What is the CARES Act? Breaking it Down

What is the CARES Act? Breaking it Down

The coronavirus pandemic has created both a health crisis and an economic crisis. The effects are still unfolding around us and huge numbers of people are finding either their health or their finances being impacted by the virus. To help, the government has passed the Coronavirus Aid, Relief and Economic Security (CARES) Act. But what is the CARES Act, and what does it mean for you?

The CARES Act is a huge $2 trillion stimulus package which includes help for businesses, hospitals and individuals. This was a bipartisan agreement that moved swiftly to deliver help to the American people, with millions already feeling the benefit.

It’s a major piece of legislative work though, and it can be difficult to pick out what it’s going to mean for you and your family. Here we dissect it and look at just what is the CARES Act.

What is the CARES Act?

It’s a care package for you and your family. The CARES Act acknowledges that most Americans are going to be contending with some kind of cashflow problem because of the novel coronavirus pandemic. Several measures are being rolled out to provide individuals and businesses with some stability in these shaky times.

Direct Payments or ‘Stimulus Checks’

The CARES Act is providing stimulus checks, or direct payments, straight to the bank accounts of millions of families in America. This is officially an advance tax credit, but it won’t count as income or be offset against a future refund.

Here’s a simple way to see who will get what:

  • Individuals who made up to $75,000 in 2019 will receive $1,200.
  • Heads of household who made up to $112,500 in 2019 will receive $1,200.
  • Married couples who file jointly who made up to $75,000 combined will receive $2,400.
  • Each taxpayer will receive up to $500 for each child they have under the age of 17.

Payments then decrease for individuals and married people who earn above these thresholds. Payments will reduce by $5 for every $100 earned above the limits, and then will not arrive at all for individuals who made over $99,000 in 2019, or for married couples who made $198,000 or more.

These payments are being made directly into bank accounts when the IRS holds your details from previous tax refunds. If you’ve not given the IRS your details, you can still do that.

If you haven’t received your check yet, it will likely be because the Government didn’t have your bank details and they’re sending you a physical paper check. They’re starting off with the lowest earners first and working their way through. The process is going to take several months, so if you haven’t had yours yet, you’re unlikely to have been forgotten.

Will There Be a Second Round of Stimulus Payments?

It still isn’t clear whether or not there will be a second round of stimulus payments. The HEROES Act, which would see a second payment as well as other new benefits, is currently being debated after having narrowly won a vote in the House of Representatives. It’s part of a new $3 trillion package for economic support, but it’s not yet been signed into law.

New Tax Deadlines

Due to the Coronavirus pandemic, the IRS has extended this year’s tax-filing deadlines from April 15 to July 15 2020. This new deadline applies to everyone, not just those people impacted by Coronavirus in some way.

If you’ve already filed your tax return, you won’t see any abnormal delay in your refund.
If you’re responsible for estimated tax payments, these will fall due for both the first and second quarter on July 15.


The CARES Act provides about $260 billion in additional support for people who have lost their livelihood because of the Coronavirus. This includes freelancers and self-employed workers, who usually do not qualify for unemployment benefits.

Generally speaking, workers who lose their jobs because of the pandemic will receive $600 per week for up to four months, in addition to their state unemployment program benefits.

Support to Small and Large Businesses

The COVID-19 pandemic is sending shockwaves through the economy. People are stuck at home more, and some are out of work. They’re not spending money which keeps businesses going, both small and large. The secondary impact is that businesses would then in turn have to lay people off, meaning even fewer people able to spend money.

So the CARES Act lends a financial hand to businesses who can borrow up to $10 million under the Payment Protection Program. Any part of this loan used on payroll until the end of June does not have to be paid back. Small businesses can also apply for grants of up to $10,000 to cover operating costs.
Previous loans from the SBA are also automatically subject to a debt relief program.

Protect Your Retirement Funds

The CARES Act includes some measures put in place to help protect retirement funds but also to let you access them if you need them.

You can now borrow up to $100,000 from 401(k)s instead of the previous limit of $50,000. You can also make an early withdrawal from your retirement accounts, with the early withdrawal penalty of 10% being waived. Also, you won’t pay the usual mandatory withholding at this time.

Required minimum distributions for those over the age of 72 have been waived for 2020, meaning if you can afford to, you can leave your funds where they are. If you’d already taken your 2020 RMD, you can return it if you meet the right criteria. If you’d like to do this, contact us to find out how.

Please note, our advice is to leave your retirement savings where they are if you possibly can.

What Happens Next?

As the provisions in the CARES Act are rolled out and begin to make a positive impact, the pandemic shows only little signs of slowing globally. Despite the CARES Act being the most significant legislation of its type we’ve ever seen, there is still some acknowledgement that it may not go quite far enough.

The HEROES Act is currently being debated and could see even more funds released to support families, individuals, businesses and hospitals to deal with the unprecedented crisis.

If you’re still unclear about what the CARES Act means for you, your family or your business, or if the COVID-19 pandemic has you worried about your finances, then let’s chat.  and we can go through your personal situation and how the CARES Act might help you in these challenging times.


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