What Benefits are Available Under the CARES Act?

The following is a list of benefits available under the CARES Act that was signed into law last week.

What is the Stimulus Bill?

Coronavirus Aid, Relief, and Economic Security Act (“CARES”) signed into law on March 27, 2020.

Overview: Provides for over $2 TRILLION dollars in stimulus money to individuals, businesses, and hospitals.

Paycheck Protection Program (“PPP”)

This loan program will allow businesses suffering due to the coronavirus outbreak to borrow money for a variety of qualified costs related to employee compensation and benefits, including

  1. payroll costs;
  2. continuation of health care benefits;
  3. employee compensation (of those making less than $100K);
  4. mortgage interest obligations;
  5. rent;
  6. utilities; and,
  7. interest on debt incurred before the covered period.

You can qualify for up to 2.5 times your average monthly payroll for the 12 months preceding your application.

You mush have been in business on February 15, 2020, and had employees that you paid salaries and payroll taxes.

Debt service on these loans can be delayed up to 1 year, and the loan may be forgiven if you use the funds as outlined by the program. Loan forgiveness will be equal to the amount spent by the borrower during an 8-week period after the origination date on (i) rent, (ii) payroll costs for workers making less than $100K, (iii) interest on a mortgage, and (iv) utility payments.

Example – Let’s say you paid yourself a salary through your business of $5,000 per month during the 12 months preceding. You would be eligible for $12,500.

Emergency Economic Injury Disaster Loans (“EIDLs”)

EIDL eligibility is expanded to include any business with not more than 500 employees operating under a sole proprietorship or as an independent contractor.

Applicants may request an advance of up to $10,000 and the advance may be used for any allowable purposes under §7(b)(2) of the Small Business Act and is not subject to repayment, even if the loan request is ultimately denied.

CARES Act waives: (1) the requirement of personal guarantees for loans up to $200,000, (2) the requirement that the applicant must be in business for a year (but must be in operation on January 31, 2020).

Unemployment Benefits (Pandemic Emergency Unemployment Compensation)

The law expands the scope of individuals who are eligible for unemployment benefits, including those who are furloughed or out of work as a direct result of COVID-19, self-employed or gig workers, and those who have exhausted existing state and federal unemployment benefit provisions.

The benefits are administered by each state's unemployment agency.

The law provides an increase of $600 per week in benefits through the end of July 2020.

Pandemic emergency unemployment compensation is available to individuals who have either exhausted all of the benefits available to them under existing state and federal law or who are not otherwise eligible for benefits under existing state and federal law.

Individuals must be able and available to work and actively seeking work, unless they are unable to do so as a result of COVID-19 illness, quarantine, or movement restriction.

Stimulus Checks

$1,200 per individual with income less than $75,000, or $150,000 filing jointly.

$500 per child.

Those will be rolling out during the coming weeks automatically (but be patient).

Mortgage Forbearance

You can ask for a mortgage forbearance for up to 90 days, BUT be careful about how your lender will handle these missed payments at the end of that period. Ideally, they would get tacked onto the end of the loan, but you may need a loan modification.

Call your mortgage lender before you stop paying.

Rent Payments

If you are going to have trouble paying rent – call your landlord and talk to them. There is a 120 day moratorium on evictions for certain mortgages.

Charitable Donations

The CARES Act allows taxpayers to take an above-the-line tax deduction for charitable contributions of up to $300 for the tax year beginning in 2020.

This means you can take the standard deduction AND give up to $300 to charity and deduct them both.

Health Savings Accounts

Permanently reinstated over the counter products as a reimbursable expense with your HSA. Also allows menstrual products to be an allowed expense. All retroactive to January 1, 2020.

What is a HSA?

You can contribute up to $3,550 and $7,100 for 2020 tax free, and withdraw the money tax free for approved expenses.

Have until July 15th to contribute for 2019.

Withdrawals from 401(k)’s

Can take up to $100,000 out of your retirement penalty free if you have been adversely affected by COVID-19.

You can pay the tax on that withdrawal over a three-year period, or you can pay the money back to the retirement plan over a three-year period.

You can take a loan out against your 401(k) for up to $100,000 (or the value of the plan). If you have an existing loan, you can delay you’re repayment for up to a year.

Also waives RMD’s for 2020.

**I suggest this only be used as a last option as the market is at a low right now.**

Student Loan Repayment Benefit

An employer can pay up to $5,250 in student loan repayment or educational assistance and deduct those payments. The employee does not have to claim that assistance in their income.

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