Coronavirus Megathread Update (January, 2021)

Overview

Last March, we posted a megathread with tons of information about Coronavirus-related issues, and in September a second megathread was posted with additional information on updates to payroll tax deferrals, student loan interest waiver, and unemployment. Given the ongoing nature of the pandemic and recent U.S. governmental actions, we are posting a third installment of this megathread. Please keep in mind that politics and political discussions are still not allowed here.

Stimulus Payments (updated Jan 5, 2021)

For the second round of stimulus payments: For non-dependent individuals, you are entitled to $600 if your AGI (Adjusted Gross Income) is below $75,000. For married couples filing jointly, it is $1,200 if your joint AGI is below $150,000. For head-of-household filers, it is $600 if your AGI is below $112,500. Taxpayers with dependent qualifying children will receive $600 per qualifying child (16 or younger, the rules are based on the child tax credit).

As with the first stimulus - If your AGI is above the income threshold of $75,000 or $150,000, your payment will be reduced by 5% of the difference between your AGI and the income threshold. For example, if you are single and without kids, the potential maximum amount of $600 is completely phased out once your income hits $87,000. If you are married with two young children then the maximum payment of $2,400 is completely phased out once your joint income hits $174,000.

The Get My Payment portal has been updated to include information regarding the second stimulus. This is the first place you should check for the status of your stimulus payment. The IRS released a statement about the status you are seeing on the GMP portal for second stimulus payments:

• If there is a deposit date and account information, this is where your payment will be deposited.

• If there is mailing date for a payment, allow 3-4 weeks for your check or debit card to arrive.

• If you're getting Payment Status Not Available, you will have to wait until you file your 2020 tax return to receive the Recovery Rebate Credit.

If you are not eligible based on your 2019 tax return, or are eligible for a larger amount based on your 2020 tax return, you will have to wait until you file in 2021 for the 2020 tax year to receive the owed difference of the Recovery Rebate Credit. Common cases where this applies:

• I never received the first stimulus, even though I believe I was eligible, and still get an error when checking the Get My Payment portal

• I was a dependent in 2019 (and/or 2018 if your 2019 was not yet filed for the first stimulus), or mistakenly indicated that I could be claimed as a dependent, but cannot be claimed as a dependent for 2020 (Note: You don't just decide if you're a dependent or not, verify if you are eligible to be claimed as one as defined by the IRS.)

• I had a child in 2020 and am now eligible for the additional amount for a qualifying dependent

FAQs:

• Q How will I receive my stimulus payment?

• A 2019 tax returns returns are being used to calculate each person's stimulus payment. The bank account information provided on your 2019 tax return, whether that be for a refund deposit or debit of owed payment, will be used for direct deposit of the stimulus.

• Q When will I receive my payment?

• A The deadline for second stimulus payments to be sent is January 15, 2021. After this date, if you have not received the stimulus payment yet, you will have to wait to claim it as the Recovery Rebate Credit on your 2020 tax return.

• Q I closed the bank account that I used for my 2019 return, or I do not recognize the account that the Get My Payment portal says it will be deposited to. How do I get my payment?

• A If the account is now closed or if the account information does not match an account you own, the payment will be returned to the IRS. You will then have to wait until you file your 2020 tax return to receive the Recovery Rebate Credit.

• Q I am eligible for the both the first and second and stimulus based on my 2018 and/or 2019 tax return, but will not be eligible based on my 2020 tax return. Will I need to pay back what I received?

• A No, there was no information provided in the bills requiring payments to be returned if eligibility changes between the 2018/2019 and 2020 tax years. This is also noted in the IRS FAQs.

• Q The Get My Payment portal says the payment was already sent and/or I received Notice 1444 in the mail saying my stimulus was sent, however I never actually received it. What do I do?

• A See the IRS page on Payment Issued but Lost, Stolen, Destroyed or Not Received for guidance on starting a Payment Trace

The IRS has an extensive list of Economic Impact Payment FAQs and a news release regarding the second stimulus with more information

Be aware of potential scams related to stimulus payments or other coronavirus relief packages. CNBC has a helpful article with examples of common stimulus scams.

At this time, a $2,000 stimulus has been proposed, but has not been passed by Congress. If that changes we will update this information to reflect that.

Payroll Tax Deferral

Payroll taxes consist of two related taxes: Social Security (6.2% of wages) and Medicare (1.45% of wages). Both employees and employers pay these taxes (i.e., for every $1 of social security taxes you pay, your employer also pays $1). Only the Social Security portion of payroll taxes may be deferred right now, not Medicare.

The Secretary of the Treasury has been directed to defer the collection of Social Security taxes on those making a gross income of less than $104,000 / year ($4,000 or less per bi-weekly paycheck) starting September 1.

Implementing seems to be optional by employers and many employers have decided to not implement this.

The IRS had issued Notice 2020-65 indicating that taxes deferred must be withheld and paid between January 1, 2021 and April 30, 2021, or interest and penalties will start accruing on May 1, 2021. The window to payback the deferred taxes has been extended under the new stimulus bill to December 31, 2021. Deferred taxes must be paid by January 1, 2022 or interest and penalties will start accruing.

See the previous megathread for FAQs regarding the payroll tax deferral

Coronavirus-Related Distributions from Retirement Plans

Penalty-free withdrawals from retirement accounts for Coronavirus-Related Distributions ended December 30, 2020. If you made one of these withdrawals during 2020, remember that you have three years to pay the income taxes on the withdrawal. The IRS has an article with Coronavirus-related relief for retirement plans and IRAs questions and answers with more info.

Flexible Spending Account (FSA) Rollover

FSA account balances typically do not rollover year-to-year. The second stimulus package allows for FSA balances at the end of 2020 to be rolled over and used in 2021. Any FSA balance remaining at the end of 2021 may also be rolled over and used in 2022.

Unemployment Benefits

Pandemic Unemployment Assistance (PUA) provides benefits to individuals typically not eligible for unemployment insurance, such as independent contractors or gig workers. Under the CARES Act these benefits were set to expire Dec 31, 2020. It has now been extended to March 14, 2021. Please visit your state’s PUA website for more information.

The previous unemployment relief of $300/week from the federal government and $100/week from the state expires Dec 26, 2020 (see the previous megathread for more information and FAQs regarding this executive order from August). Under this new bill, federal unemployment will provide an additional $300/week through March 14, 2021, and the maximum number of weeks that unemployment can be claimed has been increased from 39 weeks to 50 weeks.

If you lost your job or are at risk of losing your job:

Please read the information available in the Job Loss Megathread: unemployment resources, state-specific information, and help

If you have any questions regarding those resources, feel free to ask here, but please be as specific as possible with your current situation and what steps you have taken so far.

Student Loan Interest and Payment Waiver

The CARES Act suspended federally-held student loan payments and interest charges until September 30, 2020. The Executive Order signed in August extended this to December 31, 2020. The new bill has further extended this date to January 31, 2021.

Key points:

• Private student loans are not affected.
• If your loan is federally-held, you do not need to take any action to suspend payments. Your federal student loan servicer will suspend all payments automatically. You do not need to contact your student loan servicer.
• If your loan is not federally-held (i.e., federal student loans held by commercial lenders), do not assume you can pause payments without contacting your servicer. You may want to look into income-driven payment plans.

Read https://myfedloan.org/borrowers/covid/ for more information and updates.

Stock market turbulence

It's very natural to be feel concerned when there's a large drop in the stock market, especially after such a long period of growth, but it's important to keep perspective and avoid making rash decisions.

First, take a deep breath. Market downturns are not uncommon or unusual. Between 1980 and 2017, there were 11 market corrections and 8 bear markets.

Trying to time the market rarely turns out well and most people trying to enter or exit the market based on emotion, gut feelings, and everyone's predictions end up doing far worse than if they had simply continued business as normal. Stick to your plan and stay the course.

To quote Warren Buffett: "to buy or sell on current news is just crazy".

Don't make an emotional decision, don't try to predict where the market is headed in the short run, and make decisions for the long run. You're investing for decades, not trying to predict the Dow Jones or S&P 500 next week, next month, or even next year.

Being financially prepared and practicing sound finances

1. Budget your money and reduce expenses. Fundamental to a sound financial footing is knowing where your money is going. Budgeting helps you see your sources of income less your expenses. You should minimize your expenses to the extent practical.

2. Build an emergency fund. An emergency fund should be a relatively liquid sum of money that you don't touch unless something unexpected comes up. For most people, 3 to 6 months of expenses is good. A larger emergency fund may be warranted if your income is variable or uncertain. If you're in credit card debt, aim for one month of expenses and focus the rest of your money on paying down debt.

3. Don't check out of your finances. Continue following the steps in "How to handle $" as best possible starting at the beginning of the flowchart. If you can't make rent, contact your landlord. If you have trouble paying your mortgage, see below. If there are bills you can't pay, research your options and contact the company. Simply not paying a bill without any communication is almost certainly not your best option.

4. There's more good stuff you should be doing in this video from Bogleheads and the PF wiki.

Most mortgage owners eligible for reduced or suspended payments for up to 12 months under the CARES Act

Key points:

1. The CARES Act covers about 70% of all mortgages in the U.S. (those backed by Fannie and Freddie, FHA, VA, or USDA). Many companies have similar policies for most other types of loans. If you aren't sure what kind of loan you have, ask your servicer.

2. In most cases, you will not owe the missed payments as lump sum. There was a lot of confusion about this. The new guidance says that lump sums are not required for GSE and federal loans.

3. You can't just stop paying your mortgage. Contact your servicer to find out if you are eligible for this or if your servicer has adopted a similar policy.

4. Requesting mortgage relief/deferral will appear on your credit reports and may affect your eligibility for refinancing (but doesn't affect your actual credit score).

5. For more info, the CFPB published step-by-step information about how to request payment relief.

Refinancing

If you're in the market for refinancing your mortgage, it may be worth considering, but if you don't have a healthy emergency fund and extra cash, you may not want to refinance right now due to the up-front costs.

Effective Dec 1, 2020, refinancing mortgages backed by Fannie Mae and Freddie Mac will incur a 0.5% adverse mortgage fee.

Relief for Renters

The Executive Order signed in August required certain federal agencies to take steps to limit foreclosures or evictions. It did not include a list of specific actions or policies.

Following this in September, the CDC ordered Temporary Halt in Residential Evictions To Prevent the Further Spread of COVID-19 that expires December 31, 2020. The new bill extends this order through January 31, 2021.

Read Protection for Renters from the CFPB and visit the NLIHC page for COVID-19 Rental Assistance programs for additional information and resources

Other megathreads

• /r/legaladvice: COVID-19 FAQ
• /r/travel: Coronavirus Megathread Collection
• /r/smallbusiness: EIDL/PPP Megathread

Submitted January 03, 2021 at 11:34PM by PersonalFinanceMods https://ift.tt/3n5Lmpu