Tax expert, economist explain key provisions of the stimulus package
The new CARES Act signed into law by President Trump after Congress gave final approval is designed to help individuals and businesses, and a local tax expert and a Tulane University economist discussed how it will affect locals and people across the country.
Richard Tullier is a veteran certified public accountant with Wegmann Dazet & Company. He said receiving the money will not cause recipients problems at tax time.
"There’s specifically a provision in the law that requires that the amount not be taxable, it is strictly free money for lack of a better way to put it,” Tullier said. “If someone has filed their 2019 return already, they will get a check based on their adjusted gross income. If they have not, it’ll go to 2018.”
And retirees and others receiving Social Security checks will benefit as well.
“The IRS will get the information from the Social Security Administration for folks who are on Social Security to be able to find out if they meet the test and anyone that’s receiving only Social Security will meet the test, so they would get the full $1,200 per adult,” Tullier said.
For people who have been unemployed for a while and did not file a tax return last year, they will not automatically get the money, according to Tullier.
"Unless the IRS has records on you for 2018 and 2019, they’re not going to send a check or deposit automatically. Instead, the law provides that they can file a tax return for 2020 even if it’s claiming no income and on that 2020 return which will be due next April they’ll be able to claim a credit for the $1,200 or if they’re a married couple $ 2,400 plus $500 for each child,” Tullier said.
Tulane economist Steven Sheffrin, Ph.D., said the economic package may not have a significant impact on the nation’s economy which has been negatively affected by the virus over the past couple of months.
"I think of this as more of a stabilization package than a stimulus package,” Prof. Sheffrin said.
He said many people will be careful how they use the money they receive from the federal government.
"The problem is that they're not going to be able to essentially, they can spend that income, they could, you know, pay their rent, they could buy food, they could take care of a sundry of expenses but they're not going to go out and buy cars, they're not going to be able to go to restaurants,” Sheffrin stated.
Nor does he think the government-backed SBA loans being made available to businesses will happen overnight.
"The banks certainly are going to require a statement about what your payroll is, what your expenses are and some other information,” Sheffrin stated.
Tullier urges businesses to talk to their bankers and financial advisers as they prepare to take advantage of provisions in the economic package.
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