We know that you’ve probably already gotten COVID-19 updates from everyone under the sun. As a pandemic, COVID-19 affects nearly everyone under the sun. You’re affected, we’re affected, our loved ones are affected, and things have gotten really intense. But there’s one thing that’s really important to remember in times like these:
We’re all in this together.
We at TL;DR want to help you however we can. We’ve compiled a list of resources, many of them related to tax and accounting, that may help ease some of the tension you likely feel during these hard times.
Tax Deadline Extensions
As you may have already heard, the deadline to file a 1040 tax return has been extended to July 15th, 2020. The deadline for Washington State B&O tax has also been extended for both quarterly and annual filers, and monthly filers can request an extension. In short, annual B&O is due on June 15th instead of April 15th. Q1 B&O is due on June 30th.
If you are a Seattle business that files local B&O quarterly, Q1 and Q2 taxes are “tentatively due on or before” October 31, 2020. Yes, the phrasing confuses us too.
Resources for Your Business
The US Chamber of Commerce has posted a list of resources related to COVID-19. It has links to workplace tips, business guidance, travel health notices, and other resources to help your business weather the storm.
Facebook will be offering a small business grant soon and will begin taking applications “in the coming weeks.”
Business.wa.gov has assembled a list of resources specifically for Washington businesses, including links to Greater Seattle Business Alliance (GSBA) and Business Impact Northwest, organizations meant to focus on traditionally underserved populations such as LGBTQ individuals.
Gusto’s Spreadsheet of Helpfulness
Why reinvent the wheel? Payroll company Gusto (which we use) has assembled a spreadsheet full of resources available to businesses in need of aid. Scroll down towards the bottom to see some Seattle-specific relief options.
The CARE Act, Hot Off the Press
On Friday, March 27th, 2020, President Trump signed the CARE Act. While the individual provisions of this Act are a subject for another article, it also includes provisions to help small businesses.
First we’ll discuss three mutually exclusive provisions. For the three benefits below, you may choose only one of the following:
- Delay of Employer Payroll Taxes:
- As you would expect from the name, this functions like a 0% interest loan for the employer portion of FICA taxes for your employees. That portion of your payroll taxes that you would remit from 2/15/2020 through 12/31/2020 are delayed, and instead will be remitted in 2021 and 2022.
- You can already see the major downside: This is a delay of payroll taxes, meaning that you don’t get a permanent benefit. If business is still slow in 2021 and 2022, then this payroll tax delay could feel like a curse.
- Employee Retention Tax Credit (ERTC):
- Now we’re talking. Note the word “Credit,” meaning that you get a permanent benefit from the government rather than just the delay of a tax you have to pay eventually.
- If you retain 50% or more of your workforce while your revenues are cut by 50% or more (or you have to close your business), then the ERC will grant you 50% of each employee’s wages, up to $10,000 of wages, giving you a credit of $5,000 per employee!
- The dates covered are 3/12/2020 – 12/31/2020.
- The credit ends if you have a quarter where you earn 80% of the revenue of the same quarter of the previous year. It may also end if you reopen your business.
- Payment Protection Program (PPP):
- The PPP is another benefit for employers. It is structured as a loan that may be forgiven if you meet certain criteria, so it is not necessarily a permanent benefit.
- The amount of the PPP loan is 2.5 times your average monthly payroll expenses — regular hours, PTO, health and retirement benefits, basically everything except amounts paid to a payroll service in order to run your payroll.
- We’re waiting for final guidance on how exactly to calculate what an “average month” is for this purpose. What we do know is that any amounts paid over $100,000 per employee do not count for this benefit.
- Because this is a loan that is later forgiven (hopefully), it involves quite a bit of paperwork and uncertainty, but if it all falls into place you may gain a bigger benefit than the ERC/ Try running the numbers for your business.
Other CARE Act Provisions
Now that we got “the choice” out of the way, let’s take a look at some other provisions that are available regardless of which above option you choose.
- Economic Injury Disaster Loans (EIDL): The US government’s Small Business Administration (SBA) is offering loans of up to $2 million for businesses in affected states (which at this point is every state in the nation… but the state governor has to be on board).
- If you’re using the PPP above, the EIDL money technically has to be used for a different purpose. Since the PPP is for wages, the EIDL cannot be for wages.
- Emergency EIDL Grant: Do you just need cash right now? Apply for an Emergency EIDL Grant! Businesses facing economic hardship (which is everyone, right?) can get up to $10,000 of cash up-front by applying through the SBA website. *They are now saying this is $1,000 per employee you have.
- Note that this $10,000 will offset PPP loan forgiveness if you choose the PPP.
- SBA 7a Loan Debt Relief: Does your business have an SBA 7a loan? If so, apply for debt relief! There’s no downside to this: just contact your lender and apply whether you need the relief or not. You can get free principal and interest payments for 6 months!
- This debt relief provision does not change based on any of the other benefits mentioned above.
Run the numbers! The interaction of all these benefits is complex, so we can’t tell you which ones are “the best” for your situation. Here are a few very important points that bear repeating:
- The Delay of Employer Payroll Taxes option is likely the worst option, because it offers no permanent cash benefits.
- If you don’t think you’ll be able to keep at least 50% of your workforce, don’t choose the ERTC.
General Advice During These Strange Times
When the chips are down, especially for everyone all at once, it behooves business owners to give special attention to their cash flow: the actual cash going into and coming out of their bank account.
What can you do to temporarily improve your cash flow, in order to stave off bankruptcy while business slows down? Here are some potential options:
Increase or Accelerate Your Cash Receipts
- What can you do online to promote your business?
- If you sell goods, what would you need to do in order to sell them online?
- If you provide services, get creative! Can you do remote therapy sessions, telehealth, Zoom business consulting, or the like?
- For your struggling customers or clients, if they are unable to pay you in full then maybe you can work out a deal for them to pay a portion of the amount due. Anything helps.
- If you’re really in trouble and your credit sources have dried up, you can consider factoring your Accounts Receivable. Basically it means taking cash up front, using your receivables as collateral. As you might expect, there will be fees, which are often a percent of the value of the receivable.
Decrease or Delay Your Cash Payments
- We’ll lead in with the toughest decision to make: Is it time to lay off any of your employees? If this idea makes you feel sick to your stomach, understand that if you go out of business it’s akin to laying off everyone. As long as you retain at least 50% of your workforce, you’ll be eligible for the ERTC mentioned above.
- Quick thought exercise: Do you know how many monthly, quarterly, and annual payments are taken out of your business automatically? If you are paying for things that you’re not using, nip them in the bud! With any luck you’ll be able to cancel that annual auto-pay right before it comes out of Checking.
- Are you worried about making your rent on time? If so, you may be able to negotiate with your landlord to delay mortgage payments. You might be surprised at how flexible they are willing to be when the alternative is losing a tenant.
- The same can be said of loan payments. Try contacting your bank and asking if you can wait a few months before making your next loan payment. This will likely cost you more interest in the long run, but you gotta do what you gotta do.
- Can you delay paying some of your vendors? This is a tricky one, because you want to maintain good relationships with all your vendors, but they probably understand that everyone is struggling these days. Much like making deals with your customers for partial payments, maybe you can work out an installment plan with your biggest vendor.
TL;DR: We live in strange times. The best thing you can do now or in any other strange situation is to follow Douglas Adams’ advice and “Don’t Panic.” Check out the resources available to small businesses in your area, and remember that we’re all in this together!