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What you should know about the new CARES Act

Retirement Planning

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on 3/27/20. It is the largest stimulus package in US history and will directly impact nearly every American. While the law is lengthy and still being analyzed, I have summarized the areas we will see benefit most of the public directly which are:

  • Direct stimulus checks
  • Retirement account relief provisions
  • Student loan relief
  • Unemployment
  • Small business loans

Recovery Rebates

This rebate check program is expected to cover an estimated 90% of Americans. This has been the area of the new law that has generated the most attention from the public. I’ve summarized the most common questions below:

How much will my check be?

The stimulus amount is $1,200 for individuals, $2,400 for married filing joint couples, and an additional $500 per child under 17. This amount is reduced if your Adjusted Gross Income (AGI) exceeds certain thresholds and is based on your most recent tax return filed (2019 or 2018 if you have not yet filed your 2019 tax return). For every $100 of income above this threshold, your benefit is reduced by $5.

  • Married filing jointly AGI threshold $150,000
  • Head of household AGI threshold $112,500
  • All other filers AGI threshold $75,000
  • You can find your AGI on line 7 of your 2018 1040 or line 8b on your 2019 1040 tax return.

As an example, consider a married couple with a 2-year-old child married filing jointly. Their AGI is $173,000 on their 2019 tax return. Their benefit would be:

  • $2,400 (joint benefit)
  • + $500 (child benefit)
  • – $1,150 (phaseout of income above $150,000) $173,000-$150,000 = $23,000 * .05 = $1,150
  • =$1,750 benefit amount

Note that if this couple files their taxes for 2020 and their AGI is below $150,000, they will receive the additional $1,150 in 2021 when they file their 2020 tax return.

How do I get my check?

You do not need to do anything to receive your benefit.

  • Social Security recipients with direct deposit on file will receive their check via direct deposit.
  • If you received your prior tax refund via direct deposit, you will receive your deposit to this bank account.
  • For those that do not have direct deposit information on file with the IRS, a check will be sent to the last known address.

You will receive a notice within a month of payment being sent with a summary of the amount of your payment, how it was calculated, and where the payment was sent. If you do not receive your payment, this notice will have a phone number to call if your payment did not reach you.

If you moved, you may want to consider filing Form 8822 to update your address with the IRS. If you have an old address or direct deposit information on your 2018 tax return and have not yet filed your 2019 tax return, you may want to consider filing for 2019 ASAP to ensure you do not have delays in receiving your payment.

When will I receive payment?

The administration has indicated they would like to have the checks out within 3 weeks. Prior stimulus packages took 2-3 months to process. A more likely estimate would be somewhere between these time frames (3 weeks to 2 months) but it is unknown exactly when the IRS will be able to issue payments. The IRS is directed to issue payments as soon as is possible.

Other considerations

  • If you do not qualify for a stimulus check based on your prior year tax return, but your 2020 income drops allowing you to qualify, you will receive your rebate amount based on your 2020 taxes. Unfortunately in this case, this will not be received until you file your 2020 tax return in 2021.
  • If your 2018 AGI was too high to qualify, but your 2019 income is lower, you may want to file your 2019 tax return ASAP so your 2019 AGI is used and you qualify for your stimulus check now.
  • If you qualify for a stimulus check now, and your 2020 income rises to a level that would reduce or eliminate your stimulus check – you still get to keep your full stimulus check amount. There is no “claw back” provision taking your stimulus benefit away if income rises in 2020.
  • DO NOT respond to emails or phone calls requesting your bank or other information to get your stimulus check. These are scams. The IRS will send you your amount automatically, followed by a notice they will mail you.

Coronavirus-Related Distribution from Retirement Accounts

  • Allows up to $100,000 in penalty free distributions from IRAs or employer plans (such as 401k or 403b).
  • Distributions must be made in 2020.
    • This applies to distributions prior to the law being passed and includes distributions from 1/2/20 to 12/31/20
  • Generally to qualify:
    • You or a spouse/dependent have been diagnosed with COVID-19.
    • You must have experienced adverse financial effects from the virus (laid off, reduced work hours, unable to work due to no childcare, own a business that reduced hours or closed).
    • Qualification is broadly defined and relies on “self-certification” for eligibility.
  • Distributions are exempt from 10% early withdrawal penalty if you are under 59 ½.
    • Pre-tax distributions are still taxable, just do not have a penalty.
  • Distributions are not subject to mandatory tax withholding.
  • Allowed to spread taxable income over 3 years.
    • This is the default.
    • Must either split taxable income evenly over 3 years, or recognize all the income in 2020.
    • If you are in a lower tax bracket in 2020 than you likely will be in 2021 and 2022, you may want to elect to pay all the tax in 2020.
  • Allowed to deposit any or all of your distribution back into a retirement account within 3 years. Should you do this, an amended return should be filed to claim a refund of any tax paid on the distribution.
  • Consider that you may be liquidating your investments at relatively low prices, and you also may be putting your retirement on hold by accessing retirement funds early. Eligibility for this provision does not mean that you should take advantage of it. It is an added source of cash for those experiencing financial distress due to the COVID-19.

Employer sponsored retirement plan loan updates

  • Maximum loan amount from employer plan increased to 100% of vested balance up to $100,000.
  • Loan payments may be delayed 1 year.
  • If your employer sponsored retirement plan provider does not offer loans, this may not be an option for you. Retirement plans are not required to offer plan loans.

Student Loan Relief

  • Only applies to Federal Direct Loans.
  • Student loan payments deferred until 9/30/20.
  • No interest will accrue during deferment.
  • Payments will continue as normal to your loan provider unless you proactively pause them.
  • The months of deferment will still count toward any loan forgiveness program, even if no payment is made.
  • If you intend to qualify for a student loan forgiveness program such as PSLF, you will want to pause your payments during this deferment period. By pausing payments you are:
    • Able to save the amount you would have otherwise paid towards your loan.
    • You are still accruing time towards your loan forgiveness.
    • Not accumulating interest.
    • Increasing the amount you will have forgiven.
    • Reducing the total amount you will have to pay towards your loans.
    • Make sure your payments are re-instated when the deferment period ends.


The federal government is providing additional benefits for unemployment insurance for the states, but these remain state run programs. Check with your state unemployment office for updates, eligibility and application process. Expect delays due to increased volume and implementation of provisions from the CARES act.

Small Business Loans

These loans are guaranteed by the Small Business Administration (SBA). Eligibility is based on good-faith certification that the loan is necessary due to the uncertainty of economic conditions due to COVID-19. For more complete resources, please refer to the SBA Small Business Guidance & Loan Resources. To apply for a loan, visit the SBA Covid-19 Relief Application website.

The maximum loan is the lesser of

  • $10 million
  • 5 times previous year average monthly payroll costs (excluding compensation in excess of $100,000)

May be used for

  • Payroll costs
  • Group healthcare costs
  • Salaries or commissions
  • Rent or mortgage interest
  • Utilities
  • Other business interest

May be forgivable if

  • Used for a qualifying expense in first 8 weeks of issuance of loan
  • Retain the same number of employees from 2/15/20 through 6/30/20
  • No employee compensation under $100,000 have reductions of greater than 25% compared to most recent quarter

Basic loan terms

  • Maximum interest rate is 4%
  • Payments may be deferred for 6 to 12 months
  • Must be a small business or non-profit with fewer than 500 employees


The law is robust and covers many other areas. This is only intended to be a summary and opinion of pieces of the full law which is the governing document and can be found at S.3548 CARES Act. This summary is provided for educational purposes and not intended to be considered individual financial advice. If you have questions on how benefits may impact your specific situation, reach out to me directly for a complimentary consultation.