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What does the CARES act mean to me?

By: Devan Robinson

The long-awaited stimulus package has arrived:  The Coronavirus Aid, Relief, and Economic Security Act (a.k.a. the CARES act).  I wanted to provide some of the highlights and give you a sense of what to expect.

Relief for individuals

  • Direct support to individuals & families (this is the helicopter money I mentioned previously)
    • Many of you will receive a direct payment of cash of $1,200 for individuals plus $500 per child.
    • These payments will be phased out for individuals earning $75,000+ or $150,000+ for couples.
    • The IRS has posted their plans for the payments here.  The payments will be direct deposited automatically in the next three weeks.
      • They use the direct-deposit information from your prior tax-filings to make the deposit.  They also plan to have a website where you supply your banking information for those who do not have a direct deposit on file.  I will send out a note to clients when this site is available.
  • Temporary prohibition of foreclosures and evictions
    • Foreclosures on federally-backed mortgages are prohibited for 60 days and homeowners can request up to 180 days of forbearance (delay of payment).
  • Incentives for charitable giving
    • Taxpayers will be able to deduct up to $300 of cash charitable contributions (regardless of whether you itemize deductions).  Limits will also be increased for those who do itemize.

Relief for retirement savers

  • Waiver of early withdrawal penalty
    • The 10% early withdrawal penalty is waived for those who need to access retirement account funds due to COVID-19 disruptions (up to $100,000).  Income tax will STILL be owed on the distributions but can be spread over three years.
    • Important! This early withdrawal provision is for people who have been directly impacted by COVID-19.  You have become sick, lost your job, your business has been impacted, etc.  I do not know how they plan to enforce this provision but prepare to have some kind of evidence you were impacted directly.
  • Temporary waiver of RMDs
    • For investors age 70+ who normally have to take required minimum distributions (RMDs) those have now been waived for 2020.  This is great for those who would rather not sell their assets while markets are down.

Relief for small-business owners

  • Expansion of small-business lending
    • The Paycheck Protection Program will provide roughly $350 billion in loans to small businesses.  The loans may be forgiven if you maintain employees and wages.  The act also permits a deferral of payroll taxes and provides a refundable payroll tax credit for businesses impacted by COVID-19.
    • It is my understanding thus far that these loans are NOT distributed via the SBA directly.  If you are interested in one of these loans talk to your bank ASAP.  The SBA lending process is slow-and-cumbersome so I would get in line sooner rather than later.
    • The goal is to prevent layoffs - if you are a small-business facing this situation I would consider exploring the options with your bank.
    • Side-rant:  Having to talk to your BANK for ANOTHER interest-bearing loan is goofy.  When does the red-carpet get rolled out for small-business?

If you have any questions that weren't covered please do not hesitate to send me a message.  I may not know the answer right away but I will find it for you.

Enjoy the week,


The foregoing content reflects the opinions of Fairlead Financial Group LLC and is subject to change. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct.

 Past performance may not be indicative of future results. Securities investing involves risk, including the potential for loss of principal. There is no assurance that any investment plan or strategy will be successful, or that markets will recover or react as they have in the past.