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The Economic Stimulus Payment: An Overview

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The Economic Stimulus Payment: An Overview

With millions out of work, businesses shuttered and the country on the verge of another depression, the government is scrambling to help Americans stay afloat during the COVID-19 pandemic. The CARES Act, passed in March 2020, provided relief for taxpayers and small businesses who were affected by the mandatory lockdowns aimed at stopping the spread of the deadly Coronavirus. Many are wondering how the stimulus payments will work, who will get them and how long we can expect to receive government help during the pandemic.

Why Coronavirus Aid is Needed

The United States, along with many other countries in the world, depends heavily on movement and interaction to keep the economy afloat. In the United States, many states depend heavily on tourism to survive. States like Nevada, Florida, New York and California were especially hard hit, with the closure of casinos, restaurants, amusement parks and entertainment venues putting millions out of work instantly. These business closures had a ripple effect that spread to other states and industries.

Almost each and every industry in the United States has been impacted by the Coronavirus pandemic.

The CARES Act, Explained

The U.S. government signed into law a bill that provides cash relief to Americans to help with expenses during the pandemic. The $2 trillion Coronavirus Aid, Relief, and Economic Security Bill provides aid to individuals, businesses and government agencies.

Aid to Individuals:

Taxpayers who earned less than $75,000 individually or $150,000 if married, filing jointly, are entitled to a one-time payment of $1,200 for individuals or $2,400 for married couples in April 2020. They also received an additional IRS check of $500 for each qualifying child in the household.

The CARES Act also expanded unemployment insurance, offering a $600 a week increase for those eligible for benefits. It also expanded the qualifications for unemployment insurance to include independent contractors, the self-employed and those with a limited work history. The CARES Act waived early withdrawal penalties for retirement accounts. This recovery rebate came in the form of a paper check in the mail, or direct deposit if the taxpayer’s information was on file with the IRS.

Aid to Small Businesses:

Small businesses were able to apply for emergency grants that allowed them to stay open and keep their employees working. The Paycheck Protection Program provided aid to small businesses who kept their employees on payroll instead of furloughing or laying them off. This grant was available to small businesses with fewer than 500 employees, 501(c)(3) non-profit organizations and tribal businesses. It was also available to restaurants, hotels or any accommodation and food service operation.

The CARES Act also provided forgiveness of payroll expenses, mortgages, rent and interest for small businesses for up to eight weeks if they continued to pay their workers.

How to Apply for a Relief Check

In order to receive the Economic Impact Recovery Rebate, or IRS check, you simply have to be a taxpayer who filed a tax return in 2018 or 2019. If you were not required to file, or earned less than the required $600 annually for filing, you can fill out a form on the IRS website and provide your contact and banking information to receive your check. The IRS can deposit the funds directly to those who had bank accounts on file. For those that did not, a paper check was mailed to their homes.

Will the Stimulus Payment Affect Your Tax Refund?

Some wonder whether the stimulus money will affect their tax refund. It will not. The payment is a grant, not a loan, and does not have to be repaid. Filers will still receive their regular income tax refunds in addition to the check.

Will There be Economic Impact Payment to Americans?

Possibly. There is an act that has just passed the House and is headed to the Senate called the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act. This $3 trillion package will act as a follow up to the previous relief act passed in March. The bill passed the House on May 15, 2020 with a vote of 208 to 199.

This bill, if passed in the Senate, will provide the following:

  • Hazard pay for essential workers. Employers will be eligible for a grant to make a one-time pay of between $5,000 and $10,000 for each essential worker. It would also provide aid for childcare assistance for those on the frontlines
  • An extension until January of 2021 of the $600 weekly bonus for those receiving unemployment insurance
  • No garnishment for taxpayers who owe past debts like child support
  • Forgiveness of up to $10,000 for both private and federal student loans
  • Protection from eviction and foreclosure to affected renters and homeowners
  • An additional round of direct payments to Americans of $1,200 per person in the household, up to a maximum of $6,000 per family
  • Assistance to farmers and other food distributors and producers
  • No social security number requirement, making funds available to undocumented workers who typically use a taxpayer identification number (TIN)

If the new bill passes in the Senate, a second check could come as early as mid-June. Other elements of the act like student loan forgiveness, hazard pay and expanded unemployment benefits would roll out in waves over the summer and fall of 2020.

The Coronavirus pandemic of 2020 has decimated entire industries and left more than 30 million Americans jobless. This has had a devastating effect on the economy, prompting the United States government to enact legislation aimed at saving American households. The government is also working on a plan to help keep Americans from losing their homes and businesses during this pandemic, so bills are being worked through the House and Senate that can provide economic impact payment relief to individuals, small businesses and essential workers.

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