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Coronavirus Resources & FAQ

With the public health restrictions to curb the spread of coronavirus cases, we know this is a trying time for many small businesses. We're compiling resources for relief and assistance here.

We've started a bank of the most frequently asked questions we're getting from business owners, and have archived the audio files from our Friday conference calls. If you can't find your answers here, please email us your questions.

Last updated 7/9/20

Jump to news on PPP forgiveness window expansion and EIDL program re-opening!
 

Table of Contents:
SBA LOANS
   > jump to PPP
UNEMPLOYMENT
PAID LEAVE & BENEFITS
TAX RELIEF
REOPENING
OTHER TOPICS

 

Our Firm's Actions


To do our part in preventing the spread of coronavirus, The Business Guides' office in Port Townsend temporarily closed to the public on March 23, 2020. This closure was first posted on our Facebook page, which is the place to check for breaking news.

We're continuing to answer phone calls and emails and prepare tax returns during our regular business hours. We will gladly accept your tax data or signed forms in our secure outdoor dropbox, which we check frequently. We're continuing to accommodate our clients with phone meetings and by keeping our staff healthy.

If you have made prior arrangements to visit our office, say to pick up or sign documents, please wear a cloth face covering for your safety and ours.

Here is an archive of our e-newsletters during this crisis:

 

Here is an archive of our Friday conference calls during this crisis, with the most relevant and up-to-date calls BOLDED:

Click the link and the mp4 file should automatically download to your device. Open it in your media player. (You may need to use your video player to listen, although no video was recorded.)

As of 6/12, our weekly calls are currently paused so we may focus on the final days of tax season (July 15th is the new April 15th!). Check our Facebook page for news of upcoming calls.

 

Business Owner FAQ


This webpage is provided for general information and illustration purposes only. Please keep in mind this information is changing rapidly and is based on our current understanding of the programs. It can and likely will change.

Although we will be monitoring and updating this as new information becomes available, please do not solely rely on this for your financial decisions. Nothing contained in this material constitutes tax advice or legal advice. We encourage you to consult your accountant and/or legal counsel for advice specific to your situation.

By accessing links on this page, you will be leaving The Business Guides’ website and entering a website hosted by another party. The Business Guides believes these third-party sites to be reliable, but we cannot guarantee their accuracy. We also encourage you to read and evaluate the privacy and security policies of the site you are entering.

Table of Contents:
SBA LOANS
UNEMPLOYMENT
PAID LEAVE & BENEFITS
TAX RELIEF
REOPENING
OTHER TOPICS

 

SBA LOANS
 

6/15/20 Breaking News! The SBA reopened the EIDL program application portal today to small businesses with under 500 employees. Previously, applications were only being accepted from agricultural businesses. APPLICATION PAGE.

6/5/20 Breaking News! A bill to expand the PPP loan forgiveness window from 8 weeks to 24 weeks was signed into law this morning. It includes other more generous rules for how small businesses can spend their PPP loan funds and still have them forgiven. SHORT SUMMARY & LONGER SUMMARY on Forbes. See related FAQs below.


Q:  Who is currently eligible to apply for the SBA's Economic Injury Disaster Loan (EIDL) program, which includes an advance of up to $10,000 that does not have to be repaid?

A:  As of June 15th, the program has reopened to all small businesses (with under 500 employees) that are experiencing economic impacts due to COVID-19. For the two months prior, only agricultural business EIDL applications were being accepted. The SBA is continuing to process EIDL Loan and Advance applications that were already in the queue before April 16th on a first come, first-served basis. LEARN MORE on the SBA's EIDL website.

This is an existing loan program that was expanded in March to include coronavirus as a qualifying "disaster." Because of the high demand for the EIDL, the SBA capped the maximum loan amount available to $150,000—plus whatever your business qualifies for as the advance (up to $10,000 based on $1,000 per employee). EIDLs can be approved by the SBA based solely on an applicant’s credit score (not repayment ability) and no tax return is required to apply. Sole proprietors and independent contractors may apply.

EIDL funds can be used for a wide range of business expenses, including payroll, rent, general operating expenses, and accounts payable. They can be used for fixed debt payments, but they cannot be used to pay off or refinance long-term debt, or for payments to "investor owners" who don't work in the business. Don't use your EIDL loan to take distributions from your company, or pay off a loan to yourself as the owner. Due the the "emergency" nature of these loans, the funds also cannot be used for repairs, capital improvements, or relocating your business. Choice Bank has easy-to-scan lists of eligible and ineligible expenses.

If you already have a PPP loan, we recommend you uncheck the box in your online EIDL application requesting the EIDL advance, as any advance will be subtracted from the forgiveness balance of your PPP loan and you could end up carrying a balance on your PPP loan, even if you qualified for "full forgiveness."


Q:  I applied for an EIDL, received the advance, and now have a loan offer. Do I have to accept the loan? What factors should I consider in deciding to accept it?

A:  You may keep the EIDL advance (which does not have to be repaid or returned) even if you don't accept the loan offer. There is no other "forgiveness" element to the EIDL, unlike the PPP loan.  

EIDLs are 30-year loans and the interest rate is 3.75% for small businesses. EIDLs smaller than $200,000 can be approved without a personal guarantee. EIDLs greater than $25,000 come with significant liens and constraints (see next FAQ).

The first payment is not due for 12 months but interest begins to accrue right away. There are no prepayment penalties, so unspent funds may be "returned" at any time to reduce the loan amount. Create an account at Pay.gov to make your SBA 1201 Borrower Payment.

Calculate the annual interest cost of your offered EIDL by multiplying your loan amount by 0.0375. If you decide to accept the EIDL as a "just in case" loan, that's how much you'll pay for the privilege for the first year.

You have two months to sign loan documents after an offer is made. The loan offer is made by email, and ignoring it is not recommended, even if you don't intend to take the loan. To avoid fraud, sign up for your EIDL portal account to claim and monitor your account, or to formally decline the loan offer.

This 5/20/20 Forbes article  has a good overview of things to consider when accepting an EIDL. It may be helpful if your EIDL application has finally been processed and you're trying to decide whether to accept a loan, even if it's just to keep in your back pocket for the next few months. We can't know what the future will hold, and its presence in your bank account might give you peace of mind.


Q:  How are borrowers constrained when accepting EIDL loans greater than $25,000?

A:  The borrower may be able to choose his/her desired loan amount from a range offered by the SBA. Loans of more than $25,000 come with significant constraints, so think carefully about whether you want to be so constrained for the entire length of your loan. 

Loans of $25,000 and below do not require any collateral; above $25,000, business assets such as inventory and equipment are used as collateral. (No personal assets are considered.) The loan documents state that you can't sell, lease or otherwise transfer any part of the collateral during the entire length of your loan without SBA approval.

Another constraint placed on borrowers with loans of more than $25,000 is the "limits on distribution of assets." Loan documents state that you may not, "without the prior written consent of SBA, make any distribution of Borrower's assets...by way of loan, gift, bonus, or otherwise, to any owner or partner or any of its employees." We have spoken with SBA staff to confirm this includes S-Corp owner distributions and bonuses, along with employee bonuses. However, these are not constrained for the entire length of the loan, but only while you hold unspent EIDL funds. Once you appropriately spend your EIDL funds (and retain documentation of this in case of an audit), you regain your "distribution rights" and can once again take owner distributions and give bonuses.

Some business owners have elected to accept loans of no more than $25,000 to avoid these constraints.


Q:  Can I accept both an EIDL and a PPP loan?

A:  Yes. The government has made it clear that you can have both types of loans as long as they are used for different expenses or “not for the same purpose.” Keep the funds separated and document that you spent the funds from each program on separate expenses. (No double dipping!) With both in hand, the PPP is well suited for payroll expenses and the EIDL can be used for other operating expenses.

If you already have a PPP loan, we recommend you uncheck the box in your online EIDL application requesting the EIDL advance, as any advance you receive will be subtracted from the forgiveness balance of your PPP loan and you could end up carrying a balance on your PPP loan, even if you qualified for "full forgiveness."

If you get an EIDL advance before you apply for a PPP loan, you will either receive a PPP loan that has been adjusted downward by that amount, or the amount forgiven will be reduced by an amount equal to the advance. Bottom line: you can't get the $1,000-per-employee EIDL "grant" and have the PPP loan fully funded and forgiven.


Q:  What is the Paycheck Protection Program (PPP)?

A:  This is an SBA loan for businesses needing funding due to the uncertainty of current economic conditions caused by COVID-19, and it encourages employers to keep employees on payroll or to re-hire them. Small businesses were able to apply starting on April 3rd. Independent contractors and self-employed individuals were able to apply on April 10th. Applications were briefly closed on April 16th when the program ran out of funds, and reopened on April 27th with further appropriations from Congress. The deadline for applications was June 30th. However, a bill is pending that would re-open the program for new applications through Aug. 8th.

On June 5th, the Paycheck Protection Program Flexibility Act (Flexibility Act) was signed into law and complying with the terms of these loans became a lot less onerous and more attractive. (See next FAQ.)

The loan amount can be up to 2.5 times your average monthly payroll costs, and can be fully forgiven if you spend it appropriately during the 24 weeks following your loan date. (This period was originally eight weeks, but has been expanded to 24 weeks. Borrowers with loans taken before June 5th can still choose the eight-week period if they wish.) The interest rate is 1%, with all payments of principal, interest and fees deferred until the SBA determines your loan forgiveness amount (and therefore the amount of your loan.) 

You apply not with the SBA, but with a qualified bank or approved lender. Many banks limited applications to clients who do their business banking with them. Some fintech lenders accepted applications. Here is one list of non-traditional lenders.  


Q:  What changed as a result of the Paycheck Protection Program Flexibility Act signed into law on June 5th?

A:  In addition to expanding the loan forgiveness period from 8 weeks to 24 weeks, the Flexibility Act made these key changes to the PPP Program (source: Forbes article, 6/17/20):

  • For loans made after June 5th, it extended the maturity date of the loan from two years to five years. The maturity date can be extended for loans made before June 5th if the borrower and lender mutually agree. The interest rate remains at 1%, with payments deferred until the SBA determines your loan forgiveness amount.
  • The Act reduced the amount that you needed to spend on payroll in order to obtain forgiveness from 75% to 60%. Originally, the Act made it sound like if you didn’t get to 60% in payroll expenses, you didn’t get any forgiveness. However, it has been clarified that even if you don't get to 60% in payroll expenses you can still obtain partial forgiveness. 
  • The Act extended the date to replace full-time equivalent employees (FTEs) and restore salaries from June 30, 2020 until December 31, 2020. It also allowed relief for those businesses that have a loss of FTEs because of COVID-19 related restrictions that prevent the same level of business activity. This is a significant help to those businesses who still have not been able to fully reopen because of stay-at-home restrictions.


On June 16th the SBA released its new forgiveness application (with separate instructions) which is only 5 pages long and much more straightforward than the first (now defunct) one. Work through Schedule A to see how the new FTE rules affect your business. There is a shorter 3-page EZ version" (with separate instructions) that applies to borrowers that:

  • Are self-employed and have no employees; OR
  • Did not reduce the salaries or wages of their employees by more than 25%, and did not reduce the number or hours of their employees; OR
  • Experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25%.


The SBA's new guidance on these changes is interpreted in this 6/17 Forbes article.
 

Q:  What expenses are forgivable under the Paycheck Protection Program (PPP)?

A:  Managing a PPP loan for maximum forgiveness was the topic of our 5/1 conference call. We gave updated guidance in our 5/22 call, then broke the news of the forgiveness expansion act on our 6/5 call

The forgiveness rules are complex, and have changed over time, with the most recent changes coming in the Paycheck Protection Program Flexibility Act signed into law on June 5th. The SBA's official forgiveness application and instructions (along with the EZ form and instructions) were released on June 16th and are your most current source of detailed information on how the SBA will calculate your forgivable loan amount, and the documentation you are required to submit. FIND THEM HERE.

Forgivable expenses are: payroll costs, mortgage interest, rent, utilities (payments for a service for the distribution of electricity, gas, water or transportation), and group health insurance premiums. Only the state and local payroll taxes (not federal taxes) assessed on employee compensation and paid by the employer are eligible for forgiveness.

Although payroll costs for employees are more generously expanded for the new 24-week covered period, forgivable owner compensation under the new rules is calculated thus: for all owner-employees, self-employed individuals, or general partners utilizing the new 24-week period, you can pay yourself 2.5 months’ worth of your 2019 compensation up to a max of $20,833 (the 2.5-month equivalent of $100,000 per year). For an 8-week covered period, this amount is capped at 8/52 of 2019 compensation (up to $15,385). 

What's the definition of "2019 compensation"? Sole proprietors use 2019 net profit (Sched C, line 31). It's more complicated for S-Corp owners, but in general it's your 2019 W-2 wages plus health insurance premiums and retirement contributions paid by the corporation. It does not include 2019 owner distributions. The math is simple: take this 2019 amount, divide by 12 and multiply by 2.5. That's how much you can pay yourself out of your PPP loan funds and have it be considered for forgiveness.


Q:  How do I apply for forgiveness of my Paycheck Protection Program loan?

A:  Based on our conversations with local lenders, we understand that lenders will reach out to you towards the end of your 8- or 24-week loan period. If you received your loan before June 5th, we understand you as the borrower can tell your lender whether you'd prefer to apply for forgiveness under the original 8-week window, or the more expansive 24-week window.

You'll complete the SBA's forgiveness application online, and it should do all the calculations for you, but you'll need all the accurate data to enter. The lender will review your documentation and make a recommendation on the forgiveable amount to the SBA, but it's the SBA that makes the ultimate decision. Your lender must make a decision on your application for forgiveness within 60 days.


Q:  How do Paycheck Protection Program loans impact other benefits available via the CARES Act?

A:  Notably, acceptance of a PPP loan makes a business ineligible for the Employee Retention Credit (of up to 50% of up to $10,000 of wages per employee; see this FAQ), while forgiveness of such a loan makes a business ineligible for the deferral of payroll taxes (through the end of 2020) that would otherwise be allowed. 

If you get an advance from the EIDL application, you will either receive a PPP loan that has been adjusted downward by that amount, or the amount forgiven will be reduced by an amount equal to the advance. Bottom line: you can't get the $1,000-per-employee EIDL grant and have the PPP loan fully funded and forgiven.

It’s not clear how PPP or EIDL funds affect your ability to receive Pandemic Unemployment Assistance (PUA), per this Forbes article. The only guidance that we’ve received from the Treasury states “you should be aware that participation in the PPP may affect your eligibility for state administered unemployment compensation or unemployment assistance programs, including the programs authorized by Title II, Subtitle A of the CARES Act, or CARES Act Employee Retention Credits.” It's best to avoid double dipping. In most states, you do have to certify your income every two weeks. If you are using PPP or EIDL funds for payroll, you should let them know. 


Q:  Are there any non-SBA loan options?

A:  The decision to take on debt in an emergency situation is one that we don't advise on lightly. That said, the SBA loans have attractively low interest rates, repayment terms, and "free money" options. You can always apply to your bank for a regular business loan (if they're not swamped processing PPP applications). If you have home equity, you may be able to use a line of credit (HELOC) to finance your business. We have seen local credit unions offering HELOCs as with rates as low as 2%. Check with your mortgage lender.

Here in Jefferson County, the Local Investing Opportunities Network (LION) helps businesses connect with individuals willing to loan money, with loan terms to be agreed upon by both parties. These terms can sometimes be very favorable -- especially if the lender is a loyal customer of yours! LION has established a fast-track process for COVID-19 Recovery Loans.

Your business might be better off using a tax credit instead of pursuing a loan. See this FAQ about the new Employee Retention Credit, a payroll tax credit.


Q:  What are some best practices for accounting for my loan funds? And will any portion of my loan be considered taxable income?

A:  If you receive an EIDL or PPP loan, a sound recommendation is to put those funds in a separate bank account to better track how they're spent. If you use QuickBooks or a similar accounting system, you could create a virtual sub-account in your bank accounts to segregate the funds. 

Document, document, document. Keep itemized receipts, and save scanned copies or images in a separate folder on your computer so you can quickly drag and drop them into the lender's online portal when you need to show how loan funds were used.

In your accounting system, both the PPP and EIDL loan funds (not the EIDL advance) would be entered as long-term liabilities. Later on, if part of the PPP loan is forgiven, you can use a journal entry to move the forgiven amount from the liability account to an "Other Income" account. EIDL advance funds should be booked directly to "Other Income".  

In general, receipt of and payment of loans does not impact your income statement, only the balance sheet. The EIDL loan is a standard loan this way, but EIDL advances are treated as taxable income as this money is a grant, not a loan. Forgiven PPP loan amounts are not technically treated as taxable income, but the current IRS guidance states that the expenses for which you use the PPP funds will not be deductible. If you are our tax client, we'll help you sort this out when we file your 2020 tax returns. 

 

UNEMPLOYMENT
 

Applying for Pandemic Unemployment Assistance, particularly as a self-employed small business owner, was the topic of our 4/24 conference call with a panel that included a human resources specialist and a health insurance broker.
 

Q:  I'm a small business owner whose business is negatively affected by the coronavirus restrictions. Can I get unemployment benefits?

A:  In Washington State, as of April 18th, likely yes! Officers of S-Corps, sole-proprietors, and self-employed workers impacted by COVID-19 may be eligible under the expanded unemployment insurance options funded by the CARES Act. 

Washington State started accepting applications for expanded unemployment benefits (aka Pandemic Unemployment Assistance, or PUA) on April 18, 2020. The process is to first apply for regular benefits through the Employment Security Department (ESD), and when your application is denied (an alert will show up in your eServices account and email inbox), you then can apply for Pandemic Unemployment Assistance. (More info on the process here. Be prepared with the ESD's Eligibility CheckerApplication Checklist, and free webinars.)

Fantastic resource (dated April 2020): 18-page Expanded Pandemic Unemployment Benefits Guide for the self-employed and independent contractors.

Under the old rules, most small business owners are generally not eligible for unemployment benefits unless their business is fully dissolved. See #41 on the Employment Security Department's website HERE
 

Q:  Do I have to lay off my employees so they can receive unemployment benefits?

A:  Not necessarily. The Employment Security Department has expanded several programs that can help businesses affected by coronavirus, including layoff aversion programs. Emergency rules have been enacted to relieve the burden of temporary layoffs, isolation and quarantine for workers and businesses. These include SharedWork, standby, and partial employment programs. We're mostly encouraging the use of standby status, whereby your staff members will be able to receive the additional $600 weekly benefit provided by the federal CARES Act through the end of July. See ESD’s Employer COVID-19 web page for more information.

The federal CARES Act expands unemployment assistance to those not currently eligible who have been impacted by COVID-19, and provides an additional $600 per week to all unemployment recipients through July 31, 2020. The job search requirement is optional during this crisis. ESD plans to be able to make retroactive payments for both the weekly benefit amount owed as well as the additional $600 per week.

ESD rolled out its expanded unemployment programs on April 18, 2020. We understand benefits can be retroactive to the date the CARES Act became law, which was March 23rd. A worker may not be eligible if any of the following situations apply:

• I quit my job for reasons unrelated to COVID-19. • I quit my job for reasons unrelated to COVID-19. • I quit my job just to collect unemployment benefits. • I am currently receiving vacation leave, sick leave or paid time off. • I can work from home but am choosing not to.

See the Eligibility Checker checklist for who's eligible under the expanded rules.
 

Q:  I provided an offer to return to work to an employee who is refusing to return. What should I do?

A:  [The following is a condensed version of ESD's answer found here.] Individuals generally do not have the option to choose between receiving unemployment benefits or an offer to return to suitable work from their employer. They must have a "good cause reason" not to accept suitable work in order to continue receiving unemployment benefits or Pandemic Unemployment Assistance.

"Good cause reasons" an employee may refuse work and continue to collect unemployment include: • Being sick with COVID-19 or taking care of a household member who is sick with COVID-19. • Needing to stay home to take care of a young child because their school or daycare is closed.

Additionally, if you have substantially changed the job they are coming back to, by significantly cutting their pay or moving the job location a significant distance away, they may refuse that work and continue to collect benefits.

When an employee files a new or reopened unemployment benefit claim, you will be notified and can dispute the employee’s claim to have been laid off through no fault of their own. 
 

Q:  How can I help prevent unemployment benefits fraud?

A:  Our state has seen a huge spike in fraudulent claims, and employers are being asked to help. Open any letters that arrive from Employment Security Department via postal mail, and verify that the information is accurate. Employees can use an online portal to report fraudulent claims made in their own name, or employers can do this on behalf of their affected employees on this page. Victims will not have to repay the money and will still be able to apply for unemployment benefits it they need to. LEARN MORE.
 

Q:  Can I get relief of benefit charges if I need to temporarily lay off employees due to a slowdown of business which is not directly linked to COVID-19?

A:  This applies to unemployment benefits that were paid to your former employees. For most employers, the more benefits charged against an account, the higher the tax rate goes. ESD's website states: "Employers who put their employees on standby [during coronavirus] have an opportunity for some relief. The Washington State legislature approved $25 million for employers who apply for relief by 9/30/2020. This money will be used to buy down some benefit charges incurred while employees were on standby." Employers must send a written request for relief of benefit charges.

If you use the SharedWork program, the CARES Act covers 100% of the costs so it won’t impact your experience rating.

 

PAID LEAVE & BENEFITS


Q:  Can I take advantage of the new refundable payroll tax credits to reimburse me for the cost of providing coronavirus-related leave to my employees, per the Families First Coronavirus Response Act (FFCRA), signed into law on March 18, 2020?

A:  This act provides funding for businesses with fewer than 500 employees to provide their employees with paid leave starting April 1st, either for the employee's own health needs or to care for family members. This is also known as the Emergency Paid Sick Leave Act (EPSLA). We read the intent as mandating paid sick leave so that sick employees or those with sick family members do not continue to come to work and risk infecting others. It does not appear to apply to employees following a state-mandated stay-at-home order, although employees staying at home with children due to COVID-19-related school and childcare closures may be eligible. The U.S. Dept of Labor's extensive FAQ states that the FFCRA’s paid leave provisions are effective on April 1, 2020, and apply to leave taken between April 1, 2020, and December 31, 2020. 

Reimbursement will be an immediate dollar-for-dollar tax offset against payroll taxes. These taxes include withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees. If there are not sufficient payroll taxes to cover the cost of qualified sick and child care leave paid, employers will be able file a request for an accelerated payment from the IRS. Self-employed individuals have access to equivalent amounts of child care leave and sick leave credits; these credits will be claimed on their income tax return and will reduce estimated tax payments.

According to the Dept. of Labor's webpage on FFCRA, small businesses with fewer than 50 employees may qualify for exemption from the requirement to provide leave due to school closings or child care unavailability if the leave requirements would jeopardize the viability of the business as a going concern. Here is a good FAQ on the Act.


Q:  What should I do about employee benefits, like health insurance, while my employees are on standby status?

A:  Don't try to figure this out on your own. Employers with questions about eligibility and maintaining insurance coverage while employees are on standby should reach out to their broker for guidance. Our colleagues at Kristin Manwaring Insurance say they are looking at each employer’s insurance contract with their carrier and/or health insurance association/trust for guidance specific to that group.
 

Q:  What if I don't have, or if I lose, health insurance coverage as a result of COVID-19?

A:  In March, the Washington Health Benefit Exchange announced a limited-time special enrollment period for qualified individuals who were currently without insurance. This allowed uninsured individuals until May 8th to enroll in health insurance coverage through Washington Healthplanfinder for a coverage start date of June 1, 2020. This COVID-19 special enrollment opportunity has now closed.

If you have a change of income, free or low-cost Apple Health is available year-round, and Special Enrollment is available if you have certain life changes, like losing job-based coverage. LEARN MORE.

 

TAX RELIEF
 

Q:  I haven't received my refund yet, and it's been more than 3 weeks since my return was e-filed. What should I do?

A:  First, use the "Where's My Refund" tracker (see blue button on the IRS's Refund page). The IRS issues most refunds in less than 21 days, although some require additional time. We have heard from several business owners recently that their 2019 refunds have not arrived after many more weeks of waiting, so you're not alone. On its Refund page, the IRS indicates you should only call to check on your refund if it has been:

•  21 days or more since you e-filed (which is the default here at The Business Guides),
•  6 weeks or more since you mailed your return, or when
•  the "Where's My Refund" tracker (see blue button on the Refund page) tells you to contact the IRS.
 

Q:  What tax relief can I get as a small business owner?

A:  The IRS has moved both the due date for returns and the deadline for payment of 2019 federal income taxes forward three months, to July 15th. No penalties or interest will be applied until July 16, 2020.
~ If you make quarterly estimated payments, both your first quarter federal income tax payment for 2020 (previously due April 15th) and your second quarter payment (previously due June 15th) have been delayed until July 15th.
~ Employers can defer paying the employer portion of certain payroll taxes through the end of 2020, with all 2020 deferred amounts due in two equal installments, one at the end of 2021, the other at the end of 2022. NOTE: PPP loan forgiveness originally disqualified a business for this relief, but this was changed in the new PPP rules enacted 6/5/20. Learn more in this GBQ article.
~ For state excise taxes, Washington's Department of Revenue has enacted special considerations. Businesses may request a one-time extension for paying their excise tax prior to the due date. All businesses are asked to still file their returns by their original due date, even if they are unable to pay. If you miss the deadline for requesting an extension, request a penalty waiver when filing your return, along with an explanation of how COVID-19 Pandemic caused the delay.
 

Q:  I've heard about a payroll tax break called the Employee Retention Credit. How do you qualify for that?

A:  This relief is a refundable tax credit specifically targeted to businesses whose operations have been partially or fully suspended due to government-required suspension of operations, as has occurred here in Washington State. If your business is shut down by a state order, or the state order prevents you from operating at normal capacity, you automatically qualify for the credit. NOTE: this credit is not available to you if you take out a PPP loan.

If you're still operating normally, to qualify you must have a quarter with less than 50% of revenue (not profit) from the same quarter in 2019. It is a fully refundable credit against an employer’s payroll taxes for wages paid from March 12, 2020, through December 31, 2020. (Self-employment taxes are NOT eligible for this credit (in neither their entirety nor for just the ‘employer’ portion of the tax).) The amount of the credit is equal to 50% of wages paid to employees, up to a maximum of $10,000 of wages per employee. Thus, the maximum credit that may be attributable to any single employee is capped at 50% x $10,000 = $5,000. Learn more in this excellent Team Kitces article and this GBQ article.

This credit will be available until the end of 2020, or when revenue is more than 80% of the same quarter in 2019. For many local businesses, Q1 of 2020 may not meet this requirement. Be tracking your numbers for Q2! We see this as a viable credit for businesses with a large number of employees, like restaurants.


Q:  How do I claim the refundable portion of the Credit for Qualified Sick and Family Leave Wages, or the refundable portion of Employee Retention Credit?

A:  You claim these on your Form 941 for the quarter in which you are eligible. You can file Form 7200 with the IRS to request an advance on the credit, if the anticipated credit is greater than the required federal tax deposit.

From the April 2020 revised instructions for Form 941: Employers are eligible to file Form 7200 for the quarter if they paid qualified sick leave wages, qualified family leave wages, and/or qualified wages for the employee retention credit and the amount of employment tax deposits they retained wasn’t sufficient to cover the cost of qualified sick and family leave wages and the employee retention credit.

[Regarding the timing:] Form 7200 may be filed for a quarter up to the earlier of the end of the month after the end of each quarter or filing of Form 941 for the quarter. However, if you file Form 7200 after the end of the quarter, it's possible that it may not be processed prior to the processing of the filed
Form 941. Advance payment requests on Form 7200 for a quarter won't be paid after your Form 941 is processed for that quarter. When the IRS processes Form 941, we will correct the amount reported on line 13f to match the amount of advance payments issued or contact you to reconcile the difference before we finish processing Form 941.
 

Q:  I need to file Form 941 for Quarter 2 (April 1 – June 30, 2020) reporting my payroll taxes. What's new for this quarter?

A:  Q2's Form 941 is due July 31, 2020. The IRS issued revised instructions in April 2020 just for Q2. These detail the significant changes that have been made to Form 941 to allow for the reporting of new employment tax credits and other tax relief related to COVID-19. Learn more about the Emergency Paid Sick Leave Act (EPSLA) as enacted under the Families First Coronavirus Response Act (FFCRA) in the above section. Learn more about the Employee Retention Credit in this section, above. 
 

Q:  What if I didn't receive my Economic Impact Payment of up to $1,200 for individuals and an additional $500 per child under age 17?

A:  These non-taxable rebates, aka stimulus checks, began being paid out in mid-April, and we understand the vast majority have now been delivered. They are actually a new refundable tax credit for taxpayers’ 2020 taxes, based on your 2019 return if recently filed; otherwise, on your 2018 return. (The IRS has not provided guidance on when a 2019 return had to be filed to supersede a 2018 return.)

If you did not receive the full amount of $1,200 per adult, your adjusted gross income may fall in the phase-out windows of $75-99,000 for single filers, $112,500-136,500 for heads of household, and $150-198,000 for joint filers.

If you did not receive the full amount to which you believe you are entitled, you will be able to claim the additional amount when you file your 2020 tax return. Keep the Notice 1444, "Your Economic Impact Payment," which you will receive regarding your Economic Stimulus Payment with your records. This notice will be mailed to each recipient’s last known address within a few weeks after the Payment is made. When you file your 2020 tax return next year, you can refer to Notice 1444 and claim additional credits on your 2020 tax return if you are eligible for them. 

Officials say that individuals receiving Social Security benefits will receive their payment in the same account they receive their Social Security benefits. Payments will also be sent to the account into which a taxpayer’s 2018/2019 refund was deposited. Other payments will be mailed as a check or debit card to the last known address on file.

The IRS set up a website (Get My Payment) where you can check on the status of your payment. Unfortunately, we don't have a back door to the IRS portal and cannot enter or update direct deposit banking information on your behalf. There is a thorough FAQ at the IRS's Economic Impact Payment Information Center.
 

Q:  What other tax-related changes should I be aware of?

A:  The deadline for IRA contributions for 2019 has been moved to July 15th to sync with the tax filing deadline. This includes contributions to SEP IRAs.
~ Required Minimum Distributions (RMDs) from IRAs for those over age 70-1/2 are suspended for 2020. RMDs already taken in 2020 may be rolled over (but not those from inherited Beneficiary IRAs).
~ A new "Qualified Charitable Contribution" made to a 501(c)(3) charity and limited to $300 is available for those who do not itemize and who claim the standard deduction. So keep records of your nonprofit donations!
The IRS is suspending installment payments on past taxes that are due 4/1-7/15/20. (By law, interest will continue to accrue on any unpaid balances.)
~ Congress approved some relief for Tax Year 2020 that we'll be keeping abreast of on your behalf.

 

REOPENING


Q:  What are the rules on customers wearing masks in my business?

A:  In accordance with the "masking directive" issued by our county's public health officer on May 28th, our office now has signage on both doors reminding drop-in visitors of the requirement to wear cloth face coverings inside our office.

The pertinent directive for businesses in Jefferson County is not to permit any non-employee to enter buildings owned or operated by the business without wearing a cloth covering their mouth and nostrils. Signage must be placed at all entry points. There are exceptions for eateries, and curbside pick-up is encouraged. Click to read the explanation and the directive.
 

Q:  Personal protective equipment (PPE) seems to be in short supply. How can find masks, hand sanitizer, etc., so I can reopen my business?

A:  Jefferson County Emergency Management (DEM) has published a list of local suppliers of masks, hand cleaner and other PPE and sanitizing supplies needed to safely operate businesses in Jefferson County. Visit the COVID-19 PPE and Supplies Locator to find what you need. Be aware that while these local businesses are doing their best to stock essential items for sale, supplies can be hard to source at present. The locator will be updated and will remain available until finding PPE is no longer challenging.


Q:  Where can I get the official reopening guidance for businesses and workers?

A:  The rules are different in every state, and may vary by locality. In Washington State, we are operating under the Governor's "Safe Start" reopening plan, with four phases announced on May 4th. Businesses are not authorized to open until that business is able to meet all safety criteria. If safety criteria for an industry has not yet been issued by the governor’s office, those businesses must wait until that guidance is issued. Check here for the latest guidance.

 

OTHER TOPICS


Q:  How do I receive a $500 grant through GoFundMe’s Small Business Relief Fund?

A:  GoFundMe has started a Small Business Relief Fund to help small business owners receive the financial support they need to keep their businesses thriving throughout the coronavirus pandemic. Qualifying businesses that have raised at least $500 on a GoFundMe coronavirus-era campaign can receive a matching $500 grant. To find out if you’re eligible and learn about the process, read the Small Business Initiative FAQs.
 

Q:  How do I apply for a Working Washington Small Business Emergency Grant?

A:  As of late April, this program is now closed.
 

Q: Where can I get help navigating the technology behind telecommuting, for myself and my employees?

A: This was the topic of our 5/15 Friday conference call, with special guest Ramon Dailey of Dailey Computer Consulting. He shared tips on how to keep your business's information secure when it leaves your office, such as owning the equipment your employees take home to work on, requiring Multi-Factor Authentication on applications at every log-in, and switching to a paid email service and activating all the security settings (free accounts have security issues). Have a strong technology use policy reviewed by your lawyer and signed by all staff. Consider purchasing or cost-sharing mobile phones and Internet service with your employees, if they are required to have them to work from home. Find more work-from-home tips on Dailey Computer's homepage.


Q:  How can I help our local business community?

A:  Let The Business Guides know if you are not in a hurry to file your tax return, so we may prioritize filing those returns needed for loan applications and Pandemic Unemployment Assistance to boost the cash flow of your fellow business owners. 

In addition:
~ Buy gift cards from your fellow merchants.
~ Order takeout and enjoy it in the comfort of your home.|
~ Sign the JeffcoCARES (#JeffcoCares) Business Community Pledge, either as a business owner or a customer/shopper/resident, to keep the focus on community wellness.
~ Donate to Jefferson Community Foundation's Covid-19 Emergency Response General Fund HERE.


What other questions do you have? Email us.

 

Small Business Relief & Resources


By accessing links on this page, you will be leaving The Business Guides’ website and entering a website hosted by another party. The Business Guides believes these third-party sites to be reliable, but we cannot guarantee their accuracy. We also encourage you to read and evaluate the privacy and security policies of the site you are entering.
 

LION COVID-19 Recovery Loan Program - The Local Investing Opportunities Network has established a new loan program for Jefferson County businesses and non-profits dealing with the recovery from coronavirus restrictions. The loan application and instructions are downloadable from the the LION website. A fast track process has been established to handle the applications. LEARN MORE.

U.S. Small Business Administration (SBA) - Information on the Economic Injury Disaster Loan program to help small businesses overcome the temporary loss of revenue from coronavirus. LEARN MORE.

Washington Paid Family & Medical Leave - Clear FAQ on coronavirus quarantine versus illness, including distinctions between using paid sick leave or Paid Family and Medical Leave benefits. LEARN MORE.

Washington State's Employment Security Department - The place to apply for expanded unemployment benefits. Describes the emergency rules enacted to relieve the burden of temporary layoffs, isolation and quarantine for workers and businesses. Learn about placing your employees on "standby" or "partial employment" status, or in the SharedWork program. LEARN MORE.

Economic Development Council (EDC) Team Jefferson - Has a clear and concise page of resources for small businesses and individuals, with a local focus. LEARN MORE.

Washington State's Small Business Liaison Team (SBLT) - Has a comprehensive and annotated listing of statewide and some national resources for small businesses facing coronavirus impacts. LEARN MORE.

Washington State’s Official COVID-19 Site - Links to official information from a wide range of trusted sources, including government and community services. This Business & Workers page archives webinars on economic resiliency and recovery. LEARN MORE.

Washington State Department of Commerce - Crisis planning tools and resources, including a helpful Back-to-Work Planner for the steps to take when your business is allowed to re-open. LEARN MORE.

New Facebook group, Jefferson County Business Community SupportVISIT GROUP.