The CARES Act: What Veterinarians Need to Know from a Personal Finance Perspective
On March 27, 2020, the record-breaking $2+ trillion stimulus package (CARES Act- Coronavirus Aid, Relief, and Economic Security Act) was signed into law. This is in addition to the Families First Coronavirus Response Act (FFRCA) that was passed earlier in the month. Here are some of the highlights that will help you, the veterinarian, as you navigate these issues.
(Note: The following information mostly pertains to personal finance, not business finance. Information continues to change at a quick pace, so please check back for any updates!)
Due to so many people experiencing either a drop or a complete stop to their income due to coronavirus, it’s not a surprise that these stimulus checks are highly anticipated. So who will be receiving a stimulus check?
You’ll have to refer to your 2019 tax return (or your 2018 tax return if you have not yet filed).
- If you’re filing single: $1,200 if your AGI (adjusted gross income) was less than $75,000
- If you’re filing married filing jointly: $2,400 if your AGI was less than $150,000
- Each qualifying child: $500
You can find your AGI on line 8b of your 2019 1040 federal tax return
An AGI greater than those numbers start to get phased out of this benefit. You are phased out completely once you reach an AGI of $99,000 (filing single) or $198,000 (married filing jointly).
You will not need to apply to receive a stimulus check. They should be arriving by either direct deposit into your bank account or by check within the next few weeks. So if you happen to be one of the many (estimated 9 out of 10 households) who will be receiving these stimulus checks- congratulations!
However…..PLEASE have a plan for those stimulus checks! As with any unexpected windfall, you should have a good idea of where that money is best put to use. Remember, every dollar has a job, and it’s YOUR job to determine how your money is going to work for YOU. There are only a few major action items you can do with your money: save, invest, spend, or donate. Your pick.
Having a hard time figuring out how to prioritize your money? After ensuring that you have an adequate emergency fund, go ahead and read this blog post about prioritizing paying off debt versus investing.
If you’re a student loan borrower with federal loans, expect another kind of windfall.
1. If you hold federal loans, your payments will be suspended for 6 months, until September 30, 2020. That’s right. You get a 6 month break from paying your student loans.
2. Interest accrual will also be suspended for that time period.
3. In addition, these payments WILL count towards your forgiveness timetable. So if you’re on track for forgiveness (IBR, PAYE, REPAYE, applying for PSLF forgiveness), then your eventual forgiveness date will remain the same.
Loans that are NOT included are as follows: commercially held FFEL loans, Perkins loans, Health Professions Student Loans.
From your end, you won’t need to do anything in order to suspend your payments. This should be happening automatically.
However, as suggested by a Richer Life Facebook group member, I think it’s an excellent idea to get a snapshot of your loans right now. I would personally print out a paper copy of your last loan statement and take note of your current balance, principal, and interest. Log into your account frequently in order to ensure that interest isn’t accruing (or that they have credited you any interest accrual since 3/13/2020, since that’s when interest was supposed to stop accruing) and that your auto-debits (if you have it set up that way) have stopped.
In general, just keep really good track of your loans because unfortunately, loan servicers haven’t always been accurate on their end. With this massive change, I wouldn’t be surprised if there are even more mistakes made along the way.
You can find more detailed info regarding the impact of the CARES Act on student loans in this Student Loan Planner blog post and this VIN Foundation blog post.
MY THOUGHTS ABOUT STUDENT LOANS
If you’re on track for forgiveness, then congrats- you’re getting a nice break from your student loan payments!
But here’s my challenge to you….just as I mentioned with the stimulus check, you need to have a SPECIFIC PLAN with that extra cash flow. What are you going to do with it? Make sure you know exactly where that extra money is going to best serve you and your needs.
If you’re NOT on track for forgiveness, but you still hold federal loans that will be suspended….I’m assuming you’re on track to pay it down more quickly. If that’s the case, if you’re still able to afford your payments, go ahead and keep paying off your loans. As interest will not be accruing temporarily, you can use this time to your advantage as more of your payments should be going towards principal.
If your income has taken a hit and you can no longer afford your payments, then use this time to re-think your strategy and see if it still makes sense to try and pay off your loans in full and forgo forgiveness. Luckily, you’ll have a 6-month window to think about this.
For those that have private loans or federal loans that do not qualify…..these perks, unfortunately, do not apply to you. There are federal loans that could potentially be consolidated into Direct Consolidation Loans and qualify via that route, but I would definitely defer this sort of question to the student loan experts that you can find HERE.
As much as I appreciate the help that many borrowers will be getting, this situation underscores the issue that the student loan landscape is complex and the importance of having a solid plan in place so that when changes happen, you’ll be better prepared to pivot if need be. Again, there ARE student loan experts out there if you have a complicated situation and need more individualized support, so don’t forget that options DO exist!
Unemployment payments have been increased $600/week (on top of what you’re eligible for through your state) through July 31, 2020. This applies to those who are out of work due to COVID-19.
These benefits have been expanded to the following groups that may not have qualified for unemployment benefits in the past, such as part-time workers, individual contractors, freelancers/gig-economy workers, and the self-employed. Please refer to this website in order to access your state’s unemployment website.
- The deadline to file and pay taxes (if you owe) has been extended to July 15, 2020.
- This applies to your federal tax return. Your state tax return may have a different due date- please check with your state.
- The deadline to contribute to your 2019 IRA and HSA has been extended to July 15, 2020.
- Charitable deductions: In tax year 2020, charitable contributions up to $300 will count as above the line deductions. This will apply to those who are taking the standard deduction and not itemizing their deductions.
If you still cannot get your tax return done by July 15, you can file for an extension, which at this time is still scheduled for October 15, 2020. But remember, this simply moves the deadline to file; you still need to pay any taxes owed by July 15th or you will be penalized.
If you have not yet filed your 2019 taxes, there may be situations where it’s better to delay filing until closer to the deadline versus right away. Please consult with your tax professional and/or your financial professional when making these decisions.
- For those that are taking required minimum distributions (RMD) from their retirement accounts, such as an IRA or a workplace retirement account, then these RMD’s are no longer required for calendar year 2020.
- Early withdrawals from your retirement account should really be saved as a last resort move, but for those that need to do this due to coronavirus, you are now able to withdraw $100,000 without the usual 10% penalty if you are younger than 59.5. Any income tax owed on this withdrawal can be paid over the next 3 years. You also have the option to “pay back” this withdrawal over the next 3 years.
- You are also allowed to borrow up to $100,000 from your retirement plan if it’s related to COVID-19. Again, try to use this as a last resort, but it’s there if you need it.
Tax planning is especially important during retirement, so check in with a financial professional as to whether it makes sense to suspend your RMD’s and borrow from your retirement plan.
FAMILIES FIRST CORONAVIRUS RESPONSE ACT (FFRCA)
This act highlights two issues that may affect you: Paid sick leave and a temporary expansion of the FMLA (Family and Medical Leave Act). This applies to employers who have fewer than 500 employees, although this act would “exempt employers with fewer than 50 employers if the requirements of this section would place the viability of that business at risk.”
Most privately owned veterinary hospitals would fall under this exemption. Depending on the size of the practice, you can imagine that even if 1 employee were to take an extended leave, it would cause a huge strain on the practice.
If your place of employment qualifies, here are the basics regarding paid sick leave and FMLA:
PAID SICK LEAVE
If you are a full-time employee, you would get 2 weeks (up to 80 hours) of paid sick leave.
If you yourself become sick with COVID-19 or are ordered to stay home due to COVID-19, you can get regular pay up to $511/day of paid sick leave, up to a maximum of $5,110 over 2 weeks.
If you need to stay home to help care for someone who is quarantined or a child that is now staying home due to COVID-19, you can get ⅔ of regular pay up to $200/day of paid sick leave, up to a maximum of $2,000 over 2 weeks.
EMERGENCY FAMILY MEDICAL LEAVE EXPANSION ACT
As many schools and daycares have shut down due to COVID-19, this has left many parents with few options. Some have had to stop working in order to care for their children.
This act allows for 12 weeks of leave for childcare for a full-time employee. The employer is not required to pay for the first 10 days (in which case you can use paid sick leave as outlined above, or accrued sick leave), then you are entitled to ⅔ of regular pay for the remainder of the 12 weeks. The paid leave cannot be any more than $200/day, up to $10,000 total over 12 weeks
You must have been employed for at least 30 days and the leave is due to COVID-related reasons. You can find more information regarding the FFRCA here.
Now switching from the employee to the employer perspective: If you are a small business owner, then there are a slew of other considerations to keep in mind. Veterinary practices, like many other businesses, have had to deal with the impact of coronavirus on many aspects of how they conduct business. You can find a great summary of how this new legislation impacts veterinary small business owners through this AVMA link.
ALso, be sure to check in with your state VMA to see if they have any additional information and resources that are state-specific.
THINGS TO KEEP IN MIND
With loss of income, you may find yourself having a hard time keeping up with your bills. Banks, lenders, credit card companies, utilities providers, your landlord, etc are finding ways to help their customers that are experiencing financial hardship, so make sure that you explore those avenues if you’re having a tough time meeting those financial obligations.
This is also a good time to go through your budget with a fine-toothed comb to see if there is anything you can cut. Remember the importance of understanding your cash flow! Losing income is obviously a huge shift in your cash flow, so do what you can on the expenses side of your cash flow in order to keep your financial health intact.
Now that we have laws put in place to assist individuals and businesses navigate this pandemic, it’s time to take stock of where you are financially and be aware of available resources that can assist you in the near future. Remember, there are literally millions of people that have been affected, so you’re not alone!
How have you personally been affected by COVID-19? Which of these changes apply to you? Please feel free to add any helpful resources!
Leave a Reply