Drinking From the Firehose: Important Updates Related to the Economic Stimulus

The $2-6 trillion economic relief plan has many parts – and most of them are like moving targets.  Here is a quick breakdown of what you should be looking into right now – especially if you are a business owner…


Yep…I’m Drinking from the Firehose

After attending a webinar presentation provided by McCarthy Tax Preparation on Friday, 4/3/2020, I have gained further perspective on the main components of the CARES Act – most notably for business owners. I am going to keep this short and try to stick to the essential and especially time sensitive topics that may apply to you or someone you know.  There is so much to know and potentially act on.  I will stay on top of all of it…but right now this is what we need to be focused on.

There are several main components to this plan and then within them are sub-sections.  I will quickly lay the main components out here and then get into action that should (or shouldn’t) be taken in the immediate future.  For my initial in depth overview of the package go to my recent podcast titled Initial CARES Act Overview.

  • Recovery Rebate
  • Tax and Retirement Provisions
  • Unemployment Compensation
  • Key Business Provisions
  • Other Notable Provisions
  • Non-CARES Act Items

If you are a client with questions on anything that sounds relevant, please reply to this email or schedule a meeting using the link below to make sure that no opportunities are missed.

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Recovery Rebate

Did you file your 2019 return yet? If yes was your Adjusted Gross Income (AGI) on line 8b of form 1040 less than the following?

  • $150,000 for married couples
  • $112,500 for head of household
  • $75,000 for individuals

If you did not file your 2019 return yet was your 2018 AGI below the numbers above?

If your income was below these numbers for 2018 and you have not yet filed your 2019 return, you should qualify for the full recovery rebate which is $1,200 for individuals, $2,400 for married couples, and $500 for every dependent child under the age of 17.  In this scenario you should most likely wait to file your 2019 return until the rebate check is received – especially if your 2019 income is anywhere near those thresholds.

If your income was over those thresholds in either 2018, 2019, or both, you may be partially or fully phased out.  It would be ideal to compare your AGI for each year before filing the 2019 return and use the lower of the two unless you are completely phased out for both. I have covered this in pretty good detail so go back to the Initial CARES Act Overview if you want the nuts and bolts of how this works.

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Tax and Retirement Provisions

If you are taking Required Minimum Distributions (RMDs) and do not need the money this year you do not need to take it out.  If you have already taken the distribution there may still be a couple of opportunities to reverse or alter the distributions themselves or the tax consequences.  If this is you, please contact me to discuss.

If you are under the age of 59 1/2 and in desperate need of money right now you can access retirement money with no 10% penalty.  If this is you, contact me to discuss.  If you are not a client but in a pickle I will provide you with a free consultation to help get things sorted out.

I will come back to the rest of the items in further communication because they are not as time sensitive as others.

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Unemployment Compensation

There are some amazing opportunities for those that have fully or partially lost employment.  I have only received the high level details but if this is you and you have not yet contacted your state to file for unemployment, please do so right away.  Absolutely do this even if you don’t think you qualify for unemployment.  There have been provisions added for self-employed and all types of other situations.In many states individuals will be able to collect as much as $1,000 per month which in some cases is more than they were making before losing partial or full employment.

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Key Business Provisions

This is where I want to focus in this article because I think the window of time that you have to act on this will be much shorter than we are being told.  Regardless of the deadlines provided, when the money allocated to these programs runs out it is gone.  If you are self-employed you need to get on this as quickly as you can.  The two main programs that are of the most time sensitivity are:

Economic Injury Disaster Loan (EIDL) – An opportunity for a substantial, long term, low interest rate loan with the first $10,000 coming in the form of a grant that does not need to be repaid…I did not catch this in my first overview of the program.  I am looking further into the details on this.  Here are a couple of links that I will be looking into further myself:

https://covid19relief.sba.gov/#/

https://www.sba.gov/sites/default/files/resource_files/how_to_disaster_app_March_2020.pdf

The Paycheck Protection Program (PPP) – Another big opportunity but some of the forgivable provisions are coordinated with the EIDL.  There are moving parts here, but this is the one that you will need to apply for through your bank.  I have already heard many reports of people having big problems with their banks based on the types of relationships that they do or do not have in place already.  If you are a small business owner you should immediately contact any banks that you hold business deposit accounts and / or loans with to get the application started.

I don’t care if you don’t think you need this money…we have no idea where we are headed economically in terms of severity and duration.  There is a combination of free and very cheap money available for normal people for once instead of banks and Wall Street executives.  If you end up not needing the money you can turn down the loan or just repay it right away.  Do not overlook this.

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Other Notable Provisions

If you have federal student loans and have not yet stopped paying on them, contact your servicer to make those arrangements.

We will cover another opportunity soon related to employees receiving up to $5,250 of tax free income from their employer to allocate against their student loan debt.

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Non-CARES Act Items

Mortgage forbearance agreements were not part of the legislation but I have a client that was just granted a 6 month interest, penalty, and credit reporting free forbearance.  That is very valuable to them and I would encourage you to try for the same outcome. Auto loans and lease should be investigated also. What other debt do you have?  Pick up the phone and see what you can do to free up monthly cash flow and build up liquidity.

Published by

Sean Rogers, CFP®

Sean Rogers is a fee-only financial planner in Grand Rapids, MI. He serves individuals and families right in his back yard in West Michigan. He also works virtually with clients all over the country. Sean's firm, Capital Stewardship Partners delivers value-aligned, competent, conflict-free financial advice to Gen X and Millennials. The firm does not have any minimum requirements for net worth, investable assets, or income. This means that you can have affordable access to a fee-only fiduciary regardless of how much money you have available to invest. Sean Rogers is a CERTIFIED FINANCIAL PLANNER™, an XY Planning Network member, a NAPFA-Registered Financial Advisor, and member of the Financial Planning Association and Society of Financial Service Professionals.​