Coronavirus relief act raises questions
It seems that the $2.2 trillion Coronavirus Aid, Relief and Economic Security Act has created a lot of confusion. Many of you have written to me with questions. I am answering these and many more on my Jill on Money daily podcast. You also can send questions to askjill@jillonmoney.com.
Q: When will I get my check?
A: Treasury has said that direct deposits will hit accounts within three weeks of the bill’s signing, which was March 27, but it looks like that could be ambitious. If you do not have direct deposit information on file with the IRS or the Social Security Administration, the wait could be up to four months.
Q: Are the direct payments taxable?
A: No.
Q: Does everyone with a child get $500? A: No, you still have to fall within the income limits of up to $99,000 for individuals and $198,000 for married couples. Also, the child must be under 17.
Q: Do I have to take my required minimum distribution for 2020 while the market is down?
A: For calendar year 2020, no taxpayer will have to take an RMD from IRAs or any employer plans — 401(k), 403(b), 457, TSP.
Q: Should I tap my 401(k) if I need cash? A: I generally advise that people avoid touching those hard-earned and saved dollars, but the CARES Act waives the 10% penalty on early retirement plan withdrawals, as long as you can prove that you need the money because of the pandemic. You will still owe taxes on the withdrawal amount, but you can spread the tax bill over three years from the distribution date.
Q: Should I keep paying my student loans?
A: The new law will automatically suspend payments on federal student loans until Sept. 30, with no penalty or interest accruing. That said, if you are still working, making those payments means that you are getting a jump on principal paydown, which could shorten the term of your loan. Note: Perkins, state and private loans are not included.
Q: What’s the difference between being laid off and being furloughed?
A: The term layoff is usually the complete termination of an employment relationship due to economic considerations or restructurings, as opposed to be being fired for cause or due to poor performance. A furlough is a suspension of active employment, but usually with the idea that the employee will return to active employment. The recent furloughs by retail giants like Macy’s and Gap mean that workers would remain on the company’s health insurance plan for defined period of time but would not be paid. Whether you are laid off or furloughed, you can claim unemployment insurance benefits.
Q: I filed for unemployment before the pandemic; am I entitled to any of the CARES Act benefits?
A: You don’t need to be directly affected by the virus to be entitled to the expanded unemployment benefits outlined in the Act. Your current state benefits will still be extended by 13 weeks and you will also get the extra $600 federal weekly benefit.
A: Q: Which bills should I pay first?
Food is number one and after that, it’s time to prioritize. The Consumer Financial Protection Bureau has a good worksheet available at consumerfinance.gov. Some renters were given leeway in the legislation through the fourmonth nationwide eviction moratorium. But the rule only applies to those landlords who have mortgages backed or owned by Fannie Mae, Freddie Mac and other federal entities.
Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at askjill@jillonmoney.com.