Bear Mountain Capital Inc.

What You Should Know About The $2 Trillion Fiscal Stimulus Bill

| April 3, 2020

Blog | Economy

COVID-19 has emerged as a pandemic according to the World Health Organization. In an effort to minimize the spread and the risk of an overwhelmed health care system, governments have followed the advice of epidemiologists and have engaged “shutdowns” with various work-from-home or shelter-in-place mandates.

As a result, many businesses have temporarily closed their doors and the U.S. recently saw the largest spike in single-week unemployment claims ever, up 6.6 million in just a week (shown below. Note: the gray indicates periods of a U.S. recession)

As you can see from the chart, the initial weekly unemployment claims number is unprecedented. These times are unprecedented, and Congress reacted in an unprecedented way. Congress recently passed the $2 trillion fiscal stimulus bill, or Coronavirus Aid, Relief and Economic Security (CARES) Act, in an effort to help stabilize the economy for the coming weeks and months.  Is it enough? Will we get more? We can’t say, but this should provide some help to those who need it.

The cost of this bill is already 1.3x the amount Congress spent after the 2008 Financial Crisis. Combined with the Federal Reserve providing another $4 trillion to help support the credit markets with liquidity, that totals $6 trillion in federal assistance. Just how big is $6 trillion?

  • A million seconds ago was early March.
  • A billion seconds ago was 1989.
  • A hundred billion seconds ago was 1000 BC.
  • A trillion seconds ago Neanderthals became extinct (30,000 BC).
  • Six trillion seconds ago Homo sapiens first appeared.

The bill covers quite a bit; we’ll touch on the following topics at a high-level:

  • Individual and Family Assistance
  • Retirement Account Withdrawals
  • Small-Businesses Assistance
  • Expanded Unemployment Benefits
  • HealthCare Provisions
  • Charitable Contributions
  • Student Loan Deferral
  • Direct Corporate Assistance

Individual and Family Assistance

Who gets the checks and how much?

Most adults who make less than $75,000 will get a one-time payment of $1,200. This means married couples that make less than $150,000 will get $2,400. If you have a child age 16 or under, you will get an additional $500 per child.

In order to qualify you cannot be claimed as a dependent; so unfortunately, most college-aged kids who still rely on their parents for support will not get additional support under this bill.

Payments begin to phase out over $75,000, until you reach $99,000. For every $100 over the applicable threshold, you lose $5 in the check until you eventually don’t qualify for any funds.

How do they determine my income?

Your income is based off of your most recently filed tax return, specifically your AGI found on form 1040 line 8b. If you haven’t filed your 2019 tax return, the government will look at your 2018 tax return.

So if you got a big raise in 2019, you may consider delaying your filing. If your income went down in 2019 or you didn’t file before, you may consider filing now.

What if I made too much money in 2018 and 2019, but just lost a significant portion of my pay or even my job?

In that situation, you would qualify for the payment, but you wouldn’t receive the payment until you file your 2020 tax return. In the short term, you may be able to file for unemployment or for a loan if you are a small-business owner.

What if I will qualify based off my 2018 and 2019 income but I’ll make too much money in 2020?

There is no claw back provision on overpayments, so it doesn’t matter if you make more than the income limits in 2020.

How and when will I get paid?

In many cases, the IRS has your bank information (they will use 2018 info), and it will transfer you money via direct deposit. The exact timing of payments is not known, but should be toward the end of April, 2020, according to the treasury. The payments may take longer if the IRS has to mail you a check.

What if it doesn’t come?

The IRS will mail you a notice, 15 days after the payment has been the disbursed. The notice will tell you how much the payment was, where the payment was sent. If you can’t locate it, you’ll have to call the IRS using the contact information on the notice.

Is this taxable?

This payment is not taxable.

Retirement Account Withdrawals

What are the Changes?

The big changes include rules regarding the following: required minimum distributions (RMDs), borrowing from your 401(k), and coronavirus-related distributions.

Required Minimum Distributions (RMDs)

You are not required to take RMDs for 2020 for 401(k)’s, 403(b)’s, traditional IRAs, inherited IRAs, among other accounts. If you took your RMD early, you have the option to return it, if desired. Unfortunately for inherited IRA owners who took their 2020 RMD, there is no option to return it.

Borrowing from your 401(k)

In general, if your 401(k) plan allows for loans, the maximum amount you can borrow from your 401(k) is $50,000. If you are impacted by the coronavirus, you can now borrow up to $100,000.

Coronavirus-Related Distribution

If you are impacted by the coronavirus, you can withdraw $100k from your IRA or employer qualified plan without the 10% early distribution penalty. Additionally, you wouldn’t be required to withhold any amount for taxes. You will be required to pay income taxes on this distribution; however, the tax hit can be spread out over 3 years. If the money is put back into the account over 3 years, you can file an amended return and claim refunds.

If you had adverse financial consequences because of the coronavirus, you should qualify. Retirement plan sponsors are told to rely on employees’ word that they are eligible.

Small Business Assistance

What assistance is included?

There are many provisions covering small businesses. We’ll cover the following: loans, the new employee retention credit, deferral of employment taxes, and changes in net operating loses.


If your business has fewer than 500 employees, then you may qualify for a loan program, called the Paycheck Protection Program. The program will cover up to $10m to cover payroll, rent, utilities, mortgage interest, etc. Such loans are eligible for full or partial forgiveness. Eligible amounts must be spent during the first 8 weeks after the loan is made and spent on qualified costs. Here is a great summary of the details.

Additionally, the small business association has additional loans set up. Here is a great resource from the SBA. For those small businesses local to the Puget Sound Region, here is an additional list of resources.

Employee Retention Credit

Your business may qualify based on business operations being suspended due to governmental authority limiting commerce due to COVID-19. Your gross revenue for 2020 Q1 has to be down 50% compared to 2019 Q1.

The credit is worth up to 50% of qualified wage with respect to the employee.  The credit is limited to $10k per employee, for all quarters. The application of the credit changes based on if you have more or less than 100 employees.  If you have more than 100 employees, then the credit applies to wages paid to employees who can’t actually work due to COVID-19. If you have less than 100 employees, then the credit applies to wages paid to all employees.

The credit is a payroll tax credit, and business owners will receive the credit when they file their quarterly federal tax return, usually form 941.  In anticipation of receiving the credits, eligible employers can fund qualified wages by accessing federal employment taxes, including withheld taxes, or by requesting an advance of the credit from the IRS. For more questions, see IRS guidance here.

Deferred Employment Taxes

Employer taxes from the date of enactment until the end of the year will be deferred over 2 years, with half of tax due at 12/31/21 and other half due at 12/31/22.

Net Operating Losses (NOL)

NOLs from 2018-2020 can be carried back to 5 years and can fully offset income. Previously you can only carry them back for 2 years, and can only offset 80% of your income.

By allowing business owners to claim refunds on amounts previously paid, this can provide some immediate relief.  For example, if a business owner had a NOL in the 2018 or 2019 tax year, then they carry back their NOL to a previous tax year, file the appropriate tax forms, and claim a refund. For more questions on NOLs, see IRS guidance here.

Expanded Unemployment Benefits

Who is Covered?

If you are unemployed, partially unemployed or cannot work for a wide variety of coronavirus-related reasons, you would likely receive benefits.

For example, you may even qualify if you quit because you were sick or showing symptoms. Additionally, if you quit because you had to care for a child or because child-care closed, you may qualify.

How much do I receive?

Generally speaking, traditional unemployment will cover 40-45% of your wage, but it depends on your state. Note that some states have a benefit limit. Benefit amounts are calculated on previous income, using a formula from the Disaster Unemployment Assistance program. This bill will give an extra $600/week to those who are eligible, on top of the traditional state benefits.

How long will I get the unemployment benefit for?

Traditional unemployment covers 26 weeks. This bill will cover your state portion for an additional 13 weeks for a total of 39 weeks. The additional $600/week will last up to 4 months, covering weeks of unemployment ending July 31st

HealthCare Provisions

What assistance does the bill provide?

There are a lot of healthcare provisions in this bill. In regards to individuals, COVID-19 tests must be covered by your insurance. Additionally, your insurance must cover a vaccine, when it’s available.

In regards to the healthcare industry, $150B in relief funding is going towards supporting health services.

Student Loan Deferral

What relief is included?

Student loan payments are suspended for federal loans through September 30, 2020. No interest will accrue during this time. For those who are planning towards student loan forgiveness programs, these suspended month’s count towards those programs.

Charity Contributions

What are the changes?

Normally, you can only take a deduction for charitable gifts if you itemize your expenses on your tax return. For 2020, if you make cash contributions up to $300 to qualifying charities, you will get a deduction on your 2020 tax return, even if you take the standard deduction. Anyone can take this deduction.

Additionally, if you make cash contributions up to $1M, you can get a full deduction on your 2020 tax return. Normally the deduction is limited to 60% of your AGI.

Direct Corporate Assistance

What do the corporations get from the bill?

Some corporations may qualify to receive loans from the government. However, all businesses that receive government loans are subject to disclosure requirement and various restrictions. Some examples of the restrictions are: limitation of executive pay, required employee retention, and a ban on stock buybacks for the duration of the loan plus one year after. Additionally, the bill creates a special inspector general to oversee pandemic recovery. That person, along with a special committee, would provide oversight of all loans and other uses of taxpayer dollars.

Other Sources of Relief

Additionally, there are many other relief programs available. For further information, check out the following resources: