Are you feeling overwhelmed and confused by the flood of information and the alphabet soup of COVID-19 relief packages?

First there was the EIDL (Economic Injury Disaster Loan Emergency Advance) which was to provide up to $10,000 of economic relief to small businesses that were experiencing temporary financial difficulties due to COVID-19. It was later clarified that the grant amount would be calculated at $1000 per employee up to $10,000. And then they stopped taking applications.

Then there was the PPP (Paycheck Protection Plan) which was to provide loans to small businesses with fewer than 500 employees so they could keep their workforce employed during the crisis. The loans would be forgiven if they kept their employees on board. The PPP ran out of money within a few weeks. Not only that, several large corporations, including the L.A. Lakers ($4.6M), and Ruth’s Chris Steakhouse ($20M), received PPP loans that they are now repaying. Congress approved additional funding for the program last week, and the second glut of applications has begun.

And then there’s the CARES (Coronavirus Aid, Relief, and Economic Security) Act, which expands unemployment benefits and provides benefits to worker who don’t typically qualify, e.g., independent contractors. CARES also provides other benefits, described below.

Now that you have the big picture, how do you know what applies to you and the best way to move forward? Of course, every person’s situation is different, but here are some options.

If you’ve had the misfortune of getting laid off or having your hours reduced, or, as a gig worker, you’ve lost all or a portion of your income, you can apply for unemployment. In addition to the extended length of time you can collect it, you will also receive an extra $450-600 per week.

If you have been affected by COVID-19 either physically or financially, the CARES Act allows you to take money from your qualified retirement account – penalty free – either as a withdrawal or as a loan.

What’s the difference?

A penalty-free withdrawal from your qualified retirement account is available in an aggregate amount of up to $100,000 between now and December 31, 2020 if you have been affected by COVID-19. The amount withdrawn is included in your gross income, which can be reported all in the current year or over 3 years, without penalty. There is no withholding required on a coronavirus-related distribution. Be mindful that you will pay tax on this distribution yearly for 3 years.

The CARES Act also increased the amount of loans that may be made from qualified plans from $50,000 to $100,000 for reasons related to COVID-19. However, you cannot take loans from IRAs or from IRA-based plans such as SEPs, SARSEPs, and SIMPLE IRA plans.

The act also extends the loan repayment period. Any repayments due between March 27, 2020 and December 31, 2020 are delayed for a year. Also, the 5-year repayment requirement is extended to 6 years. This applies even to loans taken out before March 27, 2020. Note that this repayment rule only applies if you are still employed by the same employer.

As we look at one more month, at least, of feeling increasingly bored, confused and anxious, please know that we are here to help. And let your friends and colleagues know that we are “open for business” and welcome new clients to help them through this maze of financial confusion.

Stay safe and be well.