The CARES Act - Unemployment Insurance and Rebate Checks

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Cranfill Sumner & Hartzog LLP

On Friday, March 27, 2020, the United States House of Representatives passed the, already Senate-approved, Coronavirus Aid, Relief, and Economic Security Act, or “CARES Act.” This legislation is designed to aid individuals and small businesses as the United States and other parts of the world continue to be impacted by the Coronavirus Pandemic. The CARES Act has several components. In a previous publication, we discussed small business loan programs created by the CARES Act. To access that piece, click here. In this update, we discuss the CARES Act’s provisions related to rebate checks and unemployment benefits.

Rebate Checks

The CARES Act provides direct payments to individuals in the form of advanced tax rebates, which are expected to be issued in the coming weeks. Eligible taxpayers will receive a payment of $2,400 for a joint return and $1,200 for other filing statuses. Taxpayers will also receive $500 per qualifying child. In order to be eligible for this rebate, the individual must have filed taxes in 2019 or 2018, or received Social Security Benefits.

The value of the tax rebate begins to decrease as income rises. Beginning at $75,000 for singles, $112,500 for heads of household, and $150,000 for joint taxpayers, the rebate amount decreases at 5% per dollar of qualified income, or $50 per $1,000 earned. It disappears entirely at $99,000 for single taxpayers with no children and $198,000 for joint taxpayers with no children.

Taxpayers who earned higher incomes in 2020 will have the overpayment associated with their rebates forgiven. This means that a single taxpayer with $150,000 in 2019 income would not receive an advance rebate but would receive the $1,200 credit on their 2020 return if their income for the year fell below the $75,000. Conversely, a single taxpayer with $50,000 in income will receive a $1,200 advance rebate but does not have to pay the rebate back on the 2020 return if that taxpayer makes $150,000 this year.

Payments will be made through direct deposit when possible.

Unemployment

In North Carolina, the current maximum weekly benefit for unemployment insurance is $350 a week, for a maximum of twenty weeks. On March 17, 2020, Governor Cooper issued Executive Order No. 118, waiving numerous unemployment restrictions including the: one-week waiting period; “able to work and available to work requirements”; work search requirements; actively seeking work requirements; and “lack of work” requirement. The Order also specified that workers whose hours are reduced as a result of COVID-19 are eligible for unemployment benefits, even if they are not technically unemployed. This Executive Order was designed to make unemployment benefits more attainable for employees during the Coronavirus Pandemic.

Under the CARES Act, the federal government is going to pay an additional $600 per week on top of North Carolina’s $350 weekly benefit through July 31, 2020. The legislation also creates a temporary “pandemic unemployment assistance” program for independent contractors, the self-employed, and others not otherwise eligible for unemployment insurance. The CARES Act currently limits unemployment eligibility to thirty-nine weeks. I only mention “currently” because the CARES Act specifically notes that there may be future legislation extending this cap.

To apply for unemployment, the individual must file a claim with North Carolina’s Department of Commerce, Division of Employment Security: https://des.nc.gov/apply-unemployment.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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