In just over a month’s time the federal government has quilted together a complex patchwork of protection for millions of workers and business owners. Here’s just a portion of the growing highlight reel.
Economic Impact Checks: About 150 million checks from the government will be delivered or deposited soon. For those who qualify based on income, you’ll receive $1,200 plus another $500 for each child under 17.
There is a myth that these payments are only an advance or a loan against your tax refund next year. That is false. If you get a payment, it won’t affect your 2020 tax refund at all. However, if you made too much money in 2018 or 2019 to qualify for an immediate payment, but ultimately qualify based on this year’s income, you will receive your payment as a large tax credit next year.
Enhanced Unemployment Benefits: About 30 million people have already filed for unemployment benefits across the country. The filing process has been frustrating for many. However, it’ll be worth the wait as benefits are paid retroactively and they will be bigger than ever before.
To begin, the maximum regular unemployment benefit in Michigan is about $1,500 per month. This part lasts about 10 months. The federal government added on another flat amount of $2,400 per month. This additional part lasts until the end of July. In my view, there is a high likelihood it will be renewed. Importantly, for the first time, self-employed people who didn’t pay into the unemployment system are also entitled to receive benefits.
Paycheck Protection Program: Many millions of smaller businesses have filed to receive loans to help pay their employees over the next two months. Similar to the frustration felt by those filing for unemployment, this program has been equally cumbersome. The first wave of applications quickly depleted the program’s initial funding. Congress recently replenished it. The verdict is still out if it was enough to meet the demand.
If the loan is used for payroll costs and other qualified expenses, it will be fully or partially forgiven. Otherwise, it’ll just turn into a two-year loan at a very low interest rate. Of course, the loan forgiveness rules are confusing. It’s also important to note, to qualify for this loan you must certify that the money was “necessary” to support your business. The word “necessary” is already subject to a heated debate.
As time passes, we’ll no doubt witness the ramifications of this hastily constructed patchwork of financial support. The post-mortem analysis will be both politically and financially brutal. Until then, however, we should be reminded of Roosevelt’s famous quote, “It’s not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better…the credit belongs to the man who is actually in the arena.”
I certainly do not envy the women and men standing in the arena today.
Jason P. Tank, CFA is both the owner of Front Street Wealth Management, a purely fee-only advisory firm and the founder of the Money Series, a non-profit program committed to providing open-access to financial education, for all. Contact him at (231) 947-3775, by email at Jason@FrontStreet.com and at www.FrontStreet.com