A Guide to COVID-19 and Your Finances: What You Need to Know

Americans are taking necessary precautions for their health and the health of others within their communities, adapting their behaviors in an attempt to flatten the curve. Second only to health concerns are Americans’ worries over their individual finances — including job security, health care costs and retirement savings — and fear for the national economy.

The $2 trillion CARES Act has enacted policy to mitigate the crisis to a degree, but experts predict that it will be months before the economy is back on track.

The immediate impact of COVID-19 has been swift and crippling to the economy.

With 41 states and Washington, D.C., having already issued shelter-in-place orders, governors of states in the Midwest and the South have dug in their heels, refusing to issue statewide orders for fear of devastating their economies.

The dilemma facing leaders is the paradox of taking measures to contain the virus as a way to sustain the economy.

If, as Dr. Anthony Fauci has urged, the federal government imposes a nationwide stay-at-home order to prevent further spread of the coronavirus, the pause will have an immediate effect on the economy. And if Dr. Fauci’s and other health experts’ advice is dismissed, we will likely see thousands more cases of COVID-19.

This will only prolong the economic fallout caused by the virus, a point Bill Gates argued in The Washington Post.

“Until the case numbers start to go down across America — which could take 10 weeks or more — no one can continue business as usual or relax the shutdown. Any confusion about this point will only extend the economic pain, raise the odds that the virus will return, and cause more deaths,” Gates wrote on March 31, 2020.

On April 2, 2020, Gallup released a report based on survey responses from March 27–29, 2020, stating that 37 percent of Americans believe the United States is currently in a recession. An additional 21 percent believe the country is in a depression. The survey asked a random sample of 4,816 U.S. adults: “Right now, do you think the U.S. economy is growing, slowing down, in a recession or in an economic depression?”

The National Bureau of Economic Research defines a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.”

In spite of public opinion, interest rate cuts and the dismal state of the stock market, the White House predicts a strong economic rebound.

But in some areas of the country, leaders are reluctant to wait for an all-clear from health experts before getting people back to work and jump-starting consumer spending.

States and local governments have faced protesters fighting against the widespread shutdowns and social distancing guidelines that have forced millions of Americans out of the workplace.

Governors in most states have announced that their stay-at-home orders will expire in the last week of April 2020, but some states, against the advice of health experts, plan to reopen certain parts of their local economies sooner.

In Georgia, the governor allowed gyms, hair salons and tattoo parlors to reopen on April 24, 2020. Florida beaches have been open for restricted activity since April 17, 2020, and in South Carolina, public beaches and select retail stores reopened on April 20, 2020.

Real economy is measured by unemployment rates, real personal income, gross domestic product, known as GDP, and the effects of imports and exports.

Economists are dialing back their forecasts for GDP. Most of the world’s economies will grow less this year than they did in 2019, according to the Organisation for Economic Co-operation and Development. The scope for GDP to snap back depends greatly on governments’ ability to contain the pandemic.

S&P Global Ratings asserts that the global economy is in recession and cites “unprecedented rates of decline in economic activity and financial-asset prices, and equally fast and unprecedented policy responses to both combat and offset these declines.”

For the United States specifically, S&P Global Ratings predicts a GDP contraction of 1.3 percent from last year.

On April 1, 2020, the S&P 500 recorded its worst first day of any quarter since it launched in 1957. Some of the hardest hit sectors include those in travel and entertainment.

And crude oil stock prices, which were already on shaky ground as a result of a price war between Saudi Arabia and Russia, have also seen significant declines.

Heightened anxiety among investors has led to unprecedented market volatility and federal intervention.

Booking, entertainment and live events, airlines, cruises and casinos, and hotels and resorts saw market capitalizations plummet from Feb. 19-March 24, 2020.

These statistics show the complex interconnection between the financial sector and the real economy. The Organisation for Economic Co-operation and Development said in a paper published for the OECD Tourism Committee that “the immediate and immense shock to the tourism sector resulting from the coronavirus pandemic is affecting the wider economy.”

The World Travel and Tourism Council reiterated that sentiment with its projection that the United States, Canada and Mexico could lose up to $570 billion and 7 million jobs from the tourism industry.

President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law on March 27, 2020, to mitigate the financial ramification of the COVID-19 pandemic.

In addition to the direct monetary aid, the legislation provides for enhanced unemployment benefits, tax credits to small businesses that agree to retain or quickly rehire employees, Medicare coverage for senior telehealth services and mortgage forbearance.

The bill, a measure New York Times contributor Jim Tankersley said was celebrated as “a late but necessary intervention” was approved unanimously by the Senate on March 25, 2020.

During negotiations among the Trump administration, Senate Republicans and Democrats, Democrats fought for increased protection for workers and more money for health care providers and state governments, and Republicans expressed concerns over the size of the benefits package and the risk of inflation.

But ultimately the urgency of the pandemic forced a bipartisan compromise that made the CARES Act the largest federal aid deal in U.S. history.

The final iteration of the CARES Act includes provisions for individuals, small businesses and nonprofits, sole proprietors, freelance and contract workers, large corporations and hospitals.

The legislation passed in response to the coronavirus pandemic cost more than twice the amount of the stimulus package for the Great Recession in 2009, and more money will be needed to address the health and economic needs of the American people.

After the Paycheck Protection Program — designed to deliver financial aid to small businesses — ran out of money on April 16, 2020, the Senate passed a $484 billion follow-up relief package. The new package allows for an additional $310 billion for the Paycheck Protection Program, $75 billion for hospitals and health care providers and $25 billion for COVID-19 testing.

More funding for states and localities is next on the agenda for Congress.

“After I sign this Bill, we will begin discussions on the next Legislative Initiative with fiscal relief to State/Local Governments for lost revenues from COVID 19, much needed Infrastructure Investments for Bridges, Tunnels, Broadband, Tax Incentives for Restaurants, Entertainment, Sports, and Payroll Tax Cuts to increase Economic Growth,” the president Tweeted on April 21, 2020.

The House was expected to vote on the package on Thursday, April 22, 2020.

The federal government has committed to sending checks to qualifying individuals.

You must have a valid Social Security number to be eligible. There are exceptions for members of the military.

You do not need to apply for your stimulus check. The Internal Revenue Service will transfer the money to you based on income tax figures from 2019. If you have not yet filed your taxes for 2019, the IRS will use your income from 2018.

Checks should begin arriving by April 17, 2020, for people who have direct deposit. People who receive a check in the mail will have to wait longer for their payment. Some reports estimate that it could take up to five months to get a check through the mail.

The Treasury Department is setting up a web-based portal specifically for people to provide their banking information so they can receive their payments sooner.

According to the IRS, individual tax filers with adjusted gross income up to $75,000 will receive the full $1,200 payment.

Married couples filing jointly who earn up to $150,000 will receive the full $2,400 payment. In addition, for each qualifying child, eligible taxpayers will receive up to $500.

People who file as head of household and earn $112,500 or less will also receive the full payment.

Social Security recipients and railroad retirees who are otherwise not required to file a tax return are also eligible and will not be required to file a return.

The payment amount is reduced by $5 for each $100 above the maximum income thresholds.

You can find your adjusted gross income on line 8b of the 2019 1040 federal tax return.

The IRS has extended the income tax filing deadline to July 15, 2020. This also means that people who owe money for 2019 do not have to pay the IRS until July 15, regardless of the date on which they file their taxes.

According to The New York Times, some people will benefit from the three-month extension, but for people who expect a refund, filing sooner and getting their money quickly makes the most sense at a time when thousands of people are jobless or furloughed.

Economic impact payments are another incentive to file early — if, that is, you made less money in 2019 than you did in 2018.

Stimulus checks are based on 2018 or 2019 tax returns, so depending on the differences, if any, in your adjusted gross income, you may want to wait to file if you haven’t already.

Although most people who are eligible for a stimulus check do not need to take any action, the IRS issued a news release on March 30, 2020, that directed taxpayers who do not typically file returns to submit a simple tax return in order to receive their economic impact payment.

On April 1, 2020, the Treasury Department and the IRS announced that Social Security beneficiaries who are not typically required to file tax returns will not need to file an abbreviated tax return to receive an economic impact payment. Instead, payments will be automatically deposited into their bank accounts.

For those who rely on assistance with filing their taxes, note that Taxpayer Assistance Centers are closed. The IRS has directed those who need help to visit www.IRS.gov/freefile to find forms, help with filing, refund status and payment options.

The People First Initiative is a series of provisions to assist people who are currently dealing with tax payment and compliance burdens.

IRS Commissioner Chuck Rettig said in a news release, “In addition to extending tax deadlines and working on new legislation, the IRS is pursuing unprecedented actions to ease the burden on people facing tax issues. During this difficult time, we want people working together, focused on their well-being, helping each other and others less fortunate.”

You can now take a charitable deduction of up to $300 in cash to a qualified organization without having to itemize your tax return.

Unemployment insurance has been expanded under the CARES Act.

The federal plan offers $600 on top of current state benefits, which typically replace 40 percent to 45 percent of average earnings. The expansion used the estimated average earnings of $1,000 per week to bridge the gap between the states’ unemployment benefits and employees’ real wages.

Under the act, the expanded benefits include self-employed people, as well as part-time workers, freelancers, contractors and gig workers.

The act adds 13 weeks of benefits to the typical 26 weeks allowed by most states’ unemployment insurance. The expansion runs through Dec. 31, 2020.

The Department of Labor reported that the 6,648,000 seasonally adjusted initial claims for the week ending March 28, 2020 marked “the highest level of seasonally adjusted initial claims in the history of the seasonally adjusted series.”

The week ending April 18, 2020, saw another 4.4 million seasonally adjusted initial claims. Although it was a decrease from the prior week’s 5.2 million, it marked the fifth week of initial claims exceeding 3 million. And if reality bears out estimates, 26.5 million people in the United States will have filed for unemployment in a five-week period.

The U.S. Department of Labor offers a repository of information on filing for unemployment benefits, including instructions for applying and links to each state’s unemployment insurance office.

Your unemployment insurance benefit claim must be filed with the program in the state in which you were employed. You can file a claim online, in person or via telephone.

Refer to your state’s unemployment insurance program to confirm that you qualify for benefits. States have different criteria for eligibility. In order to ensure that Americans are getting the economic assistance they need as quickly as possible, most states are waiving their one-week waiting periods and other requirements.

For example, Florida normally requires unemployment benefit recipients to be actively seeking employment while collecting payments. But the state is waiving this requirement along with its work registration requirement until May 2, 2020.

Be prepared to provide additional information as requested. This is especially relevant if you worked in a state other than the state in which you currently live.

On March 11, 2020, the IRS issued a release stating that health savings account (HSA)-eligible high-deductible health plans (HDHPs) can pay for COVID-19 testing and treatment for patients who have not yet met their deductibles. This will not interfere with individuals’ contributions to their health savings accounts.

The IRS notes that this provision applies only to HSA-eligible HDHPs and that employees and other taxpayers in any other type of health plan with specific questions about their own plan and what it covers should contact their plan.

The Society for Human Resource Management stated that these plans can also cover telehealth services prior to a member meeting plan deductibles but that standard copays or other cost-sharing may still apply.

In addition, the law allows HSAs, health reimbursement arrangements and flexible spending accounts to cover over-the-counter medications and products and feminine hygiene products.

These changes are in effect until Dec. 31, 2020, except for the addition of feminine hygiene products, which is permanent. Purchases of these products from Jan. 1, 2020, are reimbursable.

The act also allows Medicare to cover telehealth care for seniors aged 65 and older.

Additionally, coronavirus testing will be free for all of those who are insured.

The housing market is particularly vulnerable to the COVID-19 pandemic and the havoc it is wreaking on the economy.

Mortgage rates are at all-time lows, but the flurry of buyers who would have jumped on these rates a month ago are now skittishly watching unemployment numbers rise and the stock market fall. Meanwhile, lenders are inundated with refinance applications.

The full effects of the coronavirus on the housing market vary from state to state, but for people who are having trouble making their mortgage payments or rent, the CARES Act has established a few guidelines.

For homeowners with federally backed loans, the CARES Act offers forbearance for up to six months.

The Federal Housing Finance Agency (FHFA) will also provide payment forbearance for up to 12 months to borrowers experiencing hardship caused by the coronavirus.

Assistance may be available to people with privately owned mortgages, but the terms may not reflect those outlined in the CARES Act.

Homeowners with mortgages insured by Freddie Mac and Fannie Mae may have already received notification of the 90-day forbearance from their loan servicers. If you have not received a notification or if you do not know who owns your mortgage, you can contact your servicer for assistance.

Your loan servicer is the entity to which you make your monthly payments, but that is not necessarily the entity that owns your mortgage.

The Mortgage Electronic Registration System (MERS) database keeps track of this information. You can look up your servicer and investor using your name, social security number and property address.

But beware of the consequences of accepting the relief offered. In many cases, six months of forbearance — or suspension of payments without penalty — will ultimately amount to homeowners being required to pay a lump sum at the end of the forbearance period.

The U.S. Department of Housing and Urban Development issued a letter on March 18, 2020, announcing a 60-day foreclosure and eviction moratorium for all FHA-insured Single Family mortgages.

The letter was effective upon the date of issue and urged Americans to “remain in their homes to stem the tide of COVID-19.”

The moratorium, however, applies only to FHA-insured mortgages for single family homes. This excludes millions of American homeowners and doesn’t offer solutions for when the moratorium period has expired.

In addition, the FHFA announced that it would suspend foreclosures and evictions for at least 60 days for all Enterprise-backed loans — that is, mortgages insured by Fannie Mae or Freddie Mac.

The director of the FHFA, Mark Calabria, said in a March 18, 2020, news release, “As a reminder, borrowers affected by the coronavirus who are having difficulty paying their mortgage should reach out to their mortgage servicers as soon as possible.”

According to The Washington Post, more than 40 million renters and 5 million homeowners with mortgages not backed by the government are not eligible for relief measures, noting that those who do qualify may be able to stay in their homes for now, but will find themselves in dire straits when the time comes to remit the suspended payments.

The CARES Act contains a provision that prohibits rental evictions from properties secured with federally backed loans for 120 days. The moratorium also applies to evictions from federally subsidized housing.

In addition, at least 34 states have issued moratoriums on evictions, but the orders differ from state to state.

In Delaware, the governor has banned evictions for as long as Delaware is under a state of emergency and has ordered up to $1,500 to renters who have been laid off or furloughed as a result of the COVID-19.

If you are unsure of the moratorium status in your state, contact the city government or check your state government website for assistance.

Interest-free loans for eligible small businesses are a central component of the act, which will provide $377 billion in federally guaranteed loans to small businesses and $500 billion to large companies and airlines.

Small businesses will be exempt from repaying eight weeks’ worth of the 10-week loans if they retain their employees or rehire employees who have been laid off by June 2020.

According to the IRS, the refundable employee retention tax credit is 50 percent of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19.

Eligible employers include those whose business is fully or partially suspended by government order due to COVID-19 during the calendar quarter or whose gross receipts are below 50 percent of the comparable quarter in 2019.

According to the IRS, the FFCRA stipulates that employers must provide paid leave through the Emergency Paid Sick Leave Act (EPSLA) and the Emergency Family and Medical Leave Expansion Act (Expanded FMLA).

Employers with fewer than 500 employees qualify for refundable tax credits to reimburse for the cost of providing 80 hours’ worth of paid sick and family leave related to COVID-19.

Leave applies to employees who need to care for themselves or others who have contracted COVID-19 or for workers who have children whose school or childcare provider has closed for coronavirus-related reasons.

The IRS has a procedure that allows eligible employers who do not have sufficient federal employment taxes set aside to obtain an advance of the credit.

According to the U.S. Department of the Treasury, under the CARES Act all businesses with 500 or fewer employees are eligible for the Paycheck Protection Program, which provides funds to pay up to eight weeks of payroll costs, including employee benefits, interest on mortgages, rent and utilities.

No fees or collateral are required, and the loans will be fully forgiven. Payments will be deferred for six months.

All loans will have the same terms regardless of lender or borrower. A list of participating lenders as well as additional information and full terms can be found at www.sba.gov.

The Paycheck Protection Program ran out of money on April 16, 2020. However, the Senate passed a follow-up relief package that allows for an additional $310 billion for the program.

The additional funding includes $60 billion for emergency loans and grants. The legislation dictates that this funding go to small lenders that serve small businesses in rural communities, which are particularly vulnerable to the economic impact of the coronavirus pandemic.

Employers may delay paying their portion of social security taxes and certain railroad retirement taxes for the period beginning March 27, 2020, and ending Dec. 31, 2020.

The IRS requires that 50 percent of the deferred payroll taxes be paid by Dec. 31, 2021, and the remainder be paid by Dec. 31, 2022.

Martin Tillier, contributor for nasdaq.com, has a little bit of good news for Americans who are afraid to look at their retirement account balances.

According to Tillier, although Dow lost around 23 percent from the close of the last quarter of 2019 to the close of the first quarter of 2020, it doesn’t necessarily mean that everyone’s 401(k) will mirror the decline.

Retirement funds that have been allocated strategically — meaning your money is invested in a target fund or otherwise diversified — should be safer than you think.

According to the Society for Human Resource Management, the CARES Act allows for 401(k) loan limits equal to the lesser of $100,000 or 100 percent of the participant’s vested account balance for the next six months. This is twice the standard limits.

Participants who have existing loans whose repayments are due between March 27, 2020, and Dec. 31, 2020, can extend their repayments for up to one year.

Under the CARES Act, employers may offer 401(k) plan participants and employer-sponsored IRA account holders affected by COVID-19 coronavirus-related distributions, for which employees will not incur a 10 percent penalty for early withdrawal. These distributions cannot exceed $100,000, and plan participants have three years to pay them back.

Furthermore, participants who take these distributions may spread the payment of the income taxes owed over three years, too. These payments will not count toward annual contribution limits.

Not all employers will offer this benefit, so speak with your employer about whether this option is available to you.

Retirees aged 72 and older will not have to take required minimum distributions (RMDs) from their tax-deferred 401(k)s and IRAs throughout 2020.

This provision, which is not limited to people affected by COVID-19, is helpful because RMDs are calculated by dividing the last Dec. 31 balance by a life expectancy factor.

As certified financial planner Rose Swanger told USA Today, “Had we used that to calculate the RMD, every retiree will have a higher inflated amount than what they see now on paper.”

Swanger goes on to explain that skipping one year will help retirees recuperate their investment and mitigate the tax impact.

The CARES Act provides credit protection for people whose accounts were previously in good standing. Companies will report your account status and payment history as current for 120 days after the end of the national emergency declaration.

This applies only if your account was not delinquent prior to the pandemic. Additionally, this is not an automatic process, so if you require credit protection, you must contact lenders and credit card companies to apply for a hardship program.

To apply for assistance, call the number on the back of your credit card or log in to your account online.

Experts recommend you take advantage of these provisions only if you absolutely must. If you are able, your best strategy is to continue to make your minimum payments.

They also suggest keeping an eye on your credit card balances. The higher your credit card balances, the higher your debt-to-income (DTI) ratio, which will hurt your credit score.

Most lenders consider a DTI ratio of 35 percent or lower favorable. This means that 35 percent or less of your monthly gross income goes to paying debt. When your DTI exceeds 35 percent, it can affect your ability to be approved for loans.

The key to protecting your finances during and after the coronavirus pandemic is making smart decisions about whether to take the assistance you are offered. Assess your situation, make adjustments where you can and continue to monitor your finances.

Most importantly, be persistent and patient. You will encounter obstacles — overloaded systems, overworked representatives, long wait times and short fuses. But communication is crucial to staying afloat financially during this challenging time.

All federal student loan payments will be deferred until Sept. 30, 2020. Interest will not be accrued during this time.