Economic Relief During the COVID-19 Crisis
The number of confirmed COVID-19 cases in the United States has now surpassed the numbers reported in China and Italy, and cases are continuing to climb. It’s too early to tell what the full economic impact will be, but we know it could be severe.
In light of the COVID-19 crisis and the National State of Emergency in the United States, unemployment is on the rise, and even working employees are facing an uncertain future. In response, several federal agencies have made a series of adjustments to support US citizens and businesses economically during this difficult time.
Here’s what you need to know.
Deferred Deadlines from the IRS
In response to the COVID-19 pandemic, the IRS has rolled out its People First Initiative. The initiative temporarily suspends deadlines and adjusts payment schedules to ease the financial burden on taxpayers. The tax filing due date has been extended three months to July 15, 2020. As part of this deferment, taxpayers (including businesses) who owe money are being granted a penalty and interest-free deadline extension until July 15. The IRS urges taxpayers who expect refunds to file electronically as soon as possible. Refunds are currently being filled within 21 days, which could help offset unemployment for some individuals.
For taxpayers in existing Installment Agreements, payments due between April 1, 2020, and July 15, 2020, have been suspended, and the IRS will not default any Installment Agreements during this period. However, interest will by law continue to accrue during the deferment period. The IRS has also extended deadlines for Offers in Compromise, an agreement between a taxpayer and the IRS that settles the individual's tax liabilities for less than the full amount owed. Taxpayers with pending applications have until July 15, 2020, to provide any additional documentation requested by the IRS, and all payments have been suspended until July 15 (although interest will continue to accrue). Further details can be found here.
Payment Suspension from the FHFA
The Federal Housing Finance Agency (FHFA) is also suspending payments in response to the pandemic. If your mortgage is owned by a Federal Home Loan Bank or government-sponsored entities Fannie Mae or Freddie Mac, then you could be eligible to temporarily delay monthly mortgage payments for up to twelve months. During this time you will not incur late fees or be reported to a credit bureau for delinquency. Foreclosures and evictions will also be suspended until at least May 17, 2020, by Freddie Mac and for 60 days by Fannie Mae.
If your finances have changed significantly due to the pandemic, consider asking your lender for an extension even if your mortgage is privately owned.
Similarly, owners of multifamily properties with mortgages owned by Fannie Mae or Freddie Mac are eligible for mortgage forbearance on the condition that they suspend eviction for renters who cannot pay rent as a result of COVID-19. This suspension program is designed to protect renters who have been laid off, furloughed or otherwise financially impacted by the coronavirus pandemic.
For those in a position to buy or refinance a home, though, now may be the time. Mortgage interest rates are at an all-time low as the Federal Reserve has slashed interest rates to near zero to help contain the economic fallout from the Coronavirus crisis. The federal funds rate affects the cost of borrowing on everything from credit cards to auto loans, making credit more affordable across the board.
Assistance from the SBA
The U.S. Small Business Administration is offering up to $2 million in disaster assistance loans to small businesses and nonprofits impacted by the coronavirus. These loans can be used to cover debts, payroll or accounts payable or any other bills your business is unable to pay due to COVID-19’s economic impact. Interest rates are set at 3.75% for small businesses and 2.75% for nonprofits.
These disaster assistance loans are provided on a case-by-case basis. They are designed to be affordable and offer long-term repayment plans (up to 30 years). Applications for the federally subsidized loans can be submitted online.
Small businesses that already have a business relationship with an SBA Express Lender could qualify for an SBA Express Bridge Loan. The Express Bridge Loan has been expanded to offer assistance to small businesses affected by the coronavirus. These loans provide up to $25,000 in assistance with a quick turnaround. They are designed to hold your small business while waiting for the dispersal of disaster assistance loans.