President Trump has signed a bipartisan $2 trillion economic relief plan to offer assistance to tens of millions of American households affected by the coronavirus pandemic. Its components include stimulus payments to individuals, expanded unemployment coverage, and small business loans. If you are a freelancer, you are no exception to being impacted by this relief plan. Below is information on some of the major components that are directly relevant for you.
How large will the payments be?
As a freelancer, you are eligible to receive the stimulus payment. Below is information on how it works and what to expect.
Individuals with adjusted gross incomes up to $75,000 a year will be eligible for the full $1,200 check. Reduced checks will go out to individuals making up to $99,000 a year (the payment amount falls by $5 for every $100 in income above $75,000).
Married couples are eligible for a $2,400 check as long as their adjusted gross income is under $150,000 a year. Reduced checks, on a sliding scale, will go out to married couples who earn up to $198,000. Married couples also will receive an additional $500 for every child under 17.
People who file as a “head of household” (typically single parents with children) are eligible for a $1,200 check if they have an adjusted gross income up to $112,500 a year. Reduced checks on a sliding scale are available for heads of household earning up to $136,500 annually. Heads of household will also receive an additional $500 per child under 17.
You can’t get a payment if someone claims you as a dependent, even if you’re an adult. In any given family and in most instances, everyone must have a valid Social Security number in order to be eligible. There is an exception for members of the military.
You can find your adjusted gross income on Line 8b of the 2019 1040 federal tax return.
How does the U.S. government know where to send the money?
If you have already filed a 2019 tax return (that’s the one most people are working on now), the Internal Revenue Service will use the direct deposit information on your 2019 tax return to send your payment to your bank account. If you don’t provide the IRS with your direct deposit details or you closed that account, then the IRS will mail you a check.
If you have yet to file a 2019 tax return, the IRS will see if you have filed a 2018 tax return and use that information to determine whether you meet the qualifications for a check and to find your bank details or mailing address.
When will the payments arrive?
Treasury Secretary Steven Mnuchin has set a goal of getting the first payments out the door the week of April 6. Many experts say that is an ambitious timetable, and it might get pushed back to later in April. The last time the U.S. government did anything like this, in 2008, the payments went out in batches and it took about eight weeks for the final people to receive their checks.
What’s the cutoff date to file my 2019 tax return and get a check?
You should file ASAP if you can. The IRS has not said when they will start processing the checks, but it is likely to be soon. Filing a 2019 return is especially important for people who need to update their direct deposit information or for people who would not qualify for a check based on their 2018 tax return but would qualify based on their 2019 information.
As a freelancer, this part of the relief plan should be the most exciting for you. Historically ignored by similar types of legislation, freelancers have been included this time around in a big way!
The new legislation does three primary things: extends jobless benefits to previously ineligible groups of workers (like gig workers and freelancers), offers bigger unemployment checks, and increases the duration of those payments.
Who is eligible for unemployment benefits?
The CARES Act extends unemployment insurance to workers who usually aren't eligible for such benefits at the state level—so long as their unemployment is connected to the coronavirus outbreak. Those who will now be eligible include part-time employees, freelancers, independent contractors, gig workers, and the self-employed.
How much are the unemployment benefits worth?
Under the CARES Act, individuals who are eligible for unemployment insurance (now includes part-time employees, freelancers, independent contractors, gig workers, and the self-employed) will receive both
- existing state unemployment benefits (which typically cover a percentage of an unemployed individual’s previous salary)
- an additional $600 a week from the federal government
How long do these unemployment benefits last?
The federal government’s $600 weekly payout to unemployed workers will last for a period of up to four months through July 31. Additionally, the CARES Act will extend state-level unemployment insurance by an additional 13 weeks. For instance, whereas most state unemployment benefits last 26 weeks, the bill extends benefits in those states to 39 weeks. The extended benefits will last through Dec. 31, 2020.
When will the unemployment benefits take effect?
The bill incentivizes states to pay out unemployment benefits as early as possible, by having the federal government cover the first week of benefits for states that pay recipients as soon as they become eligible (instead of waiting the customary one-week period before awarding unemployment insurance).
What if I had recently started the job I lost because of coronavirus?
Some good news. Usually you wouldn't qualify for unemployment benefits because of insufficient work history, but the CARES Act effectively waives such work history requirements and allows those workers to receive unemployment benefits if they lost their jobs because of coronavirus.
How do I apply for unemployment?
Generally, you’ll need to file an unemployment claim in the state where you worked. File a claim as soon as possible after becoming unemployed.
Many unemployment offices around the country have closed as a result of rules put in place by state governors, ruling out in-person applications for several Americans. However, you can also apply online or by telephone.
Here’s a resource to help you get started in your particular state.
Self-employed workers and freelancers are eligible for a small business loan under the Paycheck Protection Program. These loans, managed by Small Business Approved private banks, but overseen by the Federal Government, are meant to help small businesses bridge the gap during this difficult time. The total amount is meant to cover 8 weeks of overhead. That 8-week period can be taken anytime between February 15th and June 30th. These loans are capped at a maximum of 4% interest rate and require no personal guarantee. You won’t have to start paying back the loan for 6 months. All or a portion of a loan is eligible to be forgiven (meaning you wouldn’t need to pay it back ever) if it is used to cover payroll, rent or mortgage and/or utility bills. Apply for a loan here. Read the bill here (Section 1102 on page 8).
Extended timeline for taxes
Federal tax returns and extension requests for 2019 and your estimated taxes for Q1 2020 that were originally due on April 15 are now due on July 15. Note that your estimated taxes for Q2 of 2020, are still due on June 15. State taxes ARE NOT included in this extension (although many states are also providing an extension). You should contact your state tax bureau for more information about specifics in your state and visit this page on the IRS website for the most up-to-date details.
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