The first portion of the CARES Act that we’re going to cover will be unemployment. Under the CARES Act, the federal government approved a pandemic unemployment assistance relief, and in order for you to qualify, you need to meet these three criteria. So one, you need to be ineligible for any other state or federal unemployment benefits. Two, you have to be unemployed, partially unemployed, or cannot work due to the coronavirus public health emergency, and three, your job is not allowing you to telework or receive paid leave. If you meet the above criteria, you will be eligible to receive unemployment benefits for a period of 39 weeks, which reflects the regular 26 weeks, plus the temporary 13-week expansion provided by the act. This unemployment benefit covers self-employment workers, independent contractors, and individuals with limited work history.

Examples of self-employment workers could be, let’s say, for example, nannies, or any cab drivers. Examples of independent contractors could be Uber or Lyft drivers. For those States who are willing to waive that one week period, they will receive a 100% federal funding so they can make that unemployment funding readily available for all its applicants. The law also gives you an additional $600 in a weekly boost in addition to the regular unemployment benefit that you are already receiving. Individuals who were laid off before the new law was passed also qualify for this benefit. In some cases, individuals who were not laid off can also qualify by providing a self-certification that they had to quit for reasons related to the virus, and didn’t have the ability to telework with pay, or access any sick leave, or other paid leave benefits.

In case you’re wondering what telework means, it’s just simply keeping your job and doing everything you would normally do in an office space, but this time you’re doing it from your home. As you know, the benefits are taxable, so nothing changed under this law. Now moving along, another type of assistant that the CARES Act is actually providing, it’s the recovery of rebates. It basically means an incentive that you receive. So people can receive up to $1,200 per adult, and children under the age of 17 can receive up to $500. If you’re wondering, okay, so how does the government determine that? and it will be determined based on your taxes? If you’re filing as single, the cap will be $75,000 a year. If you’re filing as the head of household, it will be $112,500 a year, and if you’re filing jointly, then it will be $150,000 per year. Now, you might be wondering, okay, so what happens if I make slightly above?

So let’s say, for example, if you’re filing as a single person, and you made $80,000. You can still qualify, you just simply won’t qualify for the maximum amount of $1,200. You will receive a reduced compensation. In terms of dependents, there are no limits on dependents, as long as they appear in your tax returns. Now adult dependents and other dependents do not qualify. If you happen to have a child in 2019 but have not yet filed your taxes, you will not receive the credit for that child. Why? Because that child needs to appear in your tax return. Now in the event that you are wondering what you can do in order to get access to the recovery rebate, then let me tell you that you actually don’t need to do anything. So the IRS will use your most recently filed tax returns. Let’s say, for example, if you manage to get to your accountant, and you file your 2019 taxes, then the IRS will use your 2019 taxes.

If you haven’t filed any of your taxes yet, because maybe you were caught up in the middle of the situation, you don’t have the time, then what the IRS will do is that they will leverage your 2018 taxes to determine how much money you will receive. How you will get the money, it will also depend on what you actually chose in your tax return. Let’s say, for example, if you choose to e-file, and you requested the IRS to refund your money directly into your bank account, then what will happen is that the IRS will just simply deposit the rebate money into the account that you provided in your return, and if you provided a physical address, then you will get a check in the mail in the address that you actually provided. Typically, e-filed tax returns are processed faster, and therefore, you will actually get your refund money faster if you chose to have the money deposited directly into your account. I think I just got ahead of myself, so I already covered that.

If you’re making less because this is a pretty common question. Let’s say for example that in 2019, you made $100,000, and then for some reason in 2020, you make less money. Maybe you got laid off, or maybe your hours were cut down to a part-time basis. So in 2020, you are actually making less money than in 2019. What would happen is that you will qualify for a certain amount of money based on your 2019 taxes, but then when you file your taxes in 2020, you will receive the difference. Now, if you’re in the bucket of individuals who receive social security benefits, social security disability, or SSI, let me tell you, let me inform you that you also qualify for this benefit. If you have further questions, feel free to check out this article right here.

This is actually a great resource from taxfoundation.org, and what they did is they simply simplify the bill down to the most common questions that people typically have about the CARES Act and the benefits that you as an individual can receive. Now in the event that you were wondering how you can actually get access to this article, and if you can actually get access to this presentation, or this cheat sheet, don’t worry, I’m going to leave you a link down below so you can actually get a copy of this, so that way you can actually refer back and forth through the slides, through the pages, and use this information, and have it readily handy for whenever you need it.

The CARES Act also covers retirement funds. So you do get access to special rules for the use of your retirement. So withdraw your 401Ks, or your 457, or your 403B. In this case, you can receive up to $100,000 dollars in distribution for COVID-19 related expenses. The time to apply or to access your funds, it’s basically an entire year. So you can start it from January 2020, all the way to December 31. So you might be wondering, oh, okay, so we are already in April, when does that happen? It simply means that let’s say, for example, you took out $10,000 in January. If this was prior to any of this pandemic issue, any of this problem, so what you can actually do is to roll that $10,000 into that $100,000 distribution. For example, once again, let’s say you took in January $10,000. So that means you can still take out up to $90,000 in distribution for the entire year. You can use those funds to cover whatever COVID-19 related expenses, whether it’s medical cost, whether it’s to afford to pay your rent in the event that you lost your job. The term is actually for three years. You have three years to actually repay that money back.

You will not be held responsible for the 10% penalty, and you will also not pay any interest if you repay that money back on time, which means within the three years, there is no collateral or no personal guarantee that you need– Once again, the use is for COVID-19 related expenses. Now on the same subject, let’s talk about loans. On the prior slide, we talked about withdrawals. Now we’re going to talk about loans. The same applies to 401K, 457, or 403b. You still receive up to $100,000 in loans for COVID-19 related expenses. You will still have the entire year to apply for it. The difference here is in the terms. If you withdraw, you have to repay that money in three years as you can see here, but if you take it out as a loan, then you have up to six years to pay it, and your repayment is actually deferred for one year. The withdrawal, you don’t have any deferral. As long as you take it out, you have to start paying it.

If you take it out as a loan, then you will have one year to start paying that money back, so you have one less year to worry about any additional debts that you’re adding to your shoulders. Another difference between taking out a loan and withdrawal is that when you’re taking out a loan, you have to pay interest. When you’re doing a withdrawal, you have three years to pay it back, but there’s no interest that is added to it. Same thing, no collateral, no personal guarantee, and must be used for COVID-19 related expenses. I hope this video is actually providing you some transparency. If you’re finding the content valuable and useful, please do not forget to hit the like button so we can help this video rank, and help other people looking for this type of information.

What is the mortgage forbearance program? This is also part of the CARES act. I want to emphasize that mortgage forbearance is not to be confused with mortgage forgiveness. That doesn’t mean that if you apply for the program that you don’t have to pay that money back. You’re still held responsible for what you owe in your mortgage. What happens when you apply or request mortgage forbearance is that this program, what it does is that it allows you to pause or reduce your mortgage for a limited period of time due to the impact of the coronavirus. Once again, it doesn’t mean that the debt that you have is forgiven. The reason why I did not cover mortgage forbearance earlier is that I’m not a big fan of it. Why? Because you keep accumulating more and more interest, and you wind up paying more interest.

If you have the ability to keep making your payments, please keep making them, do not stop, because this is what happened. I have two examples here to actually give you a point of comparison for you to see why I’m not such a big fan of the mortgage forbearance. Let’s say, for example, you still owe $100,000 in year one. You do your efforts, you take advantage of unemployment, you leverage any of the rebates, you manage to find another job, you leverage credit cards, whatever is it that you managed to get, but you continue to pay your mortgage. By year two, you will owe now $90,000. The amount of interest that you will get charged in the mortgage will be based on the amount that you owe. As long as you continue to make the payments in your mortgage, that means that the interest is going to start going down slowly, but they aren’t going to go down.
If you choose to pause your mortgage or make reduced payments, so what happens is, let’s say once again, with the same example, you owe $100,000 in year one, and you took the forbearance. So you could have either paused or reduced the payment, and by year two, you could either still owe $100,000 if you chose to pause it, or if you took the reduced payment, then you will be still owing $99,000. I’m sure that if you were given a choice in how much to pay interest, you would much rather pay interest on the $90,000, and not on the $100,000 or the $99,000. This is the reason why I am not such a big fan, but I do understand that things can get really rough, and if you’re definitely running out of funds, you don’t want to risk yourself for being foreclosed on, or getting kicked out of your home.

RESOURCES & LINKS MENTIONED IN THIS EPISODE:

– Link to the presentation slides:  go.www.novariseinvest.com/cares-act

– Cares Act:  https://www.congress.gov/116/bills/hr748/BILLS-116hr748enr.pdf

VIDEOS COMPLEMENTING THIS ONE:

– How is a real estate investor managing her properties in this crisis?: https://youtu.be/36iowp8osqo

– Improve your credit while you maker money: https://youtu.be/eOx82LBo14g

– Fund & Grow your real estate portfolio: https://youtu.be/VV0n1crixUQ

PLAYLIST COMPLEMENTING THIS ONE:

– Investing During The Crisis:  https://www.youtube.com/watch?v=sSrOt5IXnMs&list=PLbg0ENts-e2tjHtaG6f7Vb-gJwXzrFsx2 

All About Business Credit Playlist: https://www.youtube.com/watch?v=dVtOEoKP8b4&list=PLbg0ENts-e2sznkpSyI-K9-rRcE3JppZh

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