From March 21 to April 25, 30.3 million people filed for unemployment tax.
What measures are put in place to help us during a time of crisis?
The first relief effort that came out is called the CARES Act Package. CARES Act stands for Coronavirus Aid, Relief, and Economic Security Act.
This Act included $560 billion for individuals providing funds for housing, food and other essentials.
Another component supported the public in an indirect manner. Money was provided for businesses to allow workers to continue working through the paycheck protection program and the economic injury disaster relief loans.
It also provided the all-mighty stimulus check.
The stimulus package includes support for public health organizations and state/local government.
The CARE Act directs these payments to individuals from the IRS. Technically the CARES Act payments (stimulus check) are an advance on a refundable tax credit that will be applied to 2020 tax insurance. This tax credit will reduce the amount you owe the government in taxes dollar-for-dollar.
The fact that these taxes are refundable means those who qualify for the credits will receive the entire amount even if the credit causes the amount of tax owed to drop below zero.
The government basically calculates the eligibility on a taxpayer’s 2019 adjusted gross income (AGI), and for those who did not file their tax returns for 2019, the government would use their 2018 AGI instead.
This is the reason why you might have gotten a relief check even though you had yet to file your tax return.
If you were someone who was receiving social security to file a tax return, the government would simply use the information given from the social security administration to determine eligibility.
Single taxpayers making less than $75,000 were eligible for a $1200 credit and married taxpayers filing jointly making less than $150,000 were eligible for a $2400 tax credit. In both cases, taxpayers also receive $500 per qualifying child, which generally would mean any dependent under 17 years old.
For taxpayers with a higher AGI, credit gets reduced by $5 every $100 above the threshold.
This would mean single taxpayers with an AGI of over $99,000, and married filing jointly above $198,000 did not receive the credit
Taxpayers who didn’t qualify based on their 2018 and 2019 AGI will receive a credit next year if the 2020 AGI falls within the eligibility territory.
If a taxpayer’s income rises above the eligibility limits in 2020, but they already received a stimulus based on their 2018 and 2019 income, the government will not hold money back or treat it as taxable income.
Paid leave credits, unemployment payments, retirements saving changes for employers also all came out of the CARES Act.
CARES Act also provided support for paid sick leave. If you contract COVID, you are able to receive 80 hours of paid sick leave at 100% of your current pay.
If you are caring for a family member or a child who contracted the virus, you are eligible to receive up to 80 hours of paid sick leave at 66% of your regular pay. These credits are capped at $200 per day.
They also expanded to unemployment payments.
So individuals who qualify for multiple unemployment insurances under state law can receive an additional $600 per week supported by the federal government.
The law also temporarily expands eligibility from unemployment insurance to cover self-employed individuals who can prove they lost work due to COVID-19.
Some retirement changes happened as well. The IRS made 2 key changes to retirement savings roles.
- The IRS waiver requirements over the age of 72 take required minimum distribution of their taxable retirement funds – this is huge! Usually, if they don’t take the required minimum distribution they pay a 50% tax! This waiver basically means the retiree won’t be forced to sell retirement funds and shares while the market is down.
- Individuals under 59.5 can take up to $100,000 from their retirement account without having to pay an early withdrawal penalty. However, you will owe tax on this money unless it’s restored with the exact same amount of money within 3 years.
Lastly, there is support within the CARES Act for employers; mostly small businesses. There are loans offered to support small business owners and their current payroll.
The goal is to ensure employers can pay even if the business suffered a loss of revenue.
As an incentive for businesses to use this loan to pay their employers, the government forgives the loan entirely to companies that use and retain their employees on their payroll and use at least 75% of it towards the payroll costs.
Companies that don’t keep paying their employees will have to pay the loan back over two years at a 1% interest rate.
The CARES Act also offers businesses assistance in paying payroll taxes like social security and medicare taxes.
As we unite as a nation during such a difficult time, it’s crucial to know what efforts are being made to aid in the relief of our citizens and businesses.