COVID Advice for Businesses
I’m not seeing a silver lining here, guys. This is going to hurt.
While the coronavirus brings the world to a screeching halt, we’re seeing lots of confusion and panic. Especially for business owners, this is a scary time. Your business may be slow, revenue is down, and you or your employees could be sick. Even if everything seems okay now, you feel uneasy. The concerns are legit and it’s okay to be scared.
As your numbers person, I’m here to give you the information necessary to manage your business during this crisis. I’ll update this page with more financial news and my advice as things progress.
Reality Check
I’m not going to sugarcoat this: we are in a crisis and facing extreme uncertainty. People are going to get sick and some will die. Most people will lose some income. Businesses will go under. The economy is going take a big blow and it will take months for the ripples to work their way through the system.
How we respond to this crisis will speak volumes about who we are. Let’s be kind and resilient. Know that anyone you meet might be in financial pain, scared, and or confused. It’s understandable to worry about your income, friends and family’s health, and how bad things will get. While we all face this uncertainty, not let’s lose our humanity.
I encourage you to take a deep breath whenever you feel fear or a sense of lack. These times can bring out the worst in people, but they also bring out the best. Choose how you want to respond. Most people will act from a place of fear. By responding in a calm, thoughtful manner, you’ll be a safe harbor in this storm.
While this current crisis will hurt in deep and serious ways, it’s not fatal to mankind. In time, we will move past this.
Updated Tax Deadlines
4/13 Update: The IRS delayed more filings and payments until 7/15. Now, any returns and filings due between 4/01 and 7/15 are automatically extended to 7/15. This includes the Q2 estimated tax payments and expat, corporate, and estate returns. If you want to file an extension beyond 7/15, you can file an extension and your returns will be due on 10/15, per usual.
3/28 Update: The payment extension also applies to Q1 estimated tax payments due on 4/15. The IRS announced some miscellaneous changes. They will not initiate any new audits, suspend any personal residence seizures, and suspend installment plan payments.
3/20 Update: The IRS is extending the due date for returns and taxes to 7/15. There won’t be any penalties or interest charged in the duration.
Original: In response to the coronavirus, Trump asked the Treasury Department to delay the income tax filing deadlines. It took over a week, but yesterday, the IRS finally announced the changes for this filing season.
State income taxes are also changing.
Connecticut: the partnership and S-corporation deadline moved back 30 days to 4/15 and payments are now due by 6/15. Individuals are to follow the IRS deadlines.
California: all business and personal returns are due on 6/15.
OUTDATED - ORIGINAL: All returns are due by their normal due date. While we didn’t get any help with the deadlines, the Treasury is giving us some economic relief. Any taxes owed are due by 7/15 (as opposed to 4/15).
Direct Assistance - the Recovery Rebate
4/13 Update: The IRS is sending out the first payments this week via direct deposit. If you have not received a refund via direct deposit or filed a 2018 or 2019 return, you can give your banking information to the IRS directly here. If the IRS doesn’t have your direct deposit details, they will mail you a paper check. Due to their printing restraints, it may take 3-4 months to mail all paper checks.
4/2 Update: The IRS will send each taxpayer $1,200 plus $500 per qualifying child.
To qualify, a taxpayer must have filed a tax return in 2018 or 2019. The rebate will start to phase out for incomes above $75,000 for single-status filers and $150,000 for joint returns. After $99,00 for a single filers and $198,000 for a married-filing-joint couple, the standard rebate will be $0. Any rebates for qualifying children do not phase out.
If they elected for direct deposit of a tax refund, they should receive this payment as a direct deposit as well. Otherwise, the IRS will mail out a check. If you haven't filed a return in 2019 or 2018, you need to file a return to get the rebate. If you haven't filed and collect social security benefits, you do not need to do anything.
The Treasury Department plans to start sending out the funds by the end of April.
Unemployment Benefits Extended
*Updated as of 3/28/20*
Many states are allowing furloughed workers to receive unemployment benefits. A furlough is when a person has a job at a company, but they aren’t working. Before coronavirus, a furlough covered situations like an unpaid leave of absence. Now, with many businesses shut, people have jobs but are getting zero hours each week.
While not common, some companies continue to pay furloughed employees or an employee can take paid-time-off. It also allows employees to keep any health benefits they get through their employer. After a furlough ends, the employees go back to work and their job is intact.
CT is allowing furloughed employees to claim unemployment and dropped the search for work requirements.
All other states benefits are available here.
Student Loan Interest Suspended on Federally Held Loans
3/28 Update: The CARES act did in fact defer student loan payments. Borrowers can apply for an emergency forbearance for 60 days or more.
3/25 Update: In the next stimulus bill, payments may be deferred as well.
Original: If you have student loans and they are serviced by a government agency, like MyFedLoans or another organization on this list, the loans are currently not accruing interest as of March 13, 2020. You do not need to do anything to get this benefit. This applies to anyone with student loans – both current and former students.
On most loans, interest accrues daily. When you log into your account, you can find the current amount of interest outstanding. Right now, that number should not be increasing. We don’t know these loans will start accruing interest again because the Department of Education hasn’t finalized the details.
During this interest-free period, you can still make payments. The entire amount will go towards the principle.
If you have loans through a private bank, then you will still be accruing interest. Private loan providers include banks, Sallie Mae, and state agencies.
Loans & Debt Payments
*Updated as of 3/25/20*
There is much talk about deferring loan and debt payments. So far, some states have asked mortgage lenders to pause payments. We may see this on a broader scale, including for rent, credit card, auto, and student loan payments.
Congress’s “Families First” Bill & Paid Sick Leave and “Phase 3” Bill
3/28 Update: More information is now in the Paid Sick Leave section
3/25 Update: Since publishing, the Treasury has clarified a bit more about how the tax credits will work. The credits will offset payroll taxes. What you remit will be reduced by the credits. If at the end of the quarter when you file a quarterly report, if the government owes you more money to cover the paid sick and family leave, they will cut you a check. Payroll companies are working hard to get more information and set it up. We don’t know the official start date you can claim this either.
Original: The House passed the Families First Coronavirus Response Act to help small businesses and workers who must get sick or assist a sick family member. It creates a refundable tax credit for businesses to cover wages paid to sick employees. Here’s how it will work:
An employee of a small business is out sick or home with a family member that’s sick.
The employee continues to receive a paycheck
The employer claims the refundable tax credits when processing payroll and in quarterly payroll reports. The government essentially pays for the employee’s sick leave.
As part of the “Phase 3” stimulus bill, Congress is debating on a program to help you employers pay employees that can’t work because of the essential/non-essential and stay-at-home orders. The new bill also may expand unemployment insurance. Both of these will help people continue to be paid even if there’s no work.
This is vital help for small businesses! I’ll update this section as I learn more. The exact amount the employee receives and the employer claims for this tax credits is being hashed out. I’m very encouraged by some the assistance coming out for small employers!
OUTDATED-ORIGINAL: It’s important to consider the timing for an employer being reimbursed. Usually, you claim a tax credit when you file your annual return (so next year). You could reduce your estimated tax payments, but you’ll need detailed records throughout the year so we can calculate your estimated taxes by quarter.
Paid Sick Leave
*Updated as of 3/28/20*
As part of the Families First Coronavirus Response Act, more small businesses can offer paid sick leave and family medical leave to employees impacted by COVID-19. Business owners, contractors, and gig workers all qualify for this aid too. A small business in this context means they have under 500 employees.
The government will reimburse companies through payroll tax credits. These benefits should take effect by April 2nd (15 days after the bill became law).
Employees can qualify for sick leave in various ways, like if ordered to quarantine, are caring for a person who must quarantine, or caring for a child or another person who’s school or facility closed due to the pandemic.
The pay varies based on if the person is quarantined or caring for someone else. If the employee has COVID-19 or symptoms, the government will cover 80 hours of work (or the person’s average two-week work hours if part-time) for up to $511/day. If the employee is caring for someone else, the dollar benefit per day drops to $200.
The new law broadened the Family and Medical Leave Act (FMLA) to include this public health emergency. Employees can claim the benefits if they are unable to work (like if the can’t work remotely or their store in shut), show symptoms of COVID-19, contract the virus, or care for someone who’s school or care facility closed. Employees can receive two-thirds of their average pay, up to $200/day for 50 days. Self-employed individuals can receive up to $200/day or 67% of their average daily income, whichever is lower.
For self-employed individuals, these benefits may not come as soon as it will for traditional employees. These benefits will be claimed as tax credits, so you may not feel any relief until you file your 2020 tax return.
I left out many rules and exceptions to these benefits. If you are interested in claiming one and need assistance to do so, please reach out. These benefits will expire at the end of the year.
Employer Retention Credit
*Updated as of 3/28/20*
If an employer loses over 50% of its revenue due to the pandemic, yet continues to pay employees, they will qualify for an employer retention credit. For businesses with 100+ employees, the credit will be 50% of the qualifying wages. For businesses with under 100 employees, all qualifying wages will qualify for the credit.
SBA Programs
*Updated as of 4/2/20*
The SBA has many new tools to help small businesses. This includes the Economic Injury Disaster Loan (EIDL), Paycheck Protection Program (PPP), SBA Debt Relief, and SBA Express Bridge Loans. All are covered in more detail below.
Economic Injury Disaster Loans
4/13 Update: The EIDL advance will be up to $10,000. We do not know how they will determine the amount yet. Unfortunately, this program is riddled with bottlenecks. Currently, I know of no one who has received an EIDL advance or EIDL.
4/2 Update: This loan is similar to the standard SBA business disaster loans. The various coronavirus bills have extended it to more businesses, including the self-employed and freelancers, and lightened the requirements. It's simple to apply – it takes only a few minutes. You can apply directly on their website here.
The terms are:
Interest Rate: 3.75% for-profit businesses / 2.75% non-profit organizations
Payback period: up to 30 years
Many places are mentioning a $10,000 grant. What they are referring to is a $10,000 advance on EIDLs. This advance is essentially free money because you don't have to repay it.
Paycheck Protection Program
4/13 Update: Alternative providers, like Kabbage and Fundera, are now accepting PPP applications. Check out this list by Gusto to see if your bank is participating and accepting applications. If not, apply at one of the other organizations listed.
This is an entirely new program. As such, the SBA, Treasury, and banks have to create all the systems and clarify the rules. So far, the program has been very slow. Just like the EIDL and EIDL advance, I don’t know of anyone who has received PPP funds yet.
4/2 Update: As the name implies, this is a loan to cover payroll expenses. If the funds are used to cover payroll and you keep at least 75% of your workforce, the SBA will forgive the loan (ie free cash, you won't have to pay it back). The max amount you can qualify for is 2.5 months of average payroll expenses (including benefits) or $10 million.
To apply for the PPP, you must go through an approved SBA lender or facilitator. Since many banks are closed, the SBA recommends you apply online. Here is a tool to help you find a local lender, in case you are able to and prefer to apply in person.
Businesses can begin applying on April 3rd. Sole proprietors, freelancers, and gig economy workers can start applying on April 10th.
You can find more information on the SBA website here.
If the funds aren’t used on the approved categories or you reduce your workforce more then 25%, only part of the funds can be forgiven. The remaining will incur 1% interest and must be paid back within 2 years.
SBA Debt Relief
*Updated as of 4/2/20*
If you have a current loan from the SBA, this program will waive your payments for 6 months. During that time, the SBA will make the payments for you. Another way to look at this program is that it will forgive 6 months of payments.
Details are scarce on this program, so if you have an SBA loan, stay tuned. Alternatively, check the SBA website.
SBA Express Bridge Loans
*Updated as of 4/2/20*
If you already loaned money from the SBA, you can apply for an additional $25,000 with minimal paperwork. These funds are part of the EIDL and can be applied for after you submit that application. For more information, click here.
Business Stimulus – A Few Notes
4/13 Update: If a company receives both an EIDL and PPP, they can roll over part of the EIDL into the PPP. This will lower the interest rate from 3.75% to 1%, but the payment term will be a max of 2 years.
4/2 Updates: The EIDL and PPP have limited budgets. If you think you're going to need the funds, apply as quickly as you can.
Businesses can apply for both the EIDL and PPP. Please note that you cannot overlap some of the stimulus benefits. In that case, only the PPP is eligible to be forgiven.
The same no-overlapping concept applies for the tax credits and unemployment benefits. You can't claim certain new tax credits if you paid received the EIDL advance or PPP funds. You cannot receive unemployment for weeks that the PPP funds cover.
Another important note is to qualify for any of the SBA loans is the business must have formed before 2/15/20.
Other Aid
*Updated 4/2/20*
Many state and local governments, as well as businesses and other groups, are offering relief payments, low-interest-rate loans, or free services. Check out the links below for lists of what's available.
Gusto: Amazing list of resources from state and local governments and businesses, frequently updated
Rising Tide Society: limited list of aid programs
US Chamber of Commerce: articles on the stimulus bills, applying for loans, and timely business advice
Recession Worries: Will We See One?
4/13 Update: Most economists, agree that we are most likely in a recession right now. Goldman Sachs’ analysts predict the first quarter of 2020 will contract slightly, with the second quarter GDP going down in a free-fall. If the coronavirus is contained quickly, they expect the economy to expand significantly in the third and fourth quarters.
The unemployment reports over the last three weeks total 16.5 million new claims. To put this in context, before the March 26 unemployment report of 3.3 million jobs lost, nearly five times the prior all time high of 695,000 in October 1982.
Original: First and foremost, this is a health crisis. How well we manage this health crisis will determine the economic impact.
If you are the defiant type and want to live your life as usual, I ask you to look at the bigger picture. The economy will come back once the health crisis passes. In the short term, the economy will hurt. There’s no avoiding it, so accept it.
The most important thing we can do is to stay healthy. The sooner we can go back to our usual routines, the better it will be for the economy. But, we can’t do that until the virus and the fear are gone. Let’s not drag out the pandemic any longer than necessary. Most people won’t be spending money because they don’t want to risk getting sick and are worried about their finances during this crisis.
Take the health recommendations seriously and respond now. Even if you are young and healthy, don’t ignore these recommendations. You could be a risk to older people. For grandma’s sake, stay home.
A recession is when we have two or more quarters of negative GDP. It’s a measure of past economic activity, so we don’t know if we are in a recession or not. With so many closures and quarantines, I expect to see negative GDP in at least one quarter.
Wild Market Volatility
This may not be common knowledge, so let me explain. The stock market works by responding to whatever is in the news. Sometimes the news is a quarterly report from a company, revised GDP estimate from a central bank, Presidential address, or a weather report. Today, the news is about a pandemic shutting down factories, industries, and borders.
Stock prices change as investors absorb and trade on the new information. Now we see big swings (aka volatility) because the news is horrible and surprising. We’ve never experienced a pandemic like this in the modern, technological age. The market is grappling with so much uncertainty now – like how long the virus will last, what will get shut down, who will be impacted, and more. We should expect to see many more dizzying swings.
The coronavirus response is slowing down economic activity and thus slowing down the world economy. It makes sense that the stock market will go down as well. It is functioning properly
Like all declines before it, the market will regain the lost points in due time. Meanwhile, try to stay healthy, be kind to your neighbors and coworkers, and do your part to help this virus pass quickly.
Oil Markets
I used to work in the energy industry, so I know more than most about what’s going on.
The price of oil has been low since 2014 because there is more supply than demand. The current pandemic has lowered demand year over year, so OPEC wanted to reduce the supply to order to increase the market price.
At a meeting of OPEC+ earlier this month, Russia refused to reduce production. Saudi Arabia responded by increasing their production. Now the supply of oil far outweighs the demand and the price per barrel tanked (no pun intended).
While this may sound good for people who need to fill up their cars, it’s awful for the US energy industry.
We’re watching an all-out war of attrition. No one is making money. Investors will see poor returns while the OPEC countries, which need oil revenues to fund their governments, will have to tap into their savings or go into debt. Until several producers’ blink or go bankrupt, oil prices will remain low.