[Please see the end of this post for a few updated details as of April 17.]
Just as our deacons stand ready to assist anyone at Redeemer who encounters financial or other tangible needs in this extraordinary time, we want to ensure that all our members and regular attenders are aware of some of the resources that have been made available to them through the federal, state, and local governments.
In late March, Congress passed and President Trump signed the Coronavirus Aid, Relief, and Economic Security Act, generally referred to as the CARES Act. The CARES Act provides an array of benefits and other provisions designed to ease the burden of the COVID-19 pandemic on individuals and families. Earlier Congress had passed and the President signed the Families First Coronavirus Response Act, which expands the leave allowed to employees who are affected by the pandemic. In addition, the State of Texas, and the City of Austin have responded to the crisis with actions that may benefit renters.
Note that what follows is a very general summary of complicated provisions of federal and state law, intended to make you aware of benefits and protections that may be available to you. We encourage you to talk to your accountant, financial advisor or another trusted counselor about these benefits and your individual personal or business situation. You should also find more specific articles and sources that may give more details. You can also call one of our elders, Barry McBee, who may be able to help you and offer more information.
For Individuals
Rebates
The best publicized benefit granted to all U.S. residents is a rebate of $1,200, with an additional $500 per child. There are income limitations on the rebate that incrementally phase it out for individuals with adjusted gross income on their tax returns of more than $75,000 ($150,000 for married couples); no rebate will be received by those making more than $99,000 individually and $198,000 as a couple. No action is needed to receive the rebate by those who filed federal income tax returns in 2018 or 2019. Late last week, the IRS announced it had begun making the first rebate payments.
The rebates will come much more rapidly to those who have a direct deposit arrangement with the IRS, while receipt of checks may take a few months. The IRS indicates that later this month it will establish an online “Get My Payment” portal where people can provide their direct deposit information to speed receipt of the rebates, if they did not do so on their income tax returns. (A portal for those who did not file tax returns in 2018 or 2019 is already open.)
The IRS also indicates it will send a letter to a taxpayer’s last known address within 15 days after a payment is made.
Some confusing information has circulated to the effect that this rebate will be offset against future federal income tax refunds. This is not the case. If within the income limitations, this is a direct payment by the federal government and will not need to be repaid or offset in any way.
Extensions of Filing and Payment Dates
The deadline for filing federal income taxes has been extended from April 15 to July 15.
If you have been making estimated federal income tax payments, these payments are postponed until October 15.
If you are self-employed and have been paying Social Security taxes, one-half of these payments (the employer portion) for 2020 is deferred. One-half of the deferred amounts can be paid by December 31, 2021, and the other one-half by December 31, 2022.
IRAs and Retirement Accounts
Individuals who are required to take minimum distributions from their IRAs and defined contribution plans in 2020 will not be required to do so, allowing them to retain these funds in their retirement accounts. This is a permissible waiver; distributions may still be taken if needed.
For those directly affected by the pandemic and who need to withdraw funds from their retirement accounts in 2020, the 10% early withdrawal penalty for distributions up to $100,000 is waived. The amount that is withdrawn can be repaid over three years. A longer period is also granted for the payment of any federal income taxes on the distributions.
Some retirement plans allow owners to borrow from their accounts. The amount of a permitted loan is increased to $100,000 or 100% of the vested account balance, whichever is less, for loans made by September 23. Six years rather than five will also be allowed for loan repayment.
Charitable Contributions
Taxpayers who have been taking the standard deduction and not itemizing their deductions will in 2020 be able to deduct up to $300 in charitable cash contributions over and above the standard deduction.
Unemployment Benefits
If you have been laid off, you can seek unemployment benefits from the State of Texas through the Texas Workforce Commission (TWC). The TWC has been overwhelmed with claims and contacts, however, so it will require patience and persistence on your part to make your way through the process.
The CARES Act also provides for expanded unemployment benefits at the state level for those whose employment has been affected by the pandemic and the ensuing public health emergency. For example, those not traditionally eligible for unemployment benefits, such as the self-employed, independent contractors, and those with limited work history, may now be eligible. You will need to contact the TWC to see if you qualify.
The CARES Act also provides funds to the states to extend unemployment benefits to workers for an additional 13 weeks after their state benefits have been exhausted, as well as an additional $600 per week payment for up to four months.
Mortgage Payments
Homeowners with federally-backed mortgages may be eligible to defer payments on their mortgage for up to six months, in what is known as forbearance, with the possibility of another six months (360 days total). The amount of principal and interest on the mortgage will still be payable, possibly through extension of the mortgage by another six to twelve months, or there may be an opportunity to refinance the mortgage at that time.
There are numerous reports of different banks and lenders approaching this relief differently, so you need to contact your specific mortgage servicer to explore how your lender is providing this relief.
There is also a moratorium for 60 days from March 18 on foreclosure on any federally-backed mortgage.
Renters
If you are renting in a property financed with a federally-backed loan or that is receiving some sort of federal subsidy, you cannot be evicted or charged fees for nonpayment of rent for 120 days. This does not relieve you of your rent obligation, however, which will still be payable in full.
It’s likely that most renters don’t know if their landlord is benefiting from federal involvement in financing the property where they live, so you need to work with your landlord or the management company at your property.
Renters statewide are also protected from eviction due to an action taken by the Texas Supreme Court. No eviction hearing can take place until after April 30. The City of Austin has instituted a 60-day grace period on evictions through May 8. Rent remains due and payable, however.
Students with Loans
Payments on federal student loans are suspended through September 30, and interest will not accrue on these loans during this period. If you made a loan payment after March 13, you can request a refund. All payments made after March 13 go toward paying down the principal amount of the loan.
As with mortgages, not all student loans are owned by the federal government and eligible for this relief. Contact your loan servicer to determine if you have a federal loan and, if not, to see what relief your private lender may offer you.
For Business Owners
If you have your own business, the CARES Act provides a number of possible benefits to you as well.
Paycheck Protection Program
To help keep employees on the job, almost $350 billion was dedicated to a Paycheck Protection Program in the CARES Act. This is a forgivable, federally guaranteed loan program for small employers and not-for-profits (with up to 500 employees) that have been affected by the pandemic. The loan amount is based on the entity’s payroll, including group health insurance costs and retirement benefits, over the last 12 months, and the loan must be used to retain workers and pay mortgage or lease obligations and utilities for the eight weeks following receipt of the loan.
Applications for the loans must be made to a Small Business Administration (SBA)-approved lender. Applications will be received through June 30, subject to the availability of funds. Leaders in Congress are currently involved in negotiations for an increase in the amount for the program.
If you have an interest in this program, you should contact your bank. There were numerous reports of delays in applying for these loans and other problems in the program’s early days, so patience and persistence here are also needed.
Other SBA Loans
Small businesses may also be eligible for an SBA Economic Injury Disaster Loan if they have been severely affected by the pandemic.
Applications for these loans can be made online through the SBA.
Payroll Tax Credit
A credit for payment of payroll taxes is available if your business operations were fully or partially suspended during the pandemic or your gross receipts declined by more than 50%. The credit is equal to 50% of wages paid to employees (all wages for employers with 100 or fewer employees or wages paid to employees who are furloughed or not providing services due to the pandemic for employers with more than 100 employees). The credit is capped at $5,000 per employee and may also be refundable if it exceeds the amount of the payroll taxes that are owed.
This credit is not available to a business that receives a loan under the Paycheck Protection Program.
Extension on Payroll Tax Payments
Employers also are allowed to defer payment of their share of Social Security taxes in the same manner as self-employed individuals (See Extensions of Filing and Payment Dates above.) As with the credit for payroll taxes, this deferral is not available to a business that receives a loan under the Paycheck Protection Program.
Update as of April 17, 2020
Two things have happened since the original posting of this information.
The IRS has opened the “Get My Payment” portal on its website, where individuals can check the status of their rebate payment and also provide direct deposit information to speed receipt of their rebate.
To track a payment, you must provide your Social Security number, date of birth, and mailing address.
To get to the part of the website where direct deposit information for your bank can be provided, you will also need to provide information from your most recent federal income tax return, including your income and refund amounts.
In addition, the IRS modified the date by which the first estimated federal income tax payment must be made for those who would have been making quarterly payments on April 15 and June 15. These taxpayers now have until July 15 to make their first payment for 2020.