In response to economic hardships caused by COVID-19, lawmakers finally struck a deal on a near-trillion-dollar economic stimulus package. The most anticipated aspect of Covid-relief is the issuance of direct stimulus checks to taxpayers and their dependents. The measure includes an extension of unemployment benefits previously set to expire at the end of the year. The package also includes extensions of earlier pandemic relief programs such as rent assistance and PPP loans. Although the bill still needs to pass the House and Senate, there are numerous implications to explore ahead of voting. What does this new stimulus package mean for you?
The long wait for more direct stimulus checks/payments is coming to an end. The earlier CARES act authorized direct payments of up to $1,200 for certain eligible taxpayers. These left millions of taxpayers wondering when the next, much needed payments would be issued for nearly 8 months. Now that they are seemingly around the corner, how much should you expect to receive?
The maximum amount for single taxpayers making under $75,000 has been halved to $600. This amount will phase out as your AGI approaches $99,000. For married couples filing jointly, these payments increase to $1,200 and phase out as your combined AGI reaches $198,000. And $600 (up from $500) will also be paid for each qualifying dependent.
Similar to the first $1,200 stimulus checks, these amounts will be based on your 2019 tax return’s adjusted gross income. As far as timing goes, nothing is final, so there aren’t any exact dates or timeframes. However, the IRS already has a system established for issuing these payments, so it should be a much quicker, smoother process than the first instance. Ask your local tax preparer how to track these payments and what they mean for the 2020 tax season.
The new legislation seeks to extend two other government programs started by the CARES Act to assist with unemployment difficulties. The Pandemic Unemployment Assistance (PUA) program provided benefits to individuals who do not normally qualify for unemployment compensation such as the self-employed and temporary workers. The Pandemic Emergency Unemployment Compensation (PEUC) program allowed an additional 13 weeks of unemployment benefits to be paid to jobless workers.
The extension is expected to be around 11 weeks for both programs. Instead of the extra $600 supplemental payments, however, they will be $300. Additionally, some self-employed and temporary workers may receive an extra $100 weekly. These unemployment payments, unlike the direct stimulus payments, are subject to income tax. States don’t normally withhold taxes when these payments are distributed, so be sure to consult your tax specialist on how to plan ahead.
Another large chunk of the bill includes $284 billion in additional aid for small businesses who did not originally receive the PPP loan, as well as a second round of loans for certain eligible small business. It will also address the ongoing question with the PPP loans: the tax deductibility of business expenses paid for with the PPP loan money. The legislation clarifies that these expenses ARE deductible, thus giving some small businesses an enormous tax break for 2020.
Struggling renters will be pleased to see that eviction moratoriums will also be extended as $25 billion has been restricted for emergency rent assistance. The moratorium was set to expire at the end of January, but the new extension date is not yet clear. Furthermore, there are specific provisions to include funding for the U.S. Postal Service, childcare providers, education, and Supplemental Nutrition Assistance Program (SNAP benefits).