Since Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27, you’ve probably been wondering if you’ll be receiving a stimulus check (and when) and if the relief package could help you in other ways. As your ally, we’re here to help with information about this $2.2 trillion relief package and the ways it can potentially impact your finances.
Stimulus payments for individuals and families.
As a part of the CARES Act, the IRS is issuing a one-time cash payment based on the income you reported on your most recent tax return. So, if you filed already for 2019, this return will be used to determine your eligibility — if not, the IRS will reference your 2018 return.
Single filers who earn $75,000 or less in adjusted gross income will receive $1,200. Couples who filed jointly and earn $150,000 or less will receive $2,400. And those with children are eligible to receive an extra $500 per child. If you make more than these thresholds, your payment will be reduced by $50 for every extra $1,000 of income.
Some people have already received their payments as a direct deposit. If your direct deposit information was not listed on your tax return, you’ll receive your payment as a paper check in the mail. You can use this website to track your return and enter your direct deposit information if you prefer.
Tax deadline extension.
The deadline for filing and paying your federal taxes has been extended by three months, from April 15 to July 15. That means you have some extra time if you owe money. But if you’re expecting a return, you may want to file sooner — that way you can take advantage of your refund sooner.
While many states have adjusted their tax deadlines to align with the federal government, not all extensions were the same. Make sure you check your state’s filing and payment deadline to know when you must submit your return.
IRA contribution deadline extension.
Yes — the deadline for making contributions to your individual retirement account (IRA) has also been extended to July 15. So you have an extra three months to fund your IRA and get closer to the maximum contribution of $6,000 if you’re under 50 years old, or $7,000 if you are 50 or older.
Changes to unemployment benefits.
The CARES Act increases unemployment benefits as well as expands who is eligible for assistance. For example, those who are self-employed, contractors, freelancers, or gig economy workers typically aren’t eligible for unemployment benefits. Now, through the Pandemic Unemployment Assistance program, these workers can receive temporary assistance for 39 weeks.
If you have filed for unemployment, you’ll continue to receive payments from your state, as well as an additional $600 per week from the federal government until July 31, 2020. The CARES Act also extends the availability of unemployment insurance by 13 weeks, from 26 to 39 weeks for certain workers.
Increased access to retirement account funds.
Typically, if you make withdrawals from your IRA or 401(k) before you are 59 ½, you will incur taxes and a penalty. Based on the CARES Act, you can now withdraw up to $100,000 penalty-free for certain expenses and financial setbacks related to the COVID-19 pandemic (think: if you have COVID-19 healthcare costs, if you’re unable to work because of the virus, if you can’t find childcare, or if you’re facing other adverse financial consequences because of the current situation).
If you make a withdrawal, it will be taxed — but if you repay the funds to your retirement account within three years, your tax obligation will be waived. If you can’t return the money within that time frame, your taxes will be spread over three years, from 2020 to 2022.
Remember: While you may be able to make early distributions from your retirement fund without penalty, you’ll want to weigh the pros and cons first. Taking money out could be disadvantageous to your long-term retirement financial health, so you might want to consider all your other possible options before doing so.
Because Ally Invest does not offer tax or legal advice, make sure to consult with a tax and legal professionals and/or your financial planner to make sure you understand all of the benefits and drawbacks of withdrawing money from your retirement accounts in times of need.
Student Loan Relief
If you are worried about paying back your student loans during this difficult time, the CARES Act can help lessen the burden. That’s because for eligible federal student loan borrowers, payments have been deferred and interest has been reduced to 0% through September 30, 2020. So, if need be, you may be able to pause payments for the next few months.
During this uncertain time, these are just a few ways you may be able to find some financial help from the federal government’s CARES Act. But remember, lots of financial services providers (like banks, creditors, and lenders) are offering their own relief programs as well to help you manage your money as best you can. And at Ally, we’ll be here to help you every step of the way.
Ally is dedicated to all our customers during this crisis. Here’s how we’re doing our part.