Understanding the Government Stimulus package for COVID-19

Q. Which taxpayers will get a payment?

A. The CARES Act intends to provide payments to most Americans, including those who do not file tax returns due to having an income low enough not to require filing.

There are only a few exceptions that limit payments:

• Individuals or households whose income exceeds a certain amount (see Q2) will get either a smaller payment or no payment.
• Individuals over age 16 who may be claimed as a dependent on another person’s tax return will not receive a payment.
• Family members who do not have a Social Security Number are not eligible. (There are two limited exceptions to this. For adopted children, an Adoption Taxpayer ID may be used. If you are part of a couple where at least one of you is in the Armed Forces, then only one of you needs to have a Social Security Number).
• Non-resident aliens are not eligible for payments.

We expect the IRS to issue additional guidance on this topic in the near future.

Q. How much will my payment be?

A. If you are eligible (see question above), the payment will be $1,200 for each adult and $500 for each child under 17, unless the individual or household has a high level of income.

You will receive this payment EVEN IF you have no income tax liability, or your income tax liability is smaller than the payment size.

You will receive this payment EVEN IF you have unpaid back Federal taxes (or other obligations to a Federal government agency) and the government is currently attempting to collect them. (Some other obligations, such as child support obligations, may impact a payment.)

The payment size IS reduced if your Adjusted Gross Income exceeds a certain level:

• For an individual (or married filing separate or surviving spouse): $75,000.
• For a head of household: $112,500.
• For a joint return: $150,000.

You receive a reduced payment if your income falls into a certain range:

• For an individual (or married filing separate or surviving spouse) with no dependents: $75,000 to $99,000. If you have dependents, each raises the upper end of this range by $10,000.
• For a head of household with one dependent: $112,500 to $146,500. Each additional dependent raises the upper end of the range by $10,000.
• For a joint return with no dependents: $150,000 to $198,000. If you have dependents, each raises the upper end of the range by $10,000.

If your income exceeds the applicable range, then you will receive no payment.

Q. What if I have not filed a tax return yet for 2019?

A. The IRS is authorized to use your tax return for 2018 if you have not yet filed a tax return for 2019. The IRS is also authorized to use Social Security Benefit Statements, as many retirees do not file income tax returns.

We expect the IRS to issue additional guidance on this topic in the near future (such as what happens if you file a 2019 tax return late in the process, what if you file an amended return).

Q. How will I receive the payment?

A. The CARES Act intends for the IRS to use bank account information that you have previous provided to the government (to receive an income tax refund, Social Security Benefits, or other payments) so you can receive your payment as soon as possible.

The IRS may use bank account information that you have used since January 1, 2018 to make a payment to you. Fifth Third customers may be notified when government stimulus funds are available in their account via email and text message.

We expect the IRS to issue additional guidance on this topic in the near future. Shortly after the CARES Act was enacted, the IRS indicated that it expects to make payments within three weeks.

Q. How will I be notified that I am receiving a payment?

A. The IRS is required to notify you by mail within 15 days of making a payment. That notice will include:

• The method of making the payment.
• The amount of the payment.
• An IRS phone number that you can call, in case the payment is not made.

Q. What if I receive a payment that I believe to be the wrong amount?

A. We expect the IRS to issue additional guidance on this topic in the near future.

The law does create a tax credit for the 2020 tax year, with the payments essentially being an advance on that payment. So if the payment is too small (because you have a new child), then you may be able to obtain the remaining amount of the payment when filing your tax return for 2020. The law also specifies that if you receive a payment that is too big, the excess is not repaid when filing your tax return for 2020.

Q. Who is eligible for mortgage assistance?

A. You are eligible for relief under the CARES Act if two conditions are met:

• You are experiencing financial hardship, either directly or indirectly, due to COVID-19.
• Your mortgage is a “Federally backed” mortgage loan for a residential property. Such loans include loans that are purchased, originated, guaranteed, or insured by such entities as Fannie Mae, Freddie Mac, Ginnie Mae, the Department of Agriculture, and the Department of Veterans Affairs.  Note, however, that Fifth Third is extending this COVID-19 relief to any of its mortgage customers and not limiting it to mortgages that are federally backed.

This assistance is available regardless of your level of income, and regardless of whether your loan was already delinquent.

Q. What mortgage assistance is available?

A. If you are eligible (see question above) for relief, then you can specify a period of time—up to 180 days—in which you do not have to make a payment.

The interest on the mortgage will continue to accrue, but only the interest that would regularly accrue if you were making on-time payments. No late penalties will be imposed, and no penalty interest will accrue.

Separately, regardless of whether you request assistance, mortgage servicers are also prohibited from taking any foreclosure-related actions on the property (unless the property is vacant or abandoned) between March 18, 2020 and May 17, 2020. This means that the lender cannot initiate a foreclosure process, move for a judgment or order of sale, execute a foreclosure-related eviction, or execute a mortgage-related sale.

Q. How do I request mortgage assistance?

A. Contact your mortgage servicer. They can tell you whether your mortgage is eligible. While under the CARES Act you must be affected by COVID-19, either directly or indirectly, your servicer cannot ask you to provide supporting evidence to receive the assistance.

Q. What if I need more than 180 days of mortgage assistance?

A. At the end of the initial 180 days, you can request an extension of up to 180 additional days of mortgage relief.

Q. How long do I have to request mortgage assistance?

A. It is possible that you can request the assistance any time so long as the Presidential COVID-19 Emergency remains in effect, or for the remainder of 2020 should the Emergency end sooner. We expect further clarification about this to come soon.

Q. Will my credit bureau information be affected by taking advantage of mortgage assistance?

A. A separate provision of the CARES Act provides protection for your credit score for a period of time.

For as long as the Presidential COVID-19 Emergency remains in effect and 120 days thereafter, if you receive a lender accommodation on a loan—which includes this mortgage assistance—then you will have no negative information about that loan reported to credit bureaus.

If your loan was current when you request mortgage assistance, your lender must continue to report the loan as current during this period of time.

If your loan was already delinquent when you request mortgage assistance, then the loan will remain in that state of delinquency in credit reports during this period of time, rather than advancing to a more severe state of delinquency.

If you make the payments required to make the loan current, then the servicer must report to the credit bureaus that the loan has become current.

Q. Does interest continue to accrue on federal student loans while payments are suspended?

A. No. Interest does not accrue during the payment suspension period.

Q. How does the suspension of payments affect loan forgiveness programs?

A. If you have a loan forgiveness program or loan rehabilitation program authorized under Federal law, and you otherwise are qualified, you will be treated as though you had made your payment.

Q. If I don’t make a loan payment during the suspension period, will that affect my credit bureau information?

A. Your loan will be reported by the Department of Education to credit bureaus reflecting that you are not required to make your regularly scheduled payments.

Q. If my Federal student loan is subject to collections activities, will those continue during the loan suspension period?

A. During the loan suspension period, wage garnishment and reductions of tax refunds, Social Security payments and other Federal payments, are suspended.

Q. If I am affected by COVID-19 and want to access funds in my retirement account, what are my options?

A. There are two general ways to access funds in your qualified retirement account and/or IRA:

• Taking a distribution from the account. Ordinarily, distributions constitute reportable income tax and also incur a 10% early-withdrawal penalty if you are not yet 59.5 years old.
• Taking out a loan from your account that must be repaid. The rules are complex, but ordinarily, such loans are generally capped at $50,000, or half the account value, whichever is smaller.

The CARES Act lets you take a maximum accumulative distribution of up to $100,000 from your  qualified retirement account if you are affected by COVID-19, either because you or a family member has contracted it, or you incur financial hardship by not being able to work, losing your job, or losing hours.        

The CARES Act waives the 10% early-withdrawal penalty and income taxes are not withheld from the distribution. You have the option of repaying some or all of the distribution to the account, and income taxes will not be due on that portion. For the remaining distribution, you can spread out the reportable income over a three-year period, instead of having to report it all this year.

The CARES Act also raises the maximum size of a loan to $100,000 from a qualified retirement plan [not applicable to IRAs] and removes the requirement for a loan to be less than half of the account value, and delays the timing of any loan repayments that would be due later in 2020 by a full year.

Q. How long do I have to take a distribution or a loan?

A. You may make a COVID-19 hardship withdrawal from your qualified retirement account or IRA any time during 2020. You may take out a loan from your qualified retirement account [not applicable to IRAs] under the more flexible rules through September 22, 2020.

Q. Do I need supporting evidence to show that my need to take a hardship distribution was caused by COVID-19?

A. The administrator of your retirement plan is allowed to let you self-certify.

Q. I would prefer not a take my required minimum distribution (RMD) from my qualified retirement plan or IRA for 2020 because there have been significant market losses this year due to COVID-19. Can I waive this requirement?

A. Yes, the CARES Act allows individuals who are normally required to take RMD for the 2020 calendar year to waive any RMD.

As these procedures are complex, and the decision to access retirement account funds before retirement can have a range of financial implications, please consult with your tax advisor or financial planner with any questions. The administrator of your retirement account may also have information about your rights under the CARES Act.

Q. What types of loans does the SBA offer to businesses that are affected by COVID-19?

A. The SBA has a number of existing loan programs that can be used, and the CARES Act provides new options, such as larger Express Loans and the Paycheck Protection Program. Please visit the SBA’s website at https://www.sba.gov/ for full details.

Q. What is the Paycheck Protection Program?

A. This is a lending program and loans can be forgiven. It is created by the CARES Act, designed to encourage businesses to keep their employees paid and employed at a time when it would otherwise be very difficult to do so.

Q. Who is eligible for a loan under the Paycheck Protection Program?

A. This program is designed to cover more types of businesses than the traditional small businesses covered by SBA lending programs. On the larger side, these include any business with fewer than 500 employees, and certain businesses with more than 500 employees. Certain individuals are also covered, including independent contractors, sole proprietors, and self-employed individuals.

The SBA should be releasing further details shortly on its website, https://www.sba.gov/.

Q. How much can I borrow under Paycheck Protection Program?

A. This program is intended to let you borrow an amount that represents the cost of covering your payroll costs for 2.5 months. If you have received an SBA loan that was made since January 31, 2020 and before you could apply for a Paycheck Protection loan, you may be able to roll that loan over into a Paycheck Protection Program loan.

Regardless of your company size, Paycheck Protection loans are capped at $10 million.

The SBA should be releasing further details shortly on its website, https://www.sba.gov/.

Q. How can I use the loan funds received through the Paycheck Protection Program?

A. You can use the funds for a wide range of business expenses. These include:

• Payroll costs.
• The cost of group health care costs for employees who are on paid sick, medical, or family leave.
• Interest on a mortgage (but not loan principal).
• Interest on other debt incurred before February 15, 2020.
• Rent.
• Utilities.

Q. Do the requirements of regular SBA loans apply to Paycheck Protection Program loans?

A. Several requirements ordinarily required of SBA loans do not apply to these loans. No collateral is required. The business owner does not have to make a personal guarantee. The requirement that a small business is unable to obtain credit elsewhere does not apply. Certain fees—such as the guarantee fee and yearly fee—are not charged.

The SBA should be releasing further details shortly on its website, https://www.sba.gov/.

Q. What requirements do apply?

A. In addition to other items typical for a loan application, the CARES Act does require the individual or business owner to make certain good-faith certifications. These include:

• That the uncertainty of current economic conditions makes the loan necessary to support ongoing operations.
• That the funds will be used to retain workers and maintain payroll or make mortgage, lease payments, and utility payments.
• That the applicant is not applying for duplicative loans or has already received duplicative funds.

Q. What do I have to do to get my Paycheck Protection loan forgiven?

A. Under the CARES Act, the costs that you incur from February 15, 2020 through June 30, 2020 that are related to payroll, mortgage loan interest, rent, and utilities are eligible for forgiveness, up to the amount of the loan.

The SBA should be releasing further details shortly on its website, https://www.sba.gov/.