PID 1428


Small Business Resources in Response to COVID-19

Resources for Small Businesses

COVID-19, Summer 2020

We have compiled several resources to help small business owners understand options available during the COVID-19 outbreak.  Disclaimer: We have compiled this information from sources we believe to be reputable. Charts and data presented directly by governmental agencies are used as frequently as possible. We hope that you will use this information as a guide, but continue to consult with your tax, legal and other advisory professionals for how each of these opportunities apply to your situation.

SC Unemployment Insurance Information – Source: dew.sc.gov/covid-hub

** Reminder: Once individuals apply for unemployment benefits and are approved and eligible, they should log in and certify that they are still unemployed, each week by Saturday at midnight. **

 

Paycheck Protection Program (“PPP”) Flexibility Act – June 2020– Source: Elliott Davis, LLC

The PPP Flexibility Act was signed into law to mitigate the challenges associated with the original March 2020 version that was part of the CARES Act, particularly that that it did not allow for enough flexibility with how the borrowed funds were used.  While the cumbersome forgiveness application remains in place, several other items have been changed to help small businesses.

Key features of the PPP Flexibility Act include:

  • The deadline to apply for a PPP loan has been extended to 12/31/2020.
  • The loan term of any unforgiven funds has been extended to 5 years.
  • Borrowers applying for PPP forgiveness can use the payroll tax deferment offered under the CARES Act.
  • Borrowers can use up to 40% of the PPP on eligible non payroll costs, including mortgage interest, rent, and utilities. Previously this was capped at 25%.
  • Originally, the covered period for use of the funds was 8 weeks. It has been extended to the earlier of 24 weeks from loan disbursement or 12/31/20. Borrowers can choose to keep the original 8-week covered period.
  • The forgiveness application is due 10 months after the end of the covered period.
  • The safe harbor date has been extended to 12/31/20 instead of 6/30/20. Borrowers have an additional 6 months to rehire and restore their workforce.

You are eligible if you are:

  • A small business with fewer than 500 employees
  • A small business that otherwise meets the SBA’s size standard
  • A 501(c)(3) with fewer than 500 employees
  • An individual who operates as a sole proprietor
  • An individual who operates as an independent contractor
  • An individual who is self-employed who regularly carries on any trade or business
  • A Tribal business concern that meets the SBA size standard
  • A 501(c)(19) Veterans Organization that meets the SBA size standard

In addition, some special rules may make you eligible:

  • If you are in the accommodation and food services sector (NAICS 72), the 500-employee rule is applied on a per physical location basis
  • If you are operating as a franchise or receive financial assistance from an approved Small Business Investment Company the normal affiliation rules do not apply

REMEMBER: The 500-employee threshold includes all employees: full-time, part-time, and any other status.

 

SBA Economic Injury Disaster Loans

  • Proceeds may be used for working capital for business expenses only including supplies and materials, payroll, debt payments, utility, and other operational costs. Essentially any expense that appeared in the business expenses in their financials in the past 12 months is likely eligible. Anything else such as expanding or renovating a facility or making capital equipment purchases (vehicles or other equipment) is not.
  • No debt consolidation will be allowed. The exception would be temporary or interim loans that were taken out since the crisis started for operational expenses may be refinanced. The business can pay regular monthly debt payments as they become due
  • Non-profits can apply but not churches, agriculture production, gambling, or sin businesses.
  • Timeline: Expected to take less than a week for approval using the scoring system after a business applies directly online (they will use tax return transcripts as well to verify applications). Targeting 30 days to close.
  • 300,000 – 500,000 applications are expected depending on the length of the COVID-19 crisis.
  • Businesses will be required to retain receipts and evidence of what they spent the proceeds on for a period of 3 years and may be subject to SBA Audit to insure only eligible business expenses were paid.
  • Businesses who accept an EIL Disaster Loan will not be eligible to apply for Paycheck Protection Loans.
  • Everyone is encouraged to apply online at https://disasterloan.sba.gov/ela
    • Be aware with peak times the site may be difficult loading. If this happens check back at off peak times such as early EST.

Retirement Plan Relief Source: IRS Retirement Plans FAQs

Most retirement plans that provide a contribution match allow employers to wait until the business tax filing deadline to match contributions.  In these cases, not providing the match each pay cycle could provide some temporarily relief.

Commercial Lender Questions

Many commercial lenders are willing to work with local businesses. Depending on the situation, we have seen that lenders are allowing businesses to switch their current payments to interest-only or even defer any payments for 90 days.  Keep in mind that interest would accrue in that time.

IRS Extends Tax Filing Deadline to July 15th, 2020 IRS News Release

The IRS announced that the April 15 tax filing and payment deadline will be extended to July 15th, 2020.  The due date for estimated tax payments for the first quarter and second quarter of 2020 have also been extended to July 15th, 2020.

Stimulus Plan Delays Payroll Tax Deadline – Source: Deloitte

The Coronavirus Stimulus Plan includes the postponement of payroll taxes for small businesses. This bill allows employers to delay the payment of their 2020 payroll taxes.  50% of the taxes must be paid by the end of 2021, and 100% by the end of 2022.

Families First Coronavirus Response Act

The act amends the Family and Medical Leave Act (FMLA) for employees who:

  1. Work for employers with fewer than 500 employees, and
  2. Have been on the job at least 30 days.

Under the bill, these employees (including those who work under a multiemployer collective agreement and whose employers pay into a multiemployer plan) will have the right to take up to 12 weeks of job-protected leave to:

  • Comply with a requirement or recommendation to quarantine due to exposure or symptoms of COVID-19,
  • Care for an at-risk family member who’s quarantined due to exposure or symptoms of COVID-19, and
  • Care for their children if the children’s school or place of care has been closed, or the childcare provider is unavailable, because of COVID-19.

Although the FMLA generally requires only job-protected leave — not paid leave — the bill mandates paid leave after 14 days at two-thirds of the employee’s usual rate. (The first 14 days are covered under the paid sick leave provisions discussed below).

Paid Sick Leave

The act requires employers with fewer than 500 employees to provide two weeks of paid sick leave, at the employee’s regular rate, to quarantine or seek a diagnosis or preventive care for COVID-19. If the employee must take leave to care for a family member for such purposes, or to care for a child whose school has closed or childcare provider isn’t available, these employees must provide leave paid at two-thirds of the employee’s regular rate. Full-time employees are entitled to 80 hours of paid sick leave, and part-time employees are entitled to the typical number of hours that they work in a typical two-week period.

As with expanded family leave, covered employers can claim an elective refundable 100% tax credit for qualified paid sick leave wages, also against Social Security taxes. But the bill makes a distinction between those wages paid for employee who must self-isolate or obtain a diagnosis and those paid for to employees caring for a family member or child. For the former, the amount of wages considered per employee is capped at $511 per day; for the latter, it’s capped at $200 per day. When calculating, the total number of days  per employee can’t exceed the excess of 10 over the total number of days taken into account for all preceding calendar quarters.

The self-employed are similarly eligible for the refundable credit at differing amounts — 100% for their personal needs and 67% to care for a family member or child. The amount of wages is capped at $511 per day or the average daily self-employment income for the taxable year per day.