SBA offering loans to small businesses hit hard by COVID-19
Every company has faced unprecedented challenges in adjusting to
life following the widespread outbreak of the coronavirus (COVID-19). Small
businesses face particular difficulties in that, by definition, their resources
— human, capital and otherwise — are limited. If this describes your company,
one place you can look to for some assistance is the Small Business
Administration (SBA).
New loan, relaxed criteria
The agency has announced that it’s offering Economic Injury
Disaster Loans under the Coronavirus Preparedness and Response Supplemental
Appropriations Act, which was recently signed into law.
Here’s how it works: The governor of a state or territory must
first submit a request for Economic Injury Disaster Loan assistance to the SBA.
The agency’s Office of Disaster Assistance then works with the governor to
approve the request. Upon completion of this process, affected small businesses
within the state gain access to information on how to apply for loan assistance.
To speed the process, the SBA has relaxed its usual
disaster-loan criteria. A state or territory now needs to certify that at least
five small businesses have suffered substantial economic injury anywhere in the
state. Previously, at least one of the companies had to be in each of the
disaster-declared counties or parishes.
Along similar lines, once the submission process is completed,
Economic Injury Disaster Loans will be available across the state. Under
previous criteria, only businesses in counties identified as disaster areas
could obtain financial assistance. Given the expected widespread and
economically drastic effect of the coronavirus, most states will have likely
garnered approval by the time you read this.
Amount, interest and terms
Economic Injury Disaster Loans offer up to $2 million in
financial assistance to help small businesses mitigate their revenue losses.
You could use the money to pay overhead costs such as utilities and rent, keep
up with accounts payable and cover payroll.
For qualifying small businesses, the interest rate is 3.75%.
Some nonprofits may also be eligible for this assistance. For them, the
interest rate is 2.75%. The specific loan terms will vary according to each
borrower’s ability to pay. The agency does say that it “offers loans with
long-term repayments in order to keep payments affordable.”
Mitigate and manage
Bear in mind that these loans are just one form of assistance
offered by the SBA. Your small business may qualify for other loans, and there
might be training programs that benefit your company. Our firm can help you
assess your financial situation in light of the coronavirus crisis and
formulate a strategy for mitigating and managing your risks going forward.
Family and Medical Leave Act (FMLA) Expanded to Provide Relief to Those Affected by COVID-19
“The Families First Coronavirus Response Act” (FFCRA), which goes into effect April 2, 2020 and expires December 31, 2020, responds to the coronavirus outbreak by providing additional assistance in the areas of COVID-19 testing, sick leave, food assistance, and more. We’ve compiled key details of FFCRA you need to know.
In summary, the Act:
- Requires private insurance plans to provide free COVID-19 testing
- Requires employers to provide emergency paid sick leave to workers affected by COVID-19 and expands family and medical leave.
- Offers increased funding for state unemployment insurance, food stamp and nutritional programs.
More specifically, here’s what The Families First Coronavirus Response Act means for both business owners and employees in the areas of sick leave and expanded family and medical leave.
- Employees are eligible for up to two weeks of sick leave (full pay for self, 2/3 pay for family care) for illness, quarantine or school closures.
- Employees are eligible for up to 12 weeks of FMLA leave for school closures (10 days unpaid and then up to 10 weeks at 2/3 pay).
- FMLA expansion covers:
- Employers with fewer than 500 employees
- Employees who have been employed for at least 30 calendar days (some exclusions may apply)
- Employees who must care for children under the age of 18 in the event of school and place-of-care closures or if care provider is unavailable due to a public health emergency with respect to COVID-19.
- Emergency paid sick leave covers:
- Employers with fewer than 500 employees
- All employees no matter the length of employment (some exclusions may apply)
Employer Emergency Paid Sick Leave and Family Medical Leave Credit
Paid sick leave credit. For an employee who is unable to work because of coronavirus quarantine or self-quarantine or has coronavirus symptoms and is seeking a medical diagnosis, eligible employers may receive a refundable sick leave credit for sick leave at the employee's regular rate of pay, up to $511 per day and $5,110 in the aggregate, for a total of 10 days.
For an employee who is caring for someone with coronavirus, or is caring for a child because the child's school or child care facility is closed, or the child care provider is unavailable due to the coronavirus, eligible employers may claim a credit for 2/3 of the employee's regular rate of pay, up to $200 per day and $2,000 in the aggregate, for up to 10 days. Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.
Child care leave credit. In addition to the sick leave credit, for an employee who is unable to work because of a need to care for a child whose school or child care facility is closed or whose child care provider is unavailable due to the coronavirus, eligible employers may receive a refundable child care leave credit. This credit is equal to 2/3 of the employee's regular pay, capped at $200 per day or $10,000 in the aggregate. Up to 10 weeks of qualifying leave can be counted towards the child care leave credit. Eligible employers ar entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.
The Coronavirus situation is changing rapidly, as are the updates to various relief efforts. We will continue to monitor news and keep you updated as clarification is provided.
If you have questions, be sure to reach out to us. Our entire team is here to support and guide you!
U.S. Small Business Administration (SBA) Offering Disaster Assistance In Response To COVID-19
Under the recently enacted Coronavirus Preparedness and Response Supplemental Appropriations Act (the Act), small businesses that have suffered substantial economic injury as a result of COVID-19 can apply for low-interest federal disaster loans through SBA. Small businesses and nonprofits can apply for working capital loans of up to $2 million.
We’ve highlighted the following key details of the Act for you here, but you can also learn more by visiting the COVID-19 disaster assistance page on SBA’s website.
- State governors must first request access to the Economic Injury Disaster Loan program. Once the declaration is made, information on the application process for disaster loan assistance will be made available to affected small businesses within the given state.
- Loans carry an interest rate of 3.75% for small businesses and 2.75% for nonprofits.
- Loans can be used to cover accounts payable, debts, payroll and other bills.
- Loans can be offered with long-term repayments in order to keep payments affordable—up to a maximum of 30 years. Terms are determined on a case-by-case basis.
- Businesses will apply for loans online and select “Economic Injury” as the reason for seeking assistance.
- SBA offers disaster assistance via its customer service center. If you have questions or want to check if your state is eligible, contact U.S. Small Business Administration via phone at 800.659. 2955 (TTY: 800.877.8339) or e-mail [email protected].
Please see this additional information regarding expansion of the EIDL program and addition of the Emergency Economic Injury Grants:
- In addition to obtaining an EIDL as explained above, the CARES Act has authorized an additional grant for applications to the EIDL. These grants provide an emergency advance of up to $10,000 to small businesses and private non-profits harmed by COVID-19 within three days of applying for an SBA Economic Injury Disaster Loan (EIDL). To access the advance, you first apply for an EIDL and then request the advance. The advance does not need to be repaid under any circumstance, and may be used to keep employees on payroll, to pay for sick leave, meet increased production costs due to supply chain disruptions, or pay business obligations, including debts, rent and mortgage payments.
- Who is eligible for the EEI Grant? Those eligible for an EIDL and who have been in operation since January 31, 2020, when the public health crisis was announced.
Businesses that are seeking short-term support in either the loan or grant format are encouraged to apply at the special COVID-19 application page here: https://covid19relief.sba.gov/#/
The Coronavirus situation is changing rapidly, as are the updates to various relief efforts. We will continue to monitor news and keep you updated as clarification is provided.
If you have questions, be sure to reach out to us. Our entire team is here to support and guide you!
Tax Update: Tax Filing and Payment Deadline Extension
Filing and payment deadlines deferred. After briefly offering more limited relief, the IRS almost immediately pivoted to a policy that provides the following to all taxpayers—meaning all individuals, trusts, estates, partnerships, associations, companies or corporations regardless of whether or how much they are affected by COVID-19:
- For a taxpayer with a Federal income tax return or a Federal income tax payment due on April 15, 2020, the due date for filing and paying is automatically postponed to July 15, 2020, regardless of the size of the payment owed.
- The taxpayer doesn’t have to file Form 4686 (automatic extensions for individuals) or Form 7004 (certain other automatic extensions) to get the extension.
- The relief is for (A) Federal income tax payments (including tax payments on self-employment income) and Federal income tax returns due on April 15, 2020 for the person’s 2019 tax year, and (B) Federal estimated income tax payments (including tax payments on self-employment income) due on April 15, 2020 for the person’s 2020 tax year.
- No extension is provided for the payment or deposit of any other type of Federal tax (e.g. estate or gift taxes) or the filing of any Federal information return.
- As a result of the return filing and tax payment postponement from April 15, 2020, to July 15, 2020, that period is disregarded in the calculation of any interest, penalty, or addition to tax for failure to file the postponed income tax returns or pay the postponed income taxes. Interest, penalties and additions to tax will begin to accrue again on July 16, 2020.
IRS FAQs Answer Filing, Payment Postponement Questions
In a series of frequently asked questions (FAQs) on its website, IRS has provided answers with respect to its recently-announced guidance that postpones until July 15, 2020 the filing of returns and payment of taxes that were initially due on April 15, 2020.
Background. In Notice 2020-18, IRS announced special Federal income tax return filing and payment relief in response to the ongoing Coronavirus Disease 2019 (COVID-19) emergency.
IRS issues FAQs. Here are the key points in the FAQs:
Eligibility issues. The following FAQs address eligibility for relief:
No COVID-19 effect required. You do not have to be sick, or quarantined, or have any other impact from COVID-19 to qualify for relief. You only need to have a Federal income tax return or payment due on April 15, 2020. (FAQ 2)
Forms affected. The Notice postpones the filing and payment of Federal income taxes reported on the following forms:
- Form 1040, 1040-SR, 1040-NR, 1040-NR-EZ, 1040-PR, 1040-SS
- Form 1041, 1041-N, 1041-QFT
- Form 1120, 1120-C, 1120-F, 1120-FSC, 1120-H, 1120-L, 1120-ND, 1120-PC, 1120-POL, 1120-REIT, 1120-RIC, 1120-SF
- Form 8960 (Net Investment Income Tax— Individuals, Estates, and Trusts)
- Form 8991 (Tax on Base Erosion Payments of Taxpayers With Substantial Gross Receipts)
With respect to Form 990-T, if that Form is due to be filed on April 15, then it has been postponed to July 15 under the Notice. For taxpayers whose Form 990-T is due on May 15, that due date has not been postponed under the Notice.
With respect to returns due on March 16, 2020, which include Form 1065, Form 1065-B, Form 1066, and Form 1120-S for calendar year taxpayers, the filing of those returns has not been postponed.
Relief for fiscal year filers. The relief provided in the Notice applies to Federal income tax returns and payments in respect of an Affected Taxpayer's 2019 tax year, and postpones those 2019 return filings and payments due on April 15, 2020 until July 15, 2020. If a taxpayer's Federal income tax return for the fiscal year ending during 2019 is due on April 15, 2020, whether that is the original due date or the due date on extension, the taxpayer's filing due date is postponed to July 15, 2020.
Non-April 15 due dates. Any taxpayers who have filing or payment due dates other than April 15 have not been granted relief at this time.
Payroll and excise taxes. Under the Notice, normal filing, payment, and deposit due dates continue to apply to both payroll and excise taxes.
Estate and gift taxes. Normal filing and payment due dates continue to apply to estate and gift taxes.
Sec. 965(h) installment payments. The relief applies to Code Sec. 965 installment payments due on April 15, 2020. Although the Code Sec. 965(h) installment payment is generally made in respect of a taxpayer's 2017 or 2018 tax year, under Code Sec. 965(h)(2), the due date of the installment payment associated with a 2019 tax return is the due date of the taxpayer's 2019 Federal income tax return. For any taxpayer whose Federal income tax return filing due date has been postponed from April 15 to July 15, 2020, the due date of that taxpayer's Code Sec. 965 installment payment has also been postponed to July 15, 2020.
Estimated payments under BEAT. For any taxpayer whose Federal income tax return filing deadline has been postponed from April 15 to July 15, 2020, the due date for Form 8991 and the Code Sec. 59A Base Erosion and Anti-Abuse Tax (BEAT) payment has been postponed to July 15, 2020.
Information returns. The relief doesn't apply to information returns. It only applies to the filing of Federal income tax returns due on April 15, 2020. Information returns such as form 3520 and form 709 must be filed by the due date. Or an extension, in the regular course, filed.
Filing/paying taxes issues. The following FAQs address filing returns and paying taxes:
No current action needed. To get the relief, nothing need be done except file and pay any tax due with your return by July 15. You don't need to file any additional forms or call IRS to qualify for this automatic Federal tax filing and payment relief.
Filing extension beyond July 15. If you are an individual, you can request an automatic extension to file your Federal income tax return if you can't file by the July 15 deadline. You can request a filing extension to electronically file Form 4868 through your tax professional, tax software, or using the Free File link on IRS.gov. Businesses, including trusts, must file Form 7004.
You must request the automatic extension by July 15, 2020. If you properly estimate your 2019 tax liability using the information available to you and file an extension form by July 15, 2020, your tax return will be due on October 15, 2020. To avoid interest and penalties when filing your tax return after July 15, 2020, pay the tax you estimate as due with your extension request. (FAQ 12)
Already filed but haven't paid. If you have already filed but haven't fully paid the taxes due, to avoid interest and penalties, pay your taxes in full by July 15, 2020. (FAQ 13)
Already filed and scheduled an April 15 payment. A scheduled payment will not be automatically rescheduled to July 15. If you do nothing, the payment will be made on the date you chose. Here is information on how to cancel and reschedule your payment:
If you scheduled a payment through IRS Direct Pay, you can use your confirmation number from the payment to access the Look Up a Payment feature. You can modify or cancel a scheduled payment until two business days before the payment date. The email notification you received when you scheduled the payment will contain the confirmation number.
If you scheduled a payment through Electronic Federal Tax Payment System (EFTPS), click on Payments from the EFTPS home page, login, then click Cancel a Tax Payment from the left menu and follow the instructions. You must do so at least two business days before the scheduled payment date.
If you scheduled a payment as part of filing your tax return (authorizing an electronic funds withdrawal), you may revoke (cancel) your payment by contacting the U.S. Treasury Financial Agent at 888-353-4537. You must call to make a payment cancellation request no later than 11:59 p.m. ET two business days prior to the scheduled payment date.
If you scheduled a payment by credit card or debit card, contact the card processor to cancel the card payment.
State tax liabilities. This relief applies only to Federal income tax payments. State filing and payment deadlines vary and are not always the same as the Federal filing and payment deadline.
June 15, 2020 estimates. June 15, 2020 estimates have not been postponed. These second quarter 2020 estimated income tax payments are still due on June 15, 2020.
IRAs and workplace-based plans. The following FAQs address issues involving IRAs and workplace-based plans:
IRAs. The Notice's relief applies to IRA contributions. IRA contributions for 2019 are due by the tax filing deadline. Thus, 2019 IRA contributions can be made by July 15.
In addition, if a taxpayer owes a 10% additional tax on a 2019 IRA distribution, the reporting and payment of the 10% additional tax has been extended to July 15.
Excess elective deferrals. Under Code Sec. 402(g), an employee can elect to defer a portion of compensation into an employer-sponsored plan. The maximum that can be deferred in 2019 was $19,000. Any excess elective deferrals (and income) have to be removed by April 15, 2020. The Notice does not extend this time.
Employer contributions to qualified plans. In general, an employer contribution made to a qualified plan after the end of a tax year, but no later than the due date of the return for that tax year is considered to have been made on the last day of that year. (Code Sec. 404(a)(6)) This is sometimes referred to as the grace period.
If an employer has a federal income tax return due date of April 15, then the Notice extends the grace period to July 15.
HSAs and MSAs. The following FAQs address issues involving Health Savings Accounts (HSAs) and Archer Medical Savings Accounts (MSAs):
…HSA and Archer MSAs. A taxpayer can make a contribution to an HSA or MSA, for a particular year, by the due date for filing the taxpayer's tax return. Because the due date for filing 2019 Federal income tax returns is now July 15, 2020, under the Notice, a taxpayer may make contributions to an HSA or MSA for 2019 by July 15, 2020.
Other questions. The following FAQs address other issues:
Filing refund claim for 2016. For individuals, in general, a refund claim for 2016 has to be made by April 15, 2020. The Notice does not extend this date since the Notice only applies to 2019 income tax returns. The Notice does not extend relief to any filings or payments for the 2016 tax year. (FAQ 22)
Form 4446. Corporations must file Form 4446, Corporation Application for Quick Refund of Overpayment of Estimated Tax, after the end of the corporation's tax year, and no later than the due date for filing the corporation's tax return (not including extensions). Form 4466 must be filed before the corporation files its tax return. (Instructions to Form 4446). The Notice does not extend the time to file Form 4446. The FAQs point out that a corporation may request its refund by filing its income tax return.
2019 estimated tax payments. The Notice's relief does not apply to 2019 estimated tax payments or penalties for failure to timely make 2019 estimated tax payments. The FAQs point out that relief from the penalty may be available under the normal rules by filing a Form 2210 (Underpayment of Estimated Tax by Individuals, Estates, and Trusts) or Form 2220 (Underpayment of Estimated Tax by Corporations). (FAQ 24)
Coronavirus (COVID-19): Tax relief for small businesses
Businesses across the country are being affected by the coronavirus
(COVID-19). Fortunately, Congress recently passed a law that provides at least
some relief. In a separate development, the IRS has issued guidance allowing
taxpayers to defer any amount
of federal income tax payments due on April 15, 2020, until July 15, 2020,
without penalties or interest.
New law
On March 18, the Senate passed the House's coronavirus bill, the Families First Coronavirus Response Act. President Trump signed the bill that day. It includes:
- Paid leave benefits to employees,
- Tax credits for employers and self-employed taxpayers,
and - FICA tax relief for employers.
Tax filing and payment extension
In Notice 2020-18, the IRS provides relief for taxpayers with a
federal income tax payment due April 15, 2020. The due date for making
federal income tax payments usually due April 15, 2020 is postponed to July 15,
2020.
Important: The IRS
announced that the 2019 income tax filing
deadline will be moved to July 15, 2020 from April 15, 2020, because of
COVID-19.
Treasury Department Secretary Steven Mnuchin announced on
Twitter, “we are moving Tax Day from April 15 to July 15. All taxpayers and
businesses will have this additional time to file and make payments without
interest or penalties.”
Previously, the U.S. Treasury Department and the IRS had
announced that taxpayers could defer making income tax payments for 2019 and
estimated income tax payments for 2020 due April 15 (up to certain amounts)
until July 15, 2020. Later, the federal government stated that you also don’t
have to file a return by April 15.
Of course, if you’re due a tax refund, you probably want to file
as soon as possible so you can receive the refund money. And you can still get
an automatic filing extension, to October 15, by filing IRS Form 4868. Contact
us with any questions you have about filing your return.
Any amount can be deferred
In Notice 2020-18, the IRS stated: “There is no limitation on
the amount of the payment that may be postponed.” (Previously, the IRS had
announced dollar limits on the tax deferrals but then made a new announcement
on March 21 that taxpayers can postpone payments “regardless of the amount
owed.”)
In Notice 2020-18, the due date is postponed only for federal
income tax payments for 2019 normally due on April 15, 2020 and federal
estimated income tax payments (including estimated payments on self-employment
income) due on April 15, 2020 for the 2020 tax year.
As of this writing, the IRS hasn’t provided a payment extension
for the payment or deposit of other types of federal tax (including payroll
taxes and excise taxes).
Contact us
This only outlines the basics of the federal tax relief
available at the time this was written. New details are coming out daily. Be
aware that many states have also announced tax relief related to COVID-19. And
Congress is working on more legislation that will provide additional relief,
including sending checks to people under a certain income threshold and
providing relief to various industries and small businesses.
We’ll keep you updated. In the meantime, contact us with any
questions you have about your situation.
Individuals get coronavirus (COVID-19) tax and other relief
Taxpayers now have more time to file their tax returns and pay
any tax owed because of the coronavirus (COVID-19) pandemic. The Treasury
Department and IRS announced that the federal income tax filing due date is
automatically extended from April 15, 2020, to July 15, 2020.
Taxpayers can also defer making federal income tax payments,
which are due on April 15, 2020, until July 15, 2020, without penalties and
interest, regardless of the amount they owe. This deferment applies to all
taxpayers, including individuals, trusts and estates, corporations and other
non-corporate tax filers as well as those who pay self-employment tax. They can
also defer their initial quarterly estimated federal income tax payments for
the 2020 tax year (including any self-employment tax) from the normal April 15
deadline until July 15.
No forms to file
Taxpayers don’t need to file any additional forms to qualify for
the automatic federal tax filing and payment relief to July 15. However,
individual taxpayers who need additional time to file beyond the July 15
deadline, can request a filing extension by filing Form 4868. Businesses who
need additional time must file Form 7004. Contact us if you need assistance
filing these forms.
If you expect a refund
Of course, not everybody will owe the IRS when they file their
2019 tax returns. If you’re due a refund, you should file as soon as possible.
The IRS has stated that despite the COVID-19 outbreak, most tax refunds are
still being issued within 21 days.
New law passes, another on the way
On March 18, 2020, President Trump signed the “Families First
Coronavirus Response Act,” which provides a wide variety of relief related to
COVID-19. It includes free testing, waivers and modifications of Federal
nutrition programs, employment-related protections and benefits, health
programs and insurance coverage requirements, and related employer tax credits
and tax exemptions.
If you’re an employee, you may be eligible for paid sick leave
for COVID-19 related reasons. Here are the specifics, according to the IRS:
- An employee who is unable to work because of a need to
care for an individual subject to quarantine, to care for a child whose
school is closed or whose child care provider is unavailable, and/or the
employee is experiencing substantially similar conditions as specified by
the U.S. Department of Health and Human Services can receive two weeks (up
to 80 hours) of paid sick leave at 2/3 the employee’s pay. - An employee who is unable to work due to a need to care
for a child whose school is closed, or child care provider is unavailable
for reasons related to COVID-19, may in some instances receive up to an
additional ten weeks of expanded paid family and medical leave at 2/3 the
employee’s pay.
As of this writing, Congress was working on passing another bill
that would provide additional relief, including checks that would be sent to
Americans under certain income thresholds. We will keep you updated about any
developments. In the meantime, please contact us with any questions or concerns
about your tax or financial situation.