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If you’re feeling a little (or a lot) uncertain financially, you’re not alone. With the stock market taking a dive and businesses shutting down, things are scary. But it’s not all bad: there is help available from the government, you just have to know where to look.
The CARES Act, along with the Families First Coronavirus Response Act, offer relief that includes:
- Paycheck Protection Program
- SBA Economic Injury Disaster Loans
- SBA Economic Injury Disaster Loan Grants
- Expanded unemployment
- Paid time off
- Rebate checks for people earning under $99,000
- Extended tax deadline
- Penalty-free retirement withdrawals
- Student loan forbearance
- Mortgage forbearance
- Credit protection
A recent article I read had the line, “now is the time to overprotect, not overreact.” To help you overprotect your family, here’s what you need to know about getting the money to help you weather this financial storm.
If your business (even as a freelancer) is suffering
Small businesses are the backbone of the US economy and they’re not being forgotten. There are a few options that can help you make ends meet right now:
Paycheck Protection Program
This is one of the biggest features of the CARES act for anyone who runs a business or is self-employed. If you’re a freelance writer, a dog walker, a coffee shop owner, this is for you.
This act set aside $350 billion dollars to keep employees working. It’s a loan that can be forgiven if you follow the rules. So yes, if you meet the requirements for forgiveness, this is like a grant from the government to keep your business running.
Paycheck Protection Program summary:
You can apply for a PPP loan with an SBA 7(a) lender (find a lender here). The maximum loan amount you can borrow is 250% of your monthly payroll costs.
Let’s say your monthly payroll cost is $5,000. The maximum amount that you can borrow is $12,500.
The goal of the program is to have you continue making your payroll payments — they don’t want you laying off your employees. If you use the loan to make payroll, pay utilities, mortgage interest, rent for eight weeks you may qualify for forgiveness.
If you use it to buy inventory, you won’t qualify for forgiveness, but you’ll still have a nice low-interest loan (the maximum interest rate is 4%).
You may wonder if this applies to you. To be honest, I did. And the odds are, it does.
If your business has been hurt by COVID-19 (or you expect it to) this is a great tool to keep things up and running for a couple of months.
This is a very simplified explanation of the program. I’ll write more about it, but for now you can review details of the Paycheck Protection Program here.
Small businesses can begin applying April 3rd and independent contractors can apply beginning April 10th.
April 3rd update: Banks and lenders are beginning to open applications online. Most banks are requiring that you have an existing banking relationship to apply. Start with your bank and ask if they are participating. If not, you can search for SBA 7(a) lenders on the SBA website.
SBA Economic Injury Disaster Loan
If your business is being hit and you don’t have other credit options to turn to, the SBA is offering loans of up to $2 million with a 3.75% interest rate. These loans can be used to fund working capital, like paying employees, rent, utilities, or debt payments.
Review the SBA loan application for more information.
SBA Economic Injury Disaster Loan Grants
If you’re a small business owner who is considering applying for an SBA Economic Injury Disaster Loan (also just called Disaster Loan), you can get relief quickly while waiting for your loan to come in.
Disaster loans are loans for small businesses — up to $2 million with a 3.75% interest rate and up to a 30 year term. This money can be used for working capital — paying your employees and paying your bills.
But this money can take a few weeks to receive. So in the meantime, businesses can apply for a $10,000 advance. You’ll receive the advance within three days and you won’t need to repay it, even if you’re not approved for the loan.
If you can’t work, your work has been reduced, or you’ve been laid off, who can qualify for unemployment?
Big changes are here for unemployment. This changes who qualifies for unemployment, how much they get, and how long they get it.
How has unemployment changed? The basics are:
- More people will now qualify for unemployment
- Unemployment checks are bigger
- Benefits will last for longer
- You can get your check sooner
A quick primer on unemployment benefit programs: the federal government sets guidelines, but ultimately it’s up to each state to decide on their own benefits. The federal government has rolled out updates to their guidance and now it’s up to each state to review the guidelines and update their own rules as they see fit.
Right now states are updating their policies so check back often to see what your state guidelines are.
Here are the updates the federal government is making:
More people now qualify for unemployment
If you have had your hours reduced, you’ve had to stay home with a child because their school is closed, or you were laid off, you’ll probably qualify for assistance.
Don’t skip this section because you think this doesn’t apply to you because you weren’t laid off. You don’t have to be unemployed to qualify for unemployment benefits.
That’s right, forget the name. You can still have a job and collect unemployment benefits.
Who can qualify for unemployment? The CARES act allows states to offer unemployment benefits to people if they are unemployed, partially unemployed, or unable to work because:
- A person has been diagnosed with CODID-19 or is awaiting a medical diagnosis
- A member of a household has been diagnosed with COVID-19
- A person is providing care for a family member who has been diagnosed with COVID-19
- A child or other person in the household is now at home because their school or childcare shut down and the parent (or caregiver) can’t work
- An employer temporarily shuts down, which prevents employees from coming to work
- An person is quarantined with the expectation of returning to work after
A caveat is that if you are on paid leave, which we’ll cover below, you are not eligible for unemployment benefits just yet.
The government is also making unemployment benefits available to people who wouldn’t normally qualify. This includes self-employed, gig workers, or people with limited work history.
So freelancers, rejoice. And then check with your state unemployment agency to see what their updated guidelines are.
Unemployment checks are bigger
Because unemployment benefits typically aren’t enough to live off of, the CARES act is stepping in with more money. People who qualify for unemployment (and that’s an expanded list as you saw above) will now get an additional $600 per week for four months.
Let’s say you qualify for the maximum unemployment amount in California of $450 per week. The CARES act throws on an additional $600 per week, so you’ll get $1,050 each week that you qualify.
Unemployment checks last for longer
Because no one knows when the economy will get back to business as usual, unemployment is being extended. People in most states will receive unemployment benefits for 26 weeks. This thing might take just a little bit longer to sort out.
The CARES Act gives people an additional 13 weeks of unemployment benefits, once their state unemployment ends.
Unemployment checks should come sooner
In many states when you apply for unemployment, you don’t get the benefits immediately. You have to wait for a 7-day “waiting period” to be over before you qualify. The federal government is reimbursing states that waive the one week waiting period.
Unemployment offices are overloaded with requests right now so getting benefits will take more time than normal.
You can search for your state’s unemployment office on CareerOneStop.com.
And a quick note about applying for unemployment. You may have seen that state websites are crashing because they can’t handle the volume of people applying. Don’t give up. The CARES act gives more funding to agencies to help them improve this.
Paid time off
The Families First Coronavirus Response Act lays out requirements for paid leave that employers need to adhere to. These changes apply through the end of the year, so even if you aren’t in this situation yet read this because you may be at some point later this year.
If you can’t work because you are:
- Required to be quarantined or you are experiencing symptoms and awaiting medical results, you’re eligible for two weeks (up to 80 hours) of paid leave at your full pay
- Caring for someone who is quarantined, caring for your child because their childcare or school has closed, or other reasons determined by the Secretary of Health and Human Services, you’re entitled to two weeks (up to 80 hours) of paid sick leave at two-thirds of your normal pay
If your child’s school or childcare is closed and you can’t work, but you’ve been with your company for over 30 days, you’re eligible for an additional 10 weeks of paid family and medical leave at two-thirds your pay.
If you make less than $99,000 per year
Most people know by now that there are rebate checks coming…eventually. The CARES act gives $1,200 rebates to everyone who has income of $75,000 or less (or married couples who make $150,000 or less).
If your income is above that, your rebate check will be reduced by $5 for every $100 above the $75,000 (or $150,000) threshold. So if you make $75,100, your rebate will be $1,195.
If your income is more than $99,000 (or $198,000) for a married couple, you won’t be getting a rebate check.
If you have a qualifying child (usually a dependent child under 17), you’ll get an additional $500 per child.
The IRS is sending out these checks and they’re using either your 2019 or 2018 tax returns. If you’ve filed 2019 they’ll use that. If you haven’t, they’ll use your 2018 tax return.
You won’t be getting these checks tomorrow, though. They’ll start mailing checks in three weeks. In 2009 it took three months for the checks to be mailed out.
You can stay up to date with the IRS rebate checks here.
If you haven’t filed your taxes yet
That’s cool. You have until July 15 to file and pay.
But if filing your 2019 tax return could be the difference between receiving a rebate check and not receiving one, get those tax returns in asap.
If you can’t pay your bills
Even with the Paycheck Protection Program, expanded unemployment, and a rebate check, there’s a good chance a lot of people are going to struggle to make ends meet. Things are going to be tough financially for the foreseeable future.
But there’s more in the CARES act that you can use.
If you have a 401(k), IRA, or another qualified retirement account, you probably know that you really can’t touch that money. At least, not without paying a 10% penalty.
That 10% penalty is now waived for up to $100,000 in retirement withdrawals.
To qualify for the penalty waiver:
- You, your spouse, or your dependent needs to have been diagnosed with COVID-19
- You experienced adverse financial consequences from COVID-19 because you were quarantined, furloughed, laid-off, had your hours at work reduced, or you had to close your business.
So really most people will qualify to use their retirement savings without penalty right now.
You do have to pay income taxes on your retirement account distribution but those can be paid over three years. You can also repay the distribution over three years.
Before you dip into your retirement to pay your bills, look for other ways to make ends meet. Your retirement funds are likely sitting in investments and investments are low right now — you may be selling some of your investments at a loss.
Student loan deferment
If you have federal student loans, your loans are automatically being placed into administrative forbearance until September 30, 2020.
If you have a Direct loan, an FFEL loan, or a Federal Perkins Loan, your interest rate will be set to 0% until September 30, 2020. That means no payments need to be made and no interest is accruing. You can log into your loan account to confirm whether you have been placed on forbearance or not.
Private student loans are not covered by the CARES Act and aren’t required to provide the same benefits. If you are struggling to make payments on a private student loan, call your lender. They may offer loan deferment though interest still may accrue.
To get updates on Federal Student loan actions during COVID-19, visit their website.
With so many people expecting to not make ends meet, lenders are being directed to accommodate those who are unable to pay.
The CARES act prohibits foreclosure for a 60-day period beginning March 18, 2020.
If you’ve been financially hit by COVID-19 (which is pretty much everyone) it also provides up to 180 days of forbearance for people who have a federally backed mortgage, including those who have mortgages that were purchased by Fannie Mae and Freddie Mac, insured by HUD, VA, or USDA.
Even if you don’t have a Fannie Mae or Freddie Mac mortgage, it’s worth calling your lender. Our mortgage isn’t federally backed and our lender was still offering a 180 day forbearance, interest-free, which will then be amortized over three years.
Additionally, states may be asking for assistance. Most lenders in California are offering forbearance or relief options to any of their customers impacted by COVID-19.
When in doubt, call your lender.
If you work out an agreement with a lender to pause payments on your debt, the CARES act also spells out just how these lenders need to report that. If you were current on your account and set up a deferral or forbearance agreement with them, they must continue to report your account as current.
This is a big deal because you don’t want your credit that you’ve worked hard to build be negatively impacted.
If you’re worried about financial uncertainty (and who isn’t?), sign up for my weekly newsletter where I share the best information I’ve found from trusted sources to help you navigate your money in the time of COVID-19.
Erica Gellerman is a CPA, MBA, personal finance writer, and founder of The Worth Project: personal finance and family travel. website. Her work has been featured on Forbes, Money, Business Insider, The Everygirl, The Everymom, and Lifehacker. When she's not writing about personal finance you can find Erica exploring Europe from her temporary home base in London.
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