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  • Haddon B. Libby

COVID-19 Relief Explained

Updated: Apr 2

After two weeks of partisan efforts, the Democrat-controlled Congress and Republican-controlled Senate agreed on a $2 Trillion relief package for American workers, small businesses and other impacted industries like the airlines industry.

Despite an estimated price tag of more than $2 Trillion, it is expected that additional aid will be required in order to keep this prolonged economic shutdown from causing long-term damage to the US economy. As a reminder, the US economy generates $2 Trillion in Gross Domestic Product each month.


Relief for People

An estimated 93% of all Americans will receive $1,200 deposited into their accounts by the middle of April. For couples, this means $2,400. For each child under 17 who you claim on your taxes, you will get another $500. According to Congressman Chuck Shumer’s (D-NY) office, seniors and others who do not file tax returns due to a disability will be able to get a check as well although there was no guidance as of March 30th. Visit irs.gov/coronavirus for updates.

Unemployment benefits are $600 per week higher and 13 weeks longer than normal through the end of June.

If you have a retirement account like a 401k, the maximum that you can borrow is up $50,000 to $100,000. If you don’t believe you will be able to pay the loan back to your retirement account over the next five years, hardship withdrawals will not be subject to a 10% early withdrawal as is normally the case. To withdraw the funds, you will need to prove that your withdrawal is due to the economic fallout created by COVID-19. As monies from a tax-exempt retirement account are usually taxed as income in the year withdrawn, taxes due on COVID-19 related withdrawals will be paid over three years instead one as is normally the case. If you already had an outstanding loan, you can defer those payments for an additional year while extending the remaining term of that loan by one year.

Retirees do not have to take their annual required minimum distribution this year if they do not want to.

People will student debt have their payments suspended until the end of September. Employer student loan repayment programs will exclude $5,250 from your income.

There are also special protections for workers who contract COVID-19 and cannot work as a result.

For those who can give charitably during these times, a special $300 deduction from gross income is part of the legislation.

Separate to this Federal relief, California is offering special assistance to those who are temporarily unemployed or experiencing reduced hours at work. Assistance includes protections like preventing evictions, getting banks to defer mortgage payments and the prevention of service disconnections by utility companies. For more information, visit covid19.ca.gov.

Relief for 1099 Employees and Small Businesses

If you are a 1099 worker, sole proprietorship or small business with fewer than 500 employees, the CARES Act has something to help you. For a relief loan, go to SBA.gov and apply.

The Paycheck Protection Program will be administered by the local bank where you keep your primary deposit account. Applications should be online by Friday, April 3rd. The maximum loan will be for 2.5 times your payroll and healthcare benefits for the previous 12 months. The loan will be forgiven if you pay your employees as required by the terms of the Program. The loan is meant to cover 4 months of payroll where individual salaries may not exceed $100,000/year. Rent or mortgage payments along with utilities will be covered for 2 months. As demand for the program is expected to exceed funding, expect that the loan amount forgiven will equate to employee costs plus 25%. As an example, if you have $100,000 in payroll and benefits per month, the expected amount to be forgiven would be $500,000. As amounts above that would be in the form of a low-cost loan at a borrowing cost of 0.5% per annum.


The SBA also has an emergency loan program for up to $10 million in total. This relief loan which can be forgiven is for 10 years at a rate of 3.75% with no origination fees. While loans will be administered by a local SBA bank, this type of relief loans needs to start at SBA.gov. The application process is all electronic so be prepared to upload a lot of PDF files.


The CARES Act wants workers rehired and will reimburse businesses for it. If the rehired employee has received some other federal assistance during their unemployed period, that employee will have to pay those monies back as part of their 2020 taxes.


The emergency period for calculating lost income begins January 31st, 2020.

Expect additional aid to be coming in the months ahead as the economic wreckage is uncovered and evaluated.

Haddon Libby is the Founder and Managing Partner of Winslow Drake Investment Management. Less than 5% of all firms perform to the Fiduciary Standard of Care as we do. To find out the difference as well as why we won Small Business of the Year by the Cathedral City Chamber of Commerce, email HLibby@WinslowDrake.com.

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