On March 27, 2020, the CARES Act was signed into law by the Federal government.  This includes many benefits to individuals and small businesses affected by COVID-19.  These benefits include:

  • Individual stimulus payments – nearly everyone in the US who makes $75,000 or less per year ($150,000 for couples) will receive an individual payment of $1,200 per person or $2,400 per couple. People with dependent children aged 16 or under will receive an extra $500 per child.  Payments begin to decrease as income increases over $75,000, up to a cap of $99,000 per person and $198,000 per married couple.
    • The IRS has recently added a telephone number for customer service regarding the stimulus payments. Please contact 800-919-9835 for questions about the status of your payment.
    • These payments are structured legally as a refundable tax credit for the 2020 tax year, for which people will file returns in 2021. This does NOT mean that you will need to return the money received in 2020 when you file your 2020 taxes next year, nor will it affect your refund for the 2020 tax year!  The tax credit was distributed in 2020, rather than as part of the 2020 tax year refunds in 2021, because the economy needed to be stimulated as soon as possible.  The payments were structured this way so that individuals who did not get the correct payment amount during 2020 distributions could still file to get this payment when they file their 2020 tax returns in 2021.  For example, if a person adds a dependent (through birth of a child, adoption, or other methods) in 2020, this would not have been reflected on the 2019 tax return and the individual would not have received the $500 dependent payment.  These individuals will be able to receive the $500 dependent payment when they file their 2020 tax returns (assuming they are eligible for the stimulus payments), since the stimulus payments are legally considered as tax credits for the 2020 tax year.
    • In order to receive these payments, individuals must be authorized to be employed in the US as citizens, lawful permanent residents, or lawful resident immigrants who have been physically present in the US for one year or more.
    • In order to receive payments, individuals must be either receiving Social Security retirement, survivor or disability benefits, SSI benefits, VA benefits, or have filed taxes within the past 2 years. If you do not file tax returns and do not receive Social Security, SSI, or VA benefits, you can provide the IRS with information needed to receive your stimulus payment at https://www.irs.gov/coronavirus/economic-impact-payments.  Non-filers have until October 15, 2020 to provide this information.
    • Individuals who receive Social Security retirement or disability benefits but who do not file tax returns will get their checks direct deposited to the account that receives their Social Security benefits.
    • If the IRS or Social Security has your direct-deposit information from tax refunds or retirement/disability benefits direct deposited to your account, your check will go to that account.
    • If you receive SSI or VA benefits, you will receive your stimulus payment via direct deposit. Previously, the IRS had stated that SSI and VA recipients would need to provide the IRS with their direct deposit information in order to get their payment, but they have recently reversed this decision.  If you have a dependent child under age 17 and receive SSI or VA benefits, you may have to provide the IRS with some information regarding the dependent child in order to receive the $500 payment.  In order to have these payments direct deposited, rather than waiting for a paper check, you must provide the IRS with this information no later than Tuesday, May 5.  The web address to provide direct deposit information and dependent child information is https://www.irs.gov/coronavirus/economic-impact-payments.
    • If the IRS attempts to direct deposit into an account is no longer valid, the IRS will be notified that the deposit failed. Additionally, within a few weeks of the deposit, everyone who is eligible for one will receive a letter saying where the deposit was sent to and what to do if you did not receive yours.  This letter will be sent to the most recent address the IRS has for each taxpayer.  This will likely include information about how to update your direct deposit information through the IRS’ website.
    • If you received a refund in 2018 or 2019 via a refund anticipation loan or pre-paid debit card from your tax preparer (including Turbo Tax, H&R Block, and others), your stimulus payment may be delayed. These programs create “temporary” bank accounts that are transmitted to the IRS as bank account information, while the taxpayer’s bank account information stays with the tax preparation company.  Direct deposits to these “temporary” bank accounts may fail.  Individuals in this situation who did not receive their stimulus should use the “Get My Payment” app on the IRS website at https://www.irs.gov/coronavirus/economic-impact-payments
    • If you owe back taxes or back student loans, the stimulus payment will not be intercepted to pay these. However, it will be intercepted to pay back child support.  Additionally, if your bank account is overdrawn, some banks are using the stimulus direct deposits to cover the overdraft amounts and fees.  The IRS has authorized banks to do this.
    • For individuals looking to claim the child credit, you must claim your child as a dependent on your taxes in the most recent year you filed in order to get this. If someone else claimed your child in the most recent tax year, they will get the $500 payment.  If no one claimed your child (for example, if you had a baby in 2020), then you can claim the $500 as a credit toward your 2020 returns that you will file in 2021.
    • You are not eligible for a stimulus payment if someone else claims you as a dependent.
    • These stimulus payments will not affect eligibility for Medicaid, SSI, or other means-tested benefit programs. They are not counted as income, and will not be counted as resources for the first 12 months after they are received.  Individuals who receive means-tested benefits are urged to spend their stimulus payments within 12 months of receipt to avoid them potentially being counted as resources.
    • Importantly, you may not be eligible for a stimulus payment if all members of your household who you claim on your tax returns do not have a valid SSN. If any members have an ITIN (Individual Tax Identification Number), or if they don’t have an SSN or ITIN, you may not be eligible even though you are authorized to work in the US.
    • Payments received by individuals in nursing homes belong to the individual, not the facility, regardless of whether Medicaid pays for care. The payment does not change how care is paid for.  The individual may spend the payment how they wish.
    • Deceased taxpayers are not eligible for a stimulus payment. If you received a stimulus payment for a deceased person, it must be returned.  If your last tax return with the deceased person was married filing jointly, you are allowed to keep your portion of the stimulus payment but must return the half that belonged to your deceased spouse.  You can return paper checks received, or write a check for amounts direct deposited or checks that were already cashed, to the following address:
      • Brookhaven Refund Inquiry Unit

5000 Corporate Ct.

Mail Stop 547

Holtsville, NY 11742

  • If returning a paper stimulus check, write VOID on the back of the check where you would normally sign it. Include a note stating why the check is being returned.  If writing a check for a payment that was direct deposited or already spent, please include the code “2020EIP” and the deceased person’s social security number in the memo line.  Make it payable to the Internal Revenue Service.
  • Please note that this address is for New York residents only.
  • The IRS has recently stated that incarcerated individuals also need to return the stimulus payments they received. Guidance from the IRS states that incarcerated individuals should use the same instructions listed above for deceased individuals to return the check.
  • Certain stimulus payments issued during May and June are arriving on pre-paid debit cards that are being mailed to participants. Please be vigilant if you receive a pre-paid debit card in the mail.
  • Unemployment compensation – the Federal stimulus bill greatly expands unemployment insurance protections. Individuals who normally qualify for state-based unemployment insurance will be eligible for an additional $600 per week on top of their regular unemployment benefits, and will receive those benefits for four months instead of three.  The $600 is a flat weekly payment on top of regular unemployment benefits, even if the $600 extra payment would result in an individual making more on unemployment than he or she did at their job.  As of now, this additional $600 per week benefit is set to expire at the end of July, 2020.
    • Additional categories of employment qualify for unemployment benefits under the Federal program. The Federal program expands unemployment benefits to self-employed individuals, independent contractors, and so-called “gig” workers (Uber, Lyft, Instacart, Grubhub, Doordash, and other such app-based businesses).  These individuals could be eligible for expanded unemployment benefits for up to 39 weeks.
    • Individuals may also qualify for expanded unemployment if the sole breadwinner in their home died from COVID-19, if the surviving individual was not employed.
    • Individuals who had previously exhausted their unemployment benefits may be eligible for the expanded Federal unemployment program.
    • Unemployment will not be available for individuals who quit (unless they were taken out of work by a doctor for COVID-19 related concerns, an order of quarantine, or an order of isolation) or who asked to be terminated specifically to obtain unemployment benefits.
    • The expanded Federal benefits will be administered through state-level unemployment compensation programs. Interested individuals should apply for unemployment with their state unemployment office.
  • Student Loan relief – the Federal stimulus bill automatically suspends ALL collection of student loan payments owned by the Federal government on Federally-issued loans, including those issued to parents. This includes loans that are not in default as well as loans that have been sent to collection agencies.  This suspension applies until September 30.
    • Federal student loan servicers should be automatically stopping these payments from being due and owing, and will automatically reinstate them on or around September 30th. For individuals with auto-debit, the servicer should not take a payment out from now until September 30th.  Individuals should contact their servicer for more details about this, but should know that they do not need to contact their servicer to sign up for this program – it is automatic.  However, it may take some time for loan servicers to enact these changes.
    • Individuals who made a payment after March 13, 2020 can have that payment refunded, but they will need to contact their servicer to arrange for this.
    • Interest will not accrue on these loans between now and September 30th, and they will be reported to credit reporting agencies as if normal payments were being made.
    • All wage garnishment and other collection activities on past-due loans will also cease until September 30th.
    • For individuals pursuing income-based repayment or public service loan forgiveness, these suspended payments will count as payments made toward the necessary number of payments required for loan forgiveness. Students pursuing IBR or PSLF should also continue to verify that their income and employment are certified yearly for continuation of these programs.
    • For individuals in loan rehabilitation programs, the temporarily suspended payments will count as “payments” toward the rehabilitation.
    • Individuals on repayment plans that do not include any loan forgiveness (such as Standard repayment) may wish to continue making payments, since interest is suspended and they may reduce their principal balance faster. However, these payments are not required of any Federally-owned and issued student loans until the program expires on September 30.
    • Individuals with privately held loans or Perkins loans are not covered under this provision. However, they should contact their servicers if they are having trouble repaying their loans to see if the private or Perkins servicers are offering similar relief.
  • Small Business Loans – Companies with fewer than 500 employees, including non-profits, may take out small business loans to cover payroll, mortgage, or other operating expenses.
    • The origination fees and credit-available-elsewhere requirements normally associated with SBA loans are suspended.
    • No personal guarantee is required for these loans, nor does a business need to specifically establish negative financial impact due to COVID-19 to qualify. There is no collateral required for these loans.  The only requirement for eligibility is the limit on the number of employees, proof that the business was operational as of February 15, 2020, and proof of the business’ payroll costs.
    • Unlike previous SBA loan programs, non-profit businesses are eligible, as are individuals who operate businesses as sole proprietorships and independent contractors.
    • The amount of the loan is the lesser of $10 million or 2.5 times the average monthly payroll cost amount for the borrower in the year period immediately preceding the COVID-19 disaster.
      • “Payroll costs” are calculated as the sum of salary, wages, tips, commissions (wages/salary/tips/commissions for employees making up to $100k annually only), group health insurance benefits, paid time off paid out, disability leave paid out, family leave paid out, allowances for dismissal or separation, retirement benefits, and payment of state/local taxes.
      • For sole proprietors or independent contractors – if you make more than $100k annually you may not qualify for the loan program due to the exclusion of compensation for employees who make more than $100k annually.
      • Excluded costs include compensation for employees based outside US, compensation for employees who make over $100k annually, compensation for leave taken under Families First Act, payment of payroll or income taxes
    • Importantly, if a business uses these loans to cover eligible expenses and does not significantly reduce paychecks or staff levels for 8 weeks after the loan is originated, the loan can become a grant that does not need to be repaid. The “grant” amount forgiven is equal to the sum of payroll costs (including salary, wages, PTO paid out, family leave paid out, and other benefit payments made such as health insurance), mortgage/rent, and utilities paid by the borrower over the 8 week period beginning with origination.  The grant amount forgiven cannot be more than the principal of the loan.
    • The “grant” amount is reduced proportionately by the amount of employees terminated between February 15, 2020 and June 30, 2020 compared to previous years’ staffing levels, and by the amount of paychecks that are reduced by 25% or more. Originally, if layoffs or pay cuts took place after February 15, 2020 and the employees are returned to employment with salary reinstatement by June 30, 2020, the grant amount will not be reduced.  However, the deadline for applications for these loans has been extended through August 8th, 2020 due to increased availability of funds.  Please confirm with your lender the terms of the grant conversion structure of your loan.
    • Businesses can obtain these loans from any SBA-certified lender. Additionally, lenders that aren’t SBA-certified can go through a streamlined process through either SBA or the Treasury Department to become certified.  The Treasury Department and SBA lenders are advising that there is a lag time between when these applications are filed and when the funds are disbursed, so applicants are encouraged to file early.
  • Charitable contributions have additional tax deductions available. Previously, individuals who did not itemize their deductions could not take deductions for charitable contributions.  However, individuals who contribute up to $300 in 2020 to a charitable cause may be able to take this deduction even if they do not itemize.  This deduction is available only for donations to charitable organizations that are normally eligible to receive tax-exempt donations.
  • Individuals who are diagnosed with COVID-19 or who suffer a financial loss associated with COVID-19 are allowed to take distributions from their retirement accounts without the normal 10% penalty associated with early distributions. They will still have to pay income tax on these distributions, but will not be responsible for the penalty.
  • Required minimum distributions from retirement accounts are suspended during the COVID-19 epidemic. This allows individuals who suffered losses due to stock market crashes to avoid “locking in” these losses by taking distributions.
  • Individuals who negotiate modified payment plans, forbearance, or other modifications for any debt payments will be reported as “current” on these modifications as long as they continue to follow the terms of the modifications.
  • If a landlord’s mortgage on a rental property is Federally-backed (including HUD, Fannie Mae, Freddie Mac, rural program vouchers, or VAWA programs), the landlord is prevented from commencing eviction proceedings against tenants in that property for 120 days from the date on which the Act was enacted (March 27).