As we at Ballast have done throughout the year, we want to continue to give updates on some of the goings-on related to the Coronavirus – especially those with financial effect. In that context, earlier this month, President Trump signed several presidential memoranda and executive orders with the stated goal of providing some economic relief to Americans. Below is a brief summary of some of those memoranda and orders.
Payroll Taxes: Included in one memorandum was a deferral of payroll taxes starting on September 1 and lasting through the end of 2020. This tax deferral applies to those workers whose wages or compensation is less than $4,000 (pre-tax) on a bi-weekly basis. The payroll taxes deferred are the employees’ share of OASDI (Social Security) taxes which amount to 6.2%. This order has also eliminated any penalties and interest that would ordinarily accompany a late payment of taxes. While the order has only deferred these taxes, meaning they have not been forgiven outright, it did call on the Secretary of the Treasury to explore avenues (including legislation) to have these deferred taxes ultimately forgiven.
As it stands today, with nothing further, workers would not have to pay these taxes through the end of the year – meaning more money in their pockets now – but they would have to pay these deferred taxes at some point in the future (again, assuming no forgiveness from Congress). Depending on what happens next, this could end up as either a great help for workers now (end of story), or it could be viewed as a short-term loan with repayment looming in the future.
Student Loans: In March 2020, it was announced that the required repayment of student loans would be suspended for at least 60 days, and that no interest would accrue during that time. Later in March, the CARES Act extended that same student loan relief through September 30, 2020. A memorandum signed earlier this month extends that relief through December 31, 2020. Keep in mind that this still only applies to student loans held by the Department of Education – it does not apply to your student loans if you have refinanced or consolidated them through a private lender.
This continues to provide several opportunities for student loan borrowers. Some ideas include redirecting student loan payments to pay down principal on other debts that continue to accrue interest (i.e., car loan, mortgage, credit card), or towards building a cash emergency fund. Alternatively, this is a good opportunity to continue to pay down your student loan principal so that when the required payments and interest eventually resumes, you have decreased the principal on which interest would accrue.
Homeowners and Renters: Also signed in August was an executive order with a stated goal to “prevent residential evictions and foreclosures resulting from financial hardships caused by COVID-19.” Before the CARES Act was passed, the Secretary of Housing and Urban Development (HUD) issued a moratorium on foreclosures and evictions for all single-family mortgages insured by the Federal Housing Administration. Also prior to the CARES Act, the Federal Housing Finance Agency (FHFA) instructed the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) to suspend foreclosures for at least 60 days – which has since been extended until at least August 31, 2020. The CARES Act itself issued a temporary moratorium on evictions of certain renters.
In an effort to continue economic relief to these homeowners and renters, this executive order directs the Secretary of the Treasury and Secretary of HUD to “identify any and all available Federal funds” that can be used to help renters and homeowners who, because of financial trouble caused by COVID-19, are struggling to pay their monthly rent or mortgage. So, if you are among these homeowners or renters covered by these temporary measures – or if you are a landlord with covered tenants – this order could lead to more economic relief in your future.
As things continue to evolve around these and other law changes that are sure to follow, we will continue to monitor the situation and provide updates. These memoranda and orders, especially those regarding payroll tax and student loans, present planning opportunities that need to be considered from multiple perspectives. Should you have any questions about how these recent changes may affect you or someone you care about, we welcome and encourage you to reach out to our office.
Presidential Memoranda; Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster; Budget & Spending; August 8, 2020; https://www.whitehouse.gov/presidential-actions/memorandum-deferring-payroll-tax-obligations-light-ongoing-covid-19-disaster/.
Presidential Memoranda; Memorandum on Continued Student Loan Payment Relief During the COVID-19 Pandemic; Education; August 8, 2020; https://www.whitehouse.gov/presidential-actions/executive-order-fighting-spread-covid-19-providing-assistance-renters-homeowners/.
Executive Orders; Executive Order on Fighting the Spread of COVID-19 by Providing Assistance to Renters and Homeowners; Economy & Jobs; August 8, 2020; https://www.whitehouse.gov/presidential-actions/memorandum-continued-student-loan-payment-relief-covid-19-pandemic/.