The coronavirus (COVID-19) outbreak is crushing the U.S. economy. The stock market is tanking (we're now in a bear market), businesses are closed, unemployment claims are spiking, consumer spending is down sharply, 2020 GDP estimates are dropping fast, and recession fears are rampant. We're in a bad place.
But the federal government is making moves that we all hope will turn things around. Congress and the Trump administration are working together on stimulus legislation, the Federal Reserve has lowered interest rates, and the IRS is providing relief to taxpayers. Other government agencies and institutions are pushing forward with additional measures to stop the bleeding and get the economy back on track. It will take time, and we have a bumpy road ahead, but action is being taken.
While some of the economic stimulus will prop up businesses, many initiatives will flood the economy with cash and directly benefit ordinary Americans who are facing a financial hit. Some action has already been taken, but there are other ideas being discussed at the highest levels of government that could be rolled out later. Here are 11 coronavirus stimulus measures that could help you financially in 2020. Some have already been enacted, while others are still just proposals, but all of them could have a positive impact on your financial health.
It sure looks like Americans will be getting stimulus checks in the mail at some point soon. There's a bill working its way through Congress that would do just that, and President Trump has already said he would sign it when it reaches his desk. The idea is to pump massive amounts of cash into the economy as quickly as possible.
The bill in Congress, which we think will be enacted, calls for stimulus checks that would actually be advanced payments of a tax credit. The checks would be worth up to $1,200 for each taxpayer ($2,400 for married couples who file a joint return), plus $500 for each qualifying child 16 years old or younger. The check amount would be gradually reduced for single filers with an adjusted gross income above $75,000, joint filers with an AGI above $150,000, and head-of-household filers with an AGI above $112,500. To see how much your check will be, go to our Stimulus Check Calculator. For additional information about the economic stimulus checks, see Your 2020 Stimulus Check: How Much? When? And Other Questions Answered.
Paid Sick and Family Leave
We don't want sick or potentially infected people going to work simply because they don't want to miss a paycheck. To address this concern, paid sick and family leave for many workers affected by the coronavirus outbreak was expanded when President Trump signed the Families First Coronavirus Response Act on March 18, 2020. Under the new law, employers with fewer than 500 workers are required to provide up to 80 hours of paid sick leave to employees affected by the virus. Workers can take paid leave if they are sick or quarantined, or if they have to stay home to care for someone else. Leave can also be taken to care for minor children who are home from school. Full pay is available for workers who are sick or quarantined (up to $511 per day), but workers taking qualified sick leave for other reasons only get two-thirds of their normal wages (up to $200 per day).
The new law also extends the existing Family and Medical Leave Act (FMLA) to cover a worker's absence to care for a child home from school or daycare. After 10 days away from work, employees will receive two-thirds of their regular salary while on coronavirus-related FMLA leave. However, this pay is limited to $200 per day ($10,000 in total). The expanded FMLA provisions generally apply to employers with fewer than 500 employees.
For more information on the new paid sick and family leave provisions, see Tax Credits Included in Coronavirus Paid Leave Law.
Tax Credits for the Self-Employed
While they don't get the same sick and family leave benefits available to employees, the Families First Coronavirus Response Act provides self-employed people with two refundable tax credits tied to the amount of time they can't work because of the coronavirus outbreak. The sick leave credit compensates self-employed people for up to 10 days away from their business for a reason that would entitle them to coronavirus-related sick leave if they were employees. The family leave credit covers up to 50 days away from work for any reason that would qualify an employee for coronavirus family leave. Both credits have limits based on the business owner's average daily self-employment income and specific reason for missing work. For more information, see Tax Credits Included in Coronavirus Paid Leave Law.
IRS Tax Deadline Extension
With everything else that's going on, at least you don't have to worry about filing your tax return by April 15. The IRS extended the deadline to help taxpayers, and tax preparers, who are struggling with the coronavirus crisis. The new deadline is July 15, which applies to both return filing and tax payments. Penalties and interest won't apply if you pay any tax due before the extended deadline. This relief also applies to 2020 estimated tax payments that would otherwise be due on April 15. For more information, see Income Tax Returns and Payments Extended.
You should also check with your state's tax agency to see if the filing and/or payment deadline for your state income tax (or other state tax) is changed because of the coronavirus crisis.
SEE ALSO: The Best Tax Software Values for 2020
Lower Interest Rates
The Federal Reserve took one of the first coronavirus-related stimulus measures when it cut interest rates to nearly zero. While this is bad news for savers, its good news for borrowers. For instance, low interest rates reduce the cost of mortgages, which helps would-be homeowners and current homeowners looking to refinance. The plunge in interest rates could also reduce borrowing costs for students who take out federal loans for the 2020-2021 academic year. Parents taking out PLUS loans could get a break, too. Expect lower rates for car loans and home equity lines of credit as well.
If you have credit card debt, you may also see interest rates on the balance fall. But even if your rate falls from, say, 17% to 16%, that will result in just a few dollars in savings per month for someone making the minimum payment on credit card debt of $5,000 (which is close to the average balance). So, paying down credit card debt should still be a high priority.
Note: Anyone still looking for savings opportunities in this coronavirus-driven environment should check out Finding the Best Savings Account After the Coronavirus Interest Rate Cuts and Strategies for CD Savers After the Coronavirus Interest Rate Cuts for our latest advice.
SEE ALSO: Why Did the Fed Cut Rates to Near Zero?
Student Loan Relief
Student loan debt can be a heavy burden in the best of times. During an economic meltdown, it can pull you below water. Lawmakers recognize this, and that's why there are several proposals to suspend student loan payments and/or defer interest. President Trump, for example, said his administration is waiving all federal student loan interest during the coronavirus crisis. However, it isn't clear if borrowers will actually see lower monthly loan payments, or just have normal interest payments applied to the loan's principal.
Senate Republicans want to go further. In addition to waiving interest, their plan suspends loan payments for up to six months (up from three months in their original bill). Students who leave school for a coronavirus-related reason would also have student loan obligations cancelled and would not have to return grants. Likewise, students participating in a work-study program could still be paid if they were unable to fulfill their obligations because of the coronavirus pandemic.
Democrats in the Senate can top that, though. They want the Department of Education to make monthly student loan payments on behalf of borrowers. Plus, after the national emergency is over, they want the federal government to make additional loan payments so that each federal student loan borrower receives a minimum of $10,000 in debt relief.
That's a pretty wide range of student loan relief measures, so some serious negotiations will be needed. However, some form of relief appears likely.
Mortgage Foreclosure and Eviction Relief
For anyone laid off from work or otherwise suffering financially because of the coronavirus-induced slowdown, losing the roof over your head is one of the scariest outcomes. To provide some protection for certain affect Americans, the Federal Housing Administration imposed a 60-day foreclosure and eviction moratorium for single family homeowners with FHA-insured mortgages. The moratorium was announced on March 18, 2020, and applies to the initiation of foreclosures and to the completion of foreclosures already in process.
In a similar move, the Federal Housing Finance Agency directed Fannie Mae and Freddie Mac to suspend foreclosures and evictions for at least 60 days. This was also announced on March 18. Fannie Mae and Freddie Mac hold mortgages for millions of homeowners throughout the U.S.
Payroll Tax Cut
Although many lawmakers and experts aren't keen on the idea, President Trump has been pushing for a temporary payroll tax cut for American workers to get more cash into the economy. Every payday, 7.65% of your wages are subtracted from your paycheck to fund Social Security and Medicare (6.2% for Social Security; 1.45% for Medicare). Your employer pays an equivalent amount of tax. The Social Security tax is only levied on the first $137,700 of earnings; however, an additional 0.9% Medicare tax is collected on wages over $200,000 for the year.
Trump has repeatedly called for the elimination or reduction of the payroll taxes paid by workers until November or, possibly, for the rest of the year. Critics claim that the infusion of cash into the economy would come too slowly from a payroll tax holiday. As a result, a payroll tax cut hasn't made its way into any of the major stimulus bills coming out of Congress--at least not yet. Since the president is such a strong supporter of the idea, and because there could be multiple stimulus bills yet to come, we can't say for certain that a payroll tax cut won't be implemented at some point this year.
Taxes are generally deferred when you save money in IRAs, 401(k) plans and other retirement accounts. However, once you turn age 72 (70½ before 2020), you have to start withdrawing money out of those accounts whether you need it or not. And that's when the IRS claims its cut. These withdrawals are called required minimum distributions (RMDs), and failure to take an RMD triggers a stiff penalty equal to 50% of the amount you should have withdrawn. First-time RMDs are due April 1, while others are due by the end of the year.
Many seniors are worried about having to take RMDs when the stock market is in the dumps. Since there probably won't be enough time for the market to recover before their RMDs are due, a lot of retirees will be forced to sell their investments for a loss or at a low price to avoid the hefty RMD penalty.
To avoid this result, Congress is considering suspending RMDs for 2020. If enacted, this would apply to both first-time RMDs due April 1 and to other RMDs that aren't due until December 31.
Early Withdrawal from Retirement Plans
People in a financial pit often just need access to cash in order to climb out of the hole they're in. One way to get cash quickly is to withdraw it or borrow it from a retirement account, such as a 401(k) plan or IRA. However, anyone younger than 59½ who withdraws money from a retirement account will be hit with a 10% penalty. If you want to borrow from a 401(k) plan, you can only take out 50% of your account balance, up to $50,000. Most loans must also be repaid within five years.
To make it easier for people affected by the coronavirus to get money out of their retirement plan, Senate Republicans want to waive the 10% penalty for people who are infected by the virus, have family members who catch it, or experience adverse financial consequences because of it. The penalty waiver would only apply to withdrawals of $100,000 or less. Taxes on these withdrawals would also be spread out over three years under this proposal. The amount a person affected by the coronavirus can borrow from a 401(k) plan would also be doubled from $50,000 to $100,000, and repayment requirements would be relaxed.
Expanded Unemployment Compensation
People are losing their jobs because of the coronavirus crisis, and spiking unemployment just makes things worse. The Families First Coronavirus Response Act pumps an additional $1 billion into the unemployment compensation system to ease the burden on states processing and paying unemployment benefits. States with greater unemployment increases will receive more funds, and employers will be encouraged to reduces the number of hours worked by employees in lieu of layoffs. States are also directed to ease eligibility requirements and access to unemployment compensation for workers who do lose their job. The federal government will also pay 100% of coronavirus-related extended unemployment compensation, instead of the usual 50%. Many people who lose their job because of the coronavirus outbreak will benefit from these changes.
A bill being considered in the U.S. Senate would provide even greater benefits. It would, for example, provide up to 39 weeks of unemployment compensation for self-employed people, independent contractors and others out of work because of the coronavirus pandemic who don't otherwise qualify for benefits. Weekly unemployment checks would also increase by $600 through June and states would be encouraged to drop one-week waiting periods before benefits can be paid. An additional 13 weeks of benefits would be provided, too.
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Copyright 2020 The Kiplinger Washington Editors