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All Posts > COVID-19

Education COVID-19

On March 27, 2020, Congress passed the CARES Act, the largest economic stimulus bill in the history of the United States, in response to the coronavirus pandemic.1 Included in the legislation are new rules for student loan relief that supersede the rules that were announced only a week earlier by the Department of Education. For more information on both sets of rules, visit the federal student aid website.

What new relief is being offered?
The new legislation provides a six-month automatic payment suspension (administrative forbearance) for any student loan held by the federal government. This six-month period ends on September 30, 2020. Borrowers do not need to contact their loan servicer to request a suspension; they will be automatically placed in administrative forbearance. Under the previous policy, the payment suspension was for two months and it was not automatic; borrowers had to contact their loan servicer to opt in.
  
The new stimulus legislation also provides a temporary incentive for employers to pay down their employees' student debt balances. Specifically, employers are able to contribute up to $5,250 toward an employee's student debt through December 31, 2020 without any tax consequences for the employee.
  
What loans qualify for the suspension?
Only student loans held by the federal government are eligible. This includes Direct Loans (which includes PLUS Loans), as well as Federal Perkins Loans and Federal Family Education Loan (FFEL) Program loans held by the Department of Education. Private student loans are not eligible.
  
Will interest continue to accrue during the suspension period?
No. Interest will not accrue during the six-month suspension period. The interest rate is being set at 0%. Also, due to the Department of Education's earlier student loan relief rules, the interest rate on all eligible
federal student loans is effectively set at 0% from March 13, 2020 through September 30, 2020.
  
What happens with auto-debit payments?
Auto-debit payments are suspended during the administrative forbearance period. Any auto-debit payments processed between March 13, 2020 and September 30, 2020 can be refunded. Borrowers should contact their loan servicer if they wish to request a refund.
  
Can borrowers keep making their student loan payments?
Yes. Borrowers can choose to keep making their monthly student loan payments during the six-month suspension period if they wish. Borrowers should contact their loan servicer to opt out of the administrative forbearance period and continue their auto-debit payments. Borrowers also have the option to make manual (i.e., not auto-debit) payments during the administrative forbearance period.
  
During this period of 0% interest, the full amount of a borrower's payment will be applied to principal (once all interest accrued prior to March 13, 2020, is paid). Borrowers can also choose to make partial payments during the suspension period.

How will the suspension period affect the Public Service Loan Forgiveness Program?
Under the Public Service Loan Forgiveness (PSLF) Program, borrowers who work in an eligible public service job and make 120 on-time student loan payments are eligible to have the remaining balance on their federal Direct Loans forgiven.2 Under the new legislation, the six-month freeze on student loan payments will not affect the 120-month running period for purposes of the PSLF program. In other words, each month of the suspension period will still count toward a borrower's 120-payment tally, even if the borrower does not make any payments during the six-month period.

How can borrowers contact their loan servicer?
A loan servicer is the company that handles a loan's billing and provides related services. Borrowers who want to contact their loan servicer for any reason should try to do so online or by phone. For borrowers who do not know who their loan servicer is or how to contact them, they can visit studentaid.gov/login or call 1-800-4-FED-AID for assistance.

The team at Kirtland Financial Services here, delivering the support and financial guidance you need.

Book your appointment with a Wealth Management Advisor today by calling 505-254-4364 or online at KirtlandFCU.org/Schedule


 
1) Coronavirus Aid, Relief, and Economic Security Act (CARES Act) , enacted March 27, 2020
2) U.S. Department of Education, Office of Federal Student Aid, 2020
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.
The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor. LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

Taxes COVID-19

Due to the coronavirus pandemic, the due date for filing federal income tax returns and making tax payments has been postponed by the IRS from Wednesday, April 15, 2020, to Wednesday, July 15, 2020. No interest, penalties, or additions to tax will be incurred by taxpayers during this 90-day relief period for any return or payment postponed under this relief provision. 

The relief applies automatically to all taxpayers, and they do not need to file any additional forms to qualify for the relief. The relief applies to federal income tax payments (for taxable year 2019) and estimated tax payments (for taxable year 2020) due on April 15, 2020, including payments of tax on self-employment income. There is no limit on the amount of tax that can be deferred. 
  
Note: Under this relief provision, no extension is provided for the payment or deposit of any other type of federal tax, or for the filing of any federal information return. 
  
Need more time? 
If you're not able to file your federal income tax return by the July due date, you can file for an extension by the July due date using IRS Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. Filing this extension gives you an additional three months (until October 15, 2020) to file your federal income tax return. You can also file for an automatic three-month extension electronically (details on how to do so can be found in the Form 4868 instructions). There may be penalties for failing to file or for filing late. 

Filing for an extension using Form 4868 does not provide any additional time to pay your tax. When you file for an extension, you have to estimate the amount of tax you will owe and pay this amount by the July filing due date. If you don't pay the amount you've estimated, you may owe interest and penalties. In fact, if the IRS believes that your estimate was not reasonable, it may void your extension. 

Tax refunds 
The IRS encourages taxpayers seeking a tax refund to file their tax return as soon as possible. Apparently, most tax refunds are still being issued within 21 days of the IRS receiving a tax return. 

You matter to us! We’re here to help you make sense of these recent changes.

Book your appointment with a Wealth Management Advisor today by calling 505-254-4364 or online at KirtlandFCU.org/Schedule

 

COVID-19

Here is a quick look at the basics of the CARES Act, passed by Congress in March to assist individuals and businesses impacted by COVID-19. 
  
INDIVIDUAL ASSISTANCE
Recovery Rebates
  • Provides all U.S. residents with an adjusted gross income of $75,000 or less $1,200 for singles and heads of households ($2,400 for married couples filing joint returns and an adjusted gross income of $150,000 or less).
  • The rebate is phased out by $5 for every $100 over $75,000 that an individual receives, and phased-out completely for incomes exceeding $99,000 (single), $146,000 (head of household with one child) or $198,000 (joint with no children).
  • Those with children are eligible to receive an additional $500 per child.
  • Those with no income, or income that comes from non-taxable benefits such as SSI, are still eligible for the rebate.
  • Checks will be sent to the address or bank account used on 2018 or 2019 tax returns. No action will be required for most eligible recipients.
  
Unemployment Compensation
  • Expands eligibility to include self-employed individuals and independent contractors.
  • Expands eligibility to 39 weeks (through the end of 2020).
  • Increases the maximum amount available by $600 per week.
  • Allows for individuals who quit their jobs due to coronavirus related concerns to be eligible for unemployment assistance.
  
RETIREMENT ASSISTANCE
Required Minimum Distributions
  • RMDs for 2020 are waived completely for IRAs and DC plans. They do not need to be made up next year.
  • We are waiting for IRS guidance related to putting distributions already taken back. It was allowed in 2009. 
  
Plan Withdrawals
  • Waives the 10% penalty tax on early withdrawals up to $100,000 for coronavirus related hardship distributions.
  • Exempts coronavirus related distributions from the 402(f) notice requirements and mandatory 20% withholding applicable to eligible rollover distributions.
  • Permits the individual to recontribute the coronavirus related distribution within three years.
  • Coronavirus related distributions are distributions made during 2020 to an individual who is diagnosed with COVID-19, who has a spouse or dependent diagnosed with COVID-19 or who experiences financial consequences as a result of COVID-19.
  
SMALL BUSINESS ASSISTANCE
Paycheck Protection Program
  • A new, $349 billion lending program administered by the SBA for small businesses, nonprofits, independent contractors, sole proprietors and self-employed individuals
  • Loans are fully guaranteed and 250% of an average monthly payroll from Feb. 15 – June 30, 2019. There is a $10 million cap on loans.
  • Eligible uses include employee compensation, compensation of an independent contractor or sole proprietor no greater than $100,000 in one year, rent or utility payments or a mortgage interest payment.
  
Employee Retention Credit
  • A refundable payroll tax credit equal to 50% of employee wages paid by certain employers during the coronavirus crisis, up to $10,000 in wages.
  • Employers are eligible for the tax credit if their operations were affected by government order limiting commerce, travel or group meetings due to coronavirus or whose quarterly receipts are less than 50% for the same quarter in the prior year.
  • Wages paid to employees during which they are furloughed or have reduced hours are eligible.
  • Businesses receiving a loan through PPP are not eligible.
  
Delay of Payment of Employment Payroll Taxes
  • Employers and self-employed individuals can defer the payment of their portion of social security tax
  • The taxes must be paid over the following two years, with half due before December 31, 2021 and the other half by December 31, 2022.
  • Businesses receiving a loan through PPP are not eligible for this deferral.
  
Excess Business Losses
  • Pass through corporations and sole proprietors are able to deduct more business losses on their taxes, freeing up cash for immediate expenses.
  • The cap, first imposed in the Tax Cuts & Jobs Act, will be effective after December 31, 2020.
  
You matter to us! We’re here to help you make sense of these recent changes.

Book your appointment with a Wealth Management Advisor today by calling 505-254-4364 or online at KirtlandFCU.org/Schedule

 
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor. This material was prepared by LPL Financial.

COVID-19

On Friday, March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. This $2 trillion emergency relief package is intended to assist individuals and businesses during the ongoing coronavirus pandemic and accompanying economic crisis. Major relief provisions are summarized here.
  
UNEMPLOYMENT PROVISIONS
The legislation provides for: 
  • An additional $600 weekly benefit to those collecting unemployment benefits, through July 31, 2020
  •  An additional 13 weeks of federally funded unemployment benefits, through the end of 2020, for individuals who exhaust their state unemployment benefits
  •  Targeted federal reimbursement of state unemployment compensation designed to eliminate state one-week delays in providing benefits
  •  Unemployment benefits through 2020 for many who would not otherwise qualify, including independent contractors and part-time workers
RECOVERY REBATES
Most individuals will receive a direct payment from the federal government. Technically a 2020 refundable income tax credit, the rebate amount will be calculated based on 2019 tax returns filed (2018 returns in cases where a 2019 return hasn't been filed) and sent automatically via check or direct deposit to qualifying individuals. To qualify for a payment, individuals generally must have a Social Security number and must not qualify as the dependent of another individual.
  
The amount of the recovery rebate is $1,200 ($2,400 if married filing a joint return) plus $500 for each qualifying child under age 17. Recovery rebates are phased out for those with adjusted gross income (AGI) exceeding $75,000 ($150,000 if married filing a joint return, $112,500 for those filing as head of household). For those with AGI exceeding the threshold amount, the allowable rebate is reduced by $5 for every $100 in income over the threshold.

Rebate Amounts and Phaseout Ranges 
 
Filing Status Payment Amount Phaseout Threshold Phaseout Completed
Married Filing Jointly $2,400 $150,000 $198,000
+1 Child $2,900 $150,000 $208,000
+2 Children $3,400 $150,000 $218,000
Head of Household $1,200 $112,500 $136,500
+1 Child $1,700 $112,500 $146,500
+2 Children $2,200 $112,500 $156,500
All Others $1,200 $75,000 $99,000

While details are still being worked out, the IRS will be coordinating with other federal agencies to facilitate payment determination and distribution. For example, eligible individuals collecting Social Security benefits may not need to file a tax return in order to receive a payment. 
  
RETIREMENT PLAN PROVISIONS
  • Required minimum distributions (RMDs) from employer-sponsored retirement plans and IRAs will not apply for the 2020 calendar year; this includes any 2019 RMDs that would otherwise have to be taken in 2020
  • The 10% early-distribution penalty tax that would normally apply to distributions made prior to age 59½ (unless an exception applies) is waived for retirement plan distributions of up to $100,000 relating to the coronavirus; special re-contribution rules and income inclusion rules for tax purposes apply as well
  • Limits on loans from employer-sponsored retirement plans are expanded, with repayment delays provided
STUDENT LOANS
  • The legislation provides a six-month automatic payment suspension for any student loan held by the federal government; this six-month period ends on September 30, 2020
  • Under already existing rules, up to $5,250 in payments made by an employer under an education assistance program could be excluded from an employee's taxable income; this exclusion is expanded to include eligible student loan repayments an employer makes on an employee's behalf before January 1, 2021
BUSINESS RELIEF
  • An employee retention tax credit is now available to employers significantly impacted by the crisis and is applied to offset Social Security payroll taxes; the credit is equal to 50% of qualified wages up to a certain maximum
  • Employers may defer paying the employer portion of Social Security payroll taxes through the end of 2020 and may pay the deferred taxes over a two-year period of time; self-employed individuals are able to do the same
  • Net operating loss rules expanded
  • Deductibility of business interest expanded
  • Provisions relating to specified Small Business Administration (SBA) loans increase the federal government guarantee to 100% and allow small businesses to borrow up to $10 million and defer payments for six months to one year; self-employed individuals, independent contractors, and sole proprietors may qualify for loans
PRIOR LEGISLATIVE RELIEF PROPOSITIONS
  • Signed into law roughly two weeks prior to the CARES Act, the Families First Coronavirus Response Act (FFCRA) also included relief provisions worth noting: 
  • Requirement that health plans cover COVID-19 testing at no cost to the patient
  • Requirement that employers with fewer than 500 employees generally must provide paid sick leave to employees affected by COVID-19 who meet certain criteria, and paid emergency family and medical leave in other circumstances
  • Payroll tax credits allowed for required sick leave as well as family and medical leave paid
There is likely to be a steady stream of guidance forthcoming with details relating to many of these provisions, so stay tuned for more information. 

The team at Kirtland Financial Services is here for you. We’re here to help! 

Book your appointment with a Wealth Management Advisor today by calling 505-254-4364 or online at KirtlandFCU.org/Schedule

 
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor. LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

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