The CARES Act: Relief for Individuals and Families

By Toni Y. Long

With the coronavirus (COVID-19) sweeping the globe and upending the U.S. economy, the Senate passed the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) on March 25, 2020. The House of Representatives passed the Act, and it was enacted into law on Friday, March 27, 2020. The CARES Act includes a nearly $2 trillion stimulus package aimed at delivering critical assistance to the U.S. economy by providing financial stability and relief for individuals and businesses affected by COVID-19

This newsletter includes a summary of key provisions of the CARES Act that we believe are important to highlight for individuals and families.


Direct Payments to Individuals and Families

Under the CARES Act, all U.S. residents with adjusted gross income up to $75,000 ($150,000 joint filers) are eligible for a $1,200 ($2,400) payment, as well as an additional $500 per child (under age 17). There are no minimum income requirements for the payment, so individuals with little or no income are eligible provided they are not a dependent of another taxpayer and have a work-eligible Social Security number.

The IRS will be processing these payments based on your most recent tax return on file for both the income determination and the payment processing. If you have not yet filed your 2019 tax return, the IRS will use your 2018 tax return information. In addition, if the IRS does not have bank account information on file for direct deposit, then your check will be mailed, which may take from 4 to 12 weeks to arrive.

Extension of Tax-Filing Requirements

Individuals now have until July 15, 2020, to file their 2019 tax returns instead of April 15. The Treasury Department has also postponed the deadline for making IRA contributions until the date taxpayers file their 2019 tax return during the extended filing period.

Unemployment Assistance Programs

Federal Pandemic Unemployment Compensation

The CARES Act extends the duration of unemployment benefits from 26 to 39 weeks through December 31, 2020, for those who remain unemployed after State unemployment benefits are no longer available. The Act also provides an addition $600 per week benefit to certain employees receiving unemployment benefits

Under this expansion, individuals who ordinarily would qualify for unemployment compensation benefits under State law are entitled to both: (1) the regular amount of compensation available under State law, as well as (2) an additional flat-fee amount of $600 per week under the new Federal Pandemic Unemployment Compensation program. The $600 is payable by the State to the individual, to be reimbursed by the Federal Government. It is not charged to the employer’s unemployment insurance account. States are not permitted to impose waiting periods for receipt of benefits under this relief. 

Pandemic Unemployment Assistance – Up to 39 Weeks of Unemployment Compensation Benefits

If an individual is unavailable to work due to COVID-19-related reasons (e.g., COVID-19 diagnosis, exposure, symptoms, or self-quarantine), they may be eligible for up to thirty-nine (39) weeks of unemployment compensation even though they are not available for work.

To be eligible for this benefit, individuals must self-certify that they meet one of the criteria for unavailabity to work for COVID-19 related reasons. Benefits are available under this program from January 27, 2020, until December 31, 2020, so long as the unemployment, partial unemployment, or inability to work caused by COVID-19 continues and does not exceed thirty-nine (39) weeks.

The benefit available under the Pandemic Unemployment Assistance is the weekly benefit amount authorized under the unemployment compensation law of the State where the covered individual was employed, plus the amount of Federal Pandemic Unemployment Compensation ($600).

Temporary Financing of Short-Time Compensation Payments

The Act also enables states to receive federal funding for short-term compensation programs and programs for employees with reduced hours and individuals who have exhausted available unemployment relief, have no right to compensation and are able to work, available to work, and are “actively seeking work.” Employers may be eligible for 50% federal funding of unemployment insurance benefits paid under the program. Funded benefits under this component are capped at twenty-six (26) weeks. 

Homeowner Protections

  • Mortgage Relief for Homeowners. The Act does not provide automatic protection for homeowners who have difficulty meeting their mortgage payments. However, it requires the servicers of federally-backed mortgages to postpone mortgage payments at the request of the borrower, provided the borrower affirms financial hardship due to COVID-19. The lender is required to grant forbearance for up to 180 days, with an extension of another 180 days at the request of the borrower. The homeowner will still need to make the payments eventually.
  • Foreclosure Moratorium. The CARES Act imposes a moratorium on foreclosures for homeowners with mortgages backed by any federal programs. This appears to apply to foreclosures that have already begun as well as new ones. The servicer of a federally-backed mortgage loan cannot initiate any foreclosure process for at least sixty (60) days beginning on March 18, 2020.

Tenant/Renter Protections

The CARES Act establishes a 120-day moratorium on beginning tenant eviction proceedings for nonpayment of rent or other charges for landlords with mortgages backed by the U.S. Department of Housing and Urban Development (HUD), Fannie Mae, Freddie Mac, and other federal entities.

Tenants could still be evicted for other reasons. Landlords also may not charge fees or penalties for nonpayment of rent during this time period. The 120-day period started after the enactment of the Act.

The moratorium applies only to new evictions. It does not stop evictions that are already in process when the Act went into effect. Protected tenants are those living in rental properties that receive any type of federal assistance, including USDA’s Section 515, Section 514/516 and Section 538 programs. 

Student Loans/Education

  • Loan Payment Suspension. Payments are automatically suspended for federal student loans through Sept. 30, 2020, with no interest accruing or penalties during the period of suspension.
  • Additional Provisions. The Act contains many other emergency-relief provisions related to education, and specifically the impact of many students being sent home mid-semester. For example, universities are allowed to make payments to students who were unable to complete work-study programs.

Early Draws from Retirement Accounts

If you take money out of a qualified retirement plan (e.g., 401K, IRA, etc.) before age 59 ½, you not only pay income tax but also a ten percent (10%) penalty. However, the CARES Act allows taxpayers to take a “coronavirus-related distribution” of up $100,000 free from the ten percent (10%) penalty for an individual diagnosed with COVID-19 by a test approved by the CDC, whose spouse or dependent is diagnosed with COVID-19, or who experienced adverse consequences as a result of being quarantined, furloughed or laid off. These provisions only apply to the ten percent (10%) penalty; the income tax will still apply. You can avoid any income recognition by repaying the distribution to the retirement plan within three years of receiving it.

Enhanced Tax Benefits for Charitable Gifts

  • $300 Deduction of Cash Contributions. Under the CARES Act, taxpayers can deduct up to $300 of cash contributions to charities, regardless of whether the individual itemizes deductions.
  • Changes to Limits on Charitable Contributions.
    • Individuals: For those who itemize their deductions for charitable giving, the fifty percent (50%) of adjusted gross income limit is suspended for 2020.

Corporations: The ten percent (10%) limit on charitable contributions is increased to twenty-five percent (25%) of taxable income.