Operating a business during a global health pandemic such as COVID-19 is difficult. There’s no best-practice manual because the challenges we’re facing are as novel as the virus itself. And while great support is being made available at the local, state, and national levels, developments emerge so frequently, it’s tough to stay on top of the right financial relief for your affected company.
Here are the recent headlines that could best assist your business.
The Federal and state tax deadlines have been extended. All individuals and business entities now have until July 15, 2020 to file tax returns and make payments. This was announced by the State of California Franchise Tax Board on March 18 and the Internal Revenue Service on March 21.
There are new tax benefits available through the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
- Payroll tax – If your business has been closed due to the coronavirus or experienced a 50% decrease in revenue compared with this time last year, you’re eligible for a 50% refundable payroll tax credit on wages up to $10,000.
- Social security – You may defer employer-side social security payroll tax payments until Jan. 1, 2021 with half owed at year-end 2021 and the remaining half at year-end 2022. This allows you to spread payroll costs out until the economy (hopefully) rebounds.
- Net operating losses – You can use net operating losses from 2018, 2019, or 2020 and carry them back five years to offset taxable income.
- Net interest – The net interest deduction has been increased from 30% of EBITDA to 50% in order to enhance liquidity if you must take on more debt to stay afloat.
There are new resources to help with business cash flow.
- Federal disaster loans – The U.S. Small Business Administration provides low-interest loans to help companies recover from physical or economic damage from a declared disaster. Apply for assistance here.
- Paycheck Protection Program – A forgivable loan program is available through SBA-approved lenders to help businesses with fewer than 500 employees maintain payroll during the crisis. Check out these frequently asked questions about the program.
- Small business loans – The limit on express loans through the SBA has been increased from $350,000 to $1 million for the rest of 2020, and EIDL loans have removed requirements for loans below $200,000 made in response to COVID-19. Specifically, the CARES Act eliminated the need for borrowers to make personal guarantees on the loan, demonstrate that the business has operated for one year, and that credit was sought elsewhere but unable to be obtained.
- Emergency grant payments – If your business needs cash NOW, you can request an advance on your loan of up to $10,000 that will be paid within three days. Under the CARES Act, you won’t be required to repay advance payments even if your EIDL loan is denied. However, the payment must be used for maintaining payroll, providing sick leave, paying rent, or other immediate operating expenses.
- Learn more from the U.S. Chamber of Commerce about coronavirus-related financial support available for businesses.
Under the Families First Coronavirus Response Act, you must provide paid sick leave for employees. If you have fewer than 500 employees, you are required to provide up to two weeks (80 hours) of paid sick leave at their regular compensation rate (up to $511 per day) if they become unable to work due to quarantine, isolation, or coronavirus symptoms. Businesses can collect a 100% refundable tax credit on qualified emergency sick leave payments made between April 1, 2020 and December 31, 2020. The credit is allowed against the employer’s share of Social Security and Medicare tax for all employees. Additionally, you must post this notice to employees from the Department of Labor.
You must offer family and medical leave to employees caring for affected loved ones. Under the Families First Coronavirus Response Act, businesses with fewer than 500 employees must offer 12 weeks of job-protected leave to employees who are unable to work from home and must care for someone in quarantine, isolation, experiencing coronavirus symptoms, or at home due to school closures. Employees who have been with the company at least 30 days and work full time must be paid two-thirds of their regular rate for up to 10 weeks. A refundable tax credit equal to 100% of qualified family leave (up to $200 per day) is available for businesses. Check out these frequently asked questions about the topic from the California Labor Commissioner’s Office.
Here's a helpful guide from the U.S. Senate Committee that we encourage you to read.
As difficult as it is to run a business right now, we know the COVID-19 pandemic will not last forever. Today’s circumstances are temporary, and at some point, life will return to “normal” – although “normal” might look a bit different. Scientists, researchers, and healthcare professionals need time to find a vaccine and treatment for the disease. These measures can buy your business time to keep the doors open while a cure is found.