COVID-19: Assistance for American Workers and Families

Some relief is coming for American workers and families affected by the COVID-19 pandemic under the Coronavirus Aid, Relief and Economic Security (CARES) Act, which was signed into law last week.  This relief includes extending and expanding unemployment benefits, providing rebates for individuals and families, and waiving certain tax penalties for retirement account withdrawals.

Unemployment Assistance: An employee who has been laid off, unemployed, partially unemployed, or unable to work because of COVID-19, may be eligible for unemployment compensation under the CARES Act.  Not included are employees who have the ability to telework with pay, or who are receiving paid sick leave or paid leave benefits.  Under the CARES Act, employees may receive the regular unemployment compensation available to them under state law, plus an additional $600 per week.  The CARES Act also extends these benefits to employees who would not otherwise be eligible for unemployment compensation, but who are actively seeking employment or are available to work.  For example, an employee who was unemployed prior to COVID-19 and who exhausted his or her 26 weeks of unemployment compensation for the benefit year may now be eligible.  The CARES Act also extends unemployment benefits for employees to 39 weeks, as opposed to the typical 26 weeks.  It also removes the one-week waiting period, allowing employees to begin receiving unemployment compensation immediately.

Rebates: The CARES Act also provides for recovery rebates or “stimulus checks” for individuals and families.  A single-filer whose adjusted gross income does not exceed $75,000 (in the case of head of household, whose adjusted gross income does not exceed $112,500), will receive a $1,200 rebate.  Those filing a joint return will receive $2,400 if their combined adjusted gross incomes do not exceed $150,000.  Individuals and families will also receive $500 for each qualifying dependent child.  These amounts phase out at five cents for every dollar earned above $75,000, $112,500, and $150,000, respectively. The rebates completely phase out for single-filers with incomes exceeding $99,000, and joint filers with incomes exceeding $198,000.  Whether an individual receives a rebate, and in what amount, is determined based on his or her 2019 tax return.  If he or she has not filed a 2019 tax return, then it is based on his or her 2018 tax return.  If an individual has past due tax debts, student loan payments, or other past due payments otherwise subject to garnishment, their rebates will not be affected.  The only exception is for individuals who have past due child support payments that have been reported to the Treasury Department.

Retirement Fund Withdrawals: An individual may take a “coronavirus related distribution” from his or her retirement account, up to $100,000, without certain tax penalties.  A “coronavirus related distribution” means a distribution made between January 1, 2020, and December 31, 2020, to an individual who was diagnosed with COVID-19, whose spouse or family member was diagnosed with COVID-19, or who experienced adverse financial consequences as a result of COVID-19.  Individuals must pay income taxes on any withdrawal, but those income taxes can be paid over a three-year period.  The withdrawal must be paid back to your retirement account within three years.

For specific questions regarding relief for American workers and families under the CARES Act, contact Kerianne Kemmerzell. For guidance on unemployment assistance, contact Tydings’ employment and labor law group.  Before making any retirement account withdrawals, or for questions regarding recovery rebates or retirement account withdrawals, you should speak with your account or tax preparer, or contact Tydings’ business, corporate and tax department

This has been prepared by Tydings for informational purposes only and does not constitute legal advice.