The CARES Act: What You Need to Know

Amid the coronavirus pandemic, people all over the world have experienced the consequences of suddenly finding themselves out of work for an indefinite period of time. With businesses closing all over, schools switching to a virtual format, and other companies trying out work-from-home arrangements, everything has been quite unstable. In order to help stimulate the economy and put some money in the pockets of Americans who are out of work, the United States government drafted and implemented the CARES Act earlier this year. Known as the Coronavirus Aid, Relief, and Economic Security (CARES) Act, this package totaled nearly $2 trillion and was signed into law on March 27, 2020 by President Trump. Here’s more about what this package entailed and how it worked to help the American people and the economy.

Historic Legislation

The CARES Act represents the largest economic stimulus package in history, with the total amount clocking in at over $2 trillion. The next closest contender was the 2009 Recovery Act, totaling at $831 billion. This legislation marked a truly unprecedented move by the federal government to stimulate the economy and hopefully blunt the massive impact of the recession set into motion by the coronavirus pandemic. The funds were designated for several important groups, with individuals, small businesses, large corporations, local and state governments, public health, and education as the main areas of focus.

Aid for American Employees

One of the main goals of the CARES Act was to provide relief directly to Americans across the country in the form of economic stimulus payments. For U.S. households with an average income of up to $99,000 or up to $198,000 for those filing jointly, it meant that individuals would receive a $1,200 payment per adult. For every child under the age of 17, families would receive $500, up to a maximum of $3,400 for a family of four. In the case of individuals who did not file a tax return in 2018 or 2019 (Social Security recipients), the IRS used information found on Form RRB-1099 and Form SSA-1099 to send them their Economic Impact Payment, as they would receive their benefits normally, either by paper check or direct deposit.

For most individuals, this stimulus check came to them without any action necessary on their part. Individuals who regularly file tax returns, use direct deposit, or who have the aforementioned forms on file with the IRS did not need to give them any additional information to receive their check and instead simply received it in the mail or had the amount show up in their direct deposit account used for tax returns. In some cases, individuals were required to file a simple tax return in order to receive the economic impact payment, and for others, the IRS set up an online portal so that direct deposit information could be communicated to them in order to receive the payment.

Paycheck Protection Program Aims to Help Small Businesses

Perhaps the second largest area which the CARES Act focused on was small businesses, both keeping them in business and encouraging them to keep their workers employed throughout this uncertain time. For this, the CARES Act created the Paycheck Protection Program (PPP). Eligible businesses included any nonprofit, veterans organization, business, or tribal business with fewer than 500 employees, less than 500 employees per physical location (for food service and accommodation businesses, or under the Small Business Administration standard if they have more than 500 employees). Through PPP, eligible organizations could receive a Small Business Interruption loan totaling up to 2.5 times the amount of their average monthly payroll, with a maximum loan amount of $10 million. The funds were available to cover salaries, benefits, and payroll expenses along with interest payments, utilities, and rent payments. It is possible for the principal of this loan to be forgiven, effectively turning it into a grant if specific qualifications are met.

The PPP also authorized $10 billion in emergency grants; $17 billion toward the payment of interest, fees, and principal on existing small business loans for six months; and $1 billion allotted to education, training, consulting, and administration as it relates to these loan programs. An existing loan program, the Economic Injury Disaster Loans (EIDL), was also increased, providing an extra $10,000 in relief to those small businesses impacted by the coronavirus pandemic (which does not need to be repaid). The program allows small businesses to borrow up to $200,000 in EIDL loans without a personal guarantee.

While there are a number of other benefits attached to the CARES Act, the large majority of the funding went toward helping Americans and helping small businesses to continue operating, as well as protecting their employees amid the sudden loss of their jobs. Through this legislation, the federal government is seeking to blunt the impact of the economic downturn caused by the pandemic.