The entire world is united in the mutual fight against the coronavirus outbreak that is currently crushing the world’s economy. While countries like Russia, Spain, Brazil, England, and the US are hit the most, fighting to save their economies, the stock market is collapsing.
Unemployment is reaching sky-high claims, and businesses are forced to shut down their operations while people take their spending to the minimum. It’s evident that the world is going through a massive crisis that is pushing the planet into yet another recession.
2020 isn’t looking good financially-wise, and GDP estimates are sinking fast. Since these are all terrible financial news, the federal government is working around the clock to come up with a solution that can hopefully turn this dire situation around.
This solution is revolving around stimulus legislation, but it also involves a tax relief for taxpayers and lower interest rates.
With more and more citizens experiencing a troubling financial hit, the federal government is working on a cash benefit that is meant to help ordinary citizens get something more than making ends meet.
With that in mind, here are 8 ways to use this COVID stimulus to improve your financial situation in 2020.
1. COVID Stimulus Checks
Some of the first financial measures are stimulus checks. This financial solution is meant to help the economy recover by pumping vast amounts of money into the veins of the economy. These checks are actually advanced payments of a new form of credit.
Added by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, this new tax credit form allows each taxpayer to receive up to $1,200. Married couples who apply for joint returns can count on $2,400. Each qualifying child brings an additional $500. A child has to be 16 or younger.
Check on the status of your Economic Impact Payment on the irs.gov website.
The financial structure for gradually reduced check amounts includes three different groups of filers:
- Single filers with adjusted gross incomes above $75,000
- Joint filers with an AGI above $150,000
- Homeowner filers with an AGI above $112,500
2. Expanded Financial Benefits for the Unemployed
In the wake of the ongoing coronavirus outbreak, people are losing their jobs fast. This spiking unemployment isn’t making things any better, so it’s time for the government to do something to help the people get through.
While the Families First Coronavirus Response Act (FFCRA) is trying everything within their power to get the unemployment compensation system up and running, the plan is to provide an additional $1 billion to make sure the system maintains its function.
Since the majority of the world’s states are facing a challenge of processing and paying all financial benefits to the unemployed, the Act’s actions are meant to help unemployed citizens share their financial load while lifting the entire burden off of the states’ financial institutions.
How the funds will be distributed depends on the status of each state. Those with greater unemployment numbers are eligible for more funds, but more importantly, employers will apply a new lieu of layoffs that includes reduced numbers of working hours.
In the case of losing a job, workers will gain access to unemployment benefits as well as eased eligibility requirements. At the moment, the extended unemployed compensation related to coronavirus goes up to 100%.
The same compensation is 50% in normal conditions. Still, the best news comes from the CARES Act, especially when it comes to self-employed people. All employees out of work, independent contractors, and self-employed individuals can count on up to 39 weeks of financial benefits.
Weekly checks for the unemployed will bring a $600 increase through July. The normal waiting period for paying these benefits is reimbursed for an additional 13 weeks.
3. Paid Family and Sick Leave Stimulus Packages
If we are to prevent the coronavirus from getting even worse, it’s paramount to prevent potentially infected and sick people from going to work. On the other hand, many workers are looking forward to the end of lockdown because the quarantine is making them miss paychecks.
The best way to address both problems and prevent this outbreak from escalating is by paying family and sick leave in full for all employees affected by the COVID-19 pandemic. Paid sick and family leave will also be expanded according to the new law, the Families First Coronavirus Response Act (FFCRA or Act), signed on March 18, 2020.
All companies employing less than 500 employees are conditioned to provide up to 80 hours of paid sick leave to workers affected by COVID-19. In case that employees get quarantined or infected, they can take paid leave.
The same goes for workers who have to stay home and care for their loved ones. The new stimulus package also extends the Family and Medical Leave Act (FMLA), covering all employees with children.
Since kindergartens and schools are closed, these parents have to take leave from work to provide for their children. Therefore, the FMLA Act provides these workers with two-thirds of their regular paycheck.
Coronavirus-related FMLA leave includes a limited pay of $200 per day. The total is no more than $10,000. The expanded Act goes only for companies with fewer than 500 workers.
4. Self-Employment Tax Credits
The Families First Coronavirus Response Act also includes self-employment benefits, although they are a bit different from the sick and family leave benefits. Self-employed workers can count on two tax credits.
Related Read: 5 COVID Relief Packages for the Self-Employed
These credits are fully refundable and depend on the amount of time the workers spend outside their jobs because of the COVID-19 pandemic. These two credits include both sick and family leave with slightly different conditions:
- The sick leave is a tax credit that makes up for up to ten days of absence from work.
- The family leave credit extends to 50-day coverage in case an employee is qualified for coronavirus family leave.
Both tax credits are limited. The limits depend on the specific reason for being absent from work and the average daily income of the business owner.
5. The Extension of the IRS Tax Deadline
Since the situation with coronavirus is raging all over the world, taxpayers can take a breath of relief since the IRS has decided to extend the tax deadline. Both tax preparers and taxpayers don’t have to worry about filing their taxes, at least until the crisis is over.
Related Read: Tax Filing Deadline Moved to July 15, 2020
So, the tax deadline for filing your tax return has been rescheduled to July 15. This new deadline covers both tax payments and tax return filing. IRS will also go easy on interests and penalties for the time being. So, if you pay your taxes due before the extended deadline, there will be no consequences.
This extension applies to both 2019 contributions to HSA or IRA and 2020 estimated tax payments. To make sure you’re up to date with the latest news, check with your state’s tax agency to make sure you understand what the payment deadline is in your state.
6. Loan Relief for Students
Even without the coronavirus outbreak, having student loan debt can be challenging enough, let alone amidst the crisis. Since the whole world is facing an economic meltdown, such debt could lead you to a total financial collapse.
Fortunately, there’s a way around it as the lawmakers are fully aware of the hardships students face during the pandemic. Because of that, the CARES act brings a range of student loan relief solutions to help the brightest fight their way out of this crisis:
- All payments related to student loans are deferred until September 30, 2020. And, all federally-owned loans will not include interest or penalty.
- All students who are already behind on their payments will get a new time window to provide payment.
- Student loan obligations for students on leave because of coronavirus will be canceled while there won’t be any return grants.
- All student participants in work-study programs will receive their paychecks if the coronavirus outbreak has prevented them from fulfilling their commitments.
- Dropouts will still be able to qualify for student loans and Pell Grants, as their grades won’t meddle with the academic requirements.
- Students can apply for up to $5,250 tax release if their employer agrees to pay a part of their student loan debt.
Related Read: Ultimate Guide to Student Loan Forgiveness
The mentioned tax release applies to that benefit, and it goes to other educational assistance and student loan repayment benefits.
7. Tax Breaks for Charitable Contributions
Any emergency or crisis makes people look to charitable organizations, food pantries, and churches for help. The COVID-19 outbreak is no different, and citizens expect charities to provide some kind of relief for the most affected.
One of the best ways to recover the world’s economy is to encourage charitable giving. Therefore, in 2020, the CARES Act provides rewards for all who make charitable contributions. The Act includes 2 tax provisions for these donations:
- An above-the-line deduction that goes up to $300 for all donations made in cash except for donations to certain organizations and donor-advised funds. This deduction won’t apply to those who itemize deductions on their 2020 tax return.
- Those who itemized their current tax return can count on waiving 60% of a normal adjusted gross income limit.
8. Lower Interest Rates
Cutting interest rates to nearly zero was one of the very first stimulus measures that the Federal Reserve executed when this COVID-19 pandemic started wreaking havoc. Even though savers won’t take kindly to this huge change, borrowers will look positively on it, without any doubt.
In fact, this financial stimulation is good news for people who need to borrow due to the coronavirus pandemic. Low rates will also help current and would-be homeowners because such measures will significantly reduce mortgage costs. Homeowners are now able to refinance their debts much easier.
The interest rate cut down will also lower the borrowing costs of federal loans for students for the 2020-2021 academic year. PLUS loans for parents could also experience a break while lower rates for home equity credits and car loans are also expected to go down.
Interest rates related to credit card debts are also expected to go down, which will result in monthly savings.
It’s still early to say how things will be in the time to come. The entire world is waiting for this horrid virus situation to resolve with the best possible outcome. Since people all over the world need their finances daily, it’s up to states to come up with useful and beneficial stimulus measures to help citizens get out of this in the best way.
Since the Federal Reserve is working around the clock to keep people provided for and taken care of, it’s safe to say that new financial solutions will arise in time. For now, students, employees, self-employed, and unemployed can count on these COVID stimulus measures to get by.
Word of Advice: be cautious where and how you seek and get help as scam & fraud increased during the COVID outbreak, too.