupted when: I'm cooking
  • Hidden Talent: Climbed Yosemite's Half Dome, twice - no fear :)
  • Something on bucket list: See the Northern Lights and Potty Train my 2 year old
  • Family Pet: Caddy and Sierra – our two cats

Hesper Duval

Fun Facts About Me

Loves spending time with 2 daughters and enjoys participating in 5k obstacle races throughout the year.

  • Hometown: Charlton, MA
  • Birth Month & Year: October, 1981
  • Favorite Hobby: Running
  • Favorite Food: Cheesecake
  • Can't be interrupted when: Reading a good book
  • Hidden Talent: Interior Design and furniture restoration
  • Something on bucket list: To travel cross-country in an RV
  • Family Pet: Charlie and Nora, both black labs from the same litter

Donna Fournier

Fun Facts About Me

When not cheering for the Patriots, Donna spends her free time travelling throughout the United States looking for new haunted places to explore. She loves to wear her cowboy hat and boots when travelling out west.

  • Hometown: Swansea, MA
  • Birth Month & Year: February, 1961
  • Favorite Hobby: Exploring haunted locations
  • Favorite Food: Pizza
  • Can't be interrupted when: Eating my pizza
  • Hidden Talent: Rollerblading
  • Something on bucket list: Travel to Australia
  • Family Pet:  Had a pet skunk

Danielle Drew

When Danielle does not have her head in a book studying to expanding her financial planning knowledge, she enjoys anything active and outdoors, including visits to the beach and hiking.  

  • Hometown: Dennis, MA
  • Birth Month & Year: November, 1985
  • Favorite Hobby: Working out, concerts, and exploring wineries
  • Favorite Food: Lobster pot pie, cheeseburgers, BBQ, the list goes on...
  • Can't be interrupted when: Working out 
  • Hidden Talent: Country line dancing
  • Something on bucket list: To hike the 48, 4000 footers of New Hampshire
  • Family Pet: none, hopefully a big dog someday

Jay Willwerth, ChFC

Fun Facts About Me

Jay’s days are spent helping clients achieve their financial goals, followed by nights and weekends typically watching his daughters play competitive volleyball.

  • Hometown: Melrose, MA
  • Birth Month & Year: September, 1959
  • Favorite Hobby: Golf
  • Favorite Food: Anything at a Patriot’s Tailgate
  • Can't be interrupted when: Watching the Patriot’s Game
  • Hidden Talent: Competitive Volleyball Watcher (Mostly his 2 daughters)
  • Something on bucket list: Play a round of Golf at Pebble Beach
  • Family Pet: Bella, our Shih-poo
 

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