On March 27, an emergency relief bill now known as the CARES Act became law to help bolster the U.S. economy as the country battles the coronavirus. The new law covers a broad cross-section of the economy — including the freelance sector. Of particular note, the relief package gives jobless workers bigger unemployment checks over a longer period of time, including freelancers and the self-employed, who are typically excluded from collecting these benefits.
Here’s what freelancers can expect to receive in terms of financial relief under this new law:
· All self-employed workers, contractors, government employees, individuals seeking part-time work, and workers who quit their job or can’t reach their place of work as a result of COVID-19 are among those eligible for unemployment benefits.
· The law allows individuals to claim unemployment benefits for an extended period of time (up to four months) and waives the typical one-week waiting period to start receiving benefits.
· Weekly unemployment benefit payouts are increased by $600.
· The law revives the “Emergency Unemployment Compensation” program for 13 additional weeks on top of states’ standard programs, meaning that if your state’s usual benefit period for unemployment payments is 26 weeks, you could receive up to 39 weeks with this federally funded extension.
· Federal funds will be distributed to state unemployment agencies, and all benefits will be administered through your state. If you have not yet done so, submit your application to your state's unemployment assistance program now. Each state may require different supporting documentation; find your state and its requirements here.
One-time Stimulus Payment
· On an individual basis, freelancers are eligible to receive a direct cash payment of up to $1,200 for each adult ($2,400 for couples), as well as $500 for each child if they meet the income limit of $75,000. People with no federal tax liability will receive only $600. It is anticipated that checks will be cut April 6.
· The individual checks start to phase out from $75,000 to $99,000 ($150,000 to $198,000 for couples filing jointly) in adjusted gross income based (AGI) on 2019 income tax returns. (Your 2018 returns will be used to calculate your AGI if the more recent information is not available). Ultimately, the package will be “reconciled after the fact” with your 2020 earnings, meaning if you earn more or less this year, you may have to pay back some of the relief money or get a bigger rebate next year.
· The law allows corporations to delay estimated tax payments until October 15, 2020. Self-employed people can also delay payroll taxes.
Disability insurance for freelancers
· In addition, the Department of Education is suspending student loan payments until September 30, 2020 without penalty.
The Paycheck Protection Program May Help Freelance Businesses
Another element of the CARES Act is the Paycheck Protection Program. Under this program, the Small Business Administration (SBA) will distribute $350 billion in small business loans that can be partially forgiven if companies meet certain requirements. The objective of the program is to provide up to eight weeks of cash-flow assistance through 100 percent federally guaranteed loans.
Here are the key points about the Paycheck Protection Program:
· The program is expected to be enacted no later than two weeks from the date the CARES Act was signed into law.
· The program is retroactive to Feb. 15, 2020. This is to help bring workers who may have already been laid off back to work.
· The loans are only available to companies with 500 or fewer employees that were in business on Feb. 15, 2020. This includes freelancers, independent contractors, and sole proprietorships.