COVID-19 Weekly Digest – 06 May 2020

Every country around the world has a strategy for dealing with COVID-19 pandemic. Some countries, like Sweden, are relying on the development of “herd immunity; however, that approach is not without risks, and shouldn’t be adopted by other countries without consideration of those risks. On the other end of the spectrum, New Zealand effectively eliminated coronavirus. Like Sweden’s approach, New Zealand’s will not work everywhere. Here in the U.S., some states, like California, are working on reopening, while others remain in lockdown. Wherever you are, we hope that you and your family stay safe, healthy, and financially secure!

CARES ACT UPDATES

Economic Impact Payments (aka Stimulus Checks)

The IRS continues to update its FAQs for Economic Impact Payments. A recent update explains what taxpayers should do if they believe the amount of their payment is incorrect. If this happens to you, you will get the additional amount when you file your 2020 tax return. If your payment is higher than the correct amount, you will not have to repay the excess.

The IRS is also continuing to update FAQs for the Get My Payment web application. They have now clarified that people who receive benefits from Social Security, Railroad Retirement, or the Veterans Administration and who do not file a tax return will receive their stimulus payment in the same manner in which benefits are received. If benefits are deposited into a bank account, the amount will be deposited to that same bank account.

You can find a useful list of information about the stimulus payments at CNet, including the tip that typing your address in all caps has helped some people access their account information through the Get My Payment application.

Paycheck Protection Program

The second round of the PPP is still processing applications but is expected to run out quickly. If you are feeling shut out of the PPP, you are not alone. According to a CNBC survey of small business owners, only 13% of the 45% who said they had applied had been approved. Several small business owners also reported to CNBC that the funds they received were too little and too late.

In response to complaints that some recipients of PPP loans had access to other sources of funds, the SBA updated its guidance to clarify that prospective applicants should take “into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business.” Companies who determine they are ineligible for the PPP loans under the new guidelines have until May 7, 2020, to return the funds without facing any possible consequences. This new guidance also states that all PPP loans over $2 million will be audited, as well as other smaller loans “as appropriate.”

No one is sure how loan forgiveness for the PPP will work. Here is a template from California State University-Chico that you can use to calculate the amount that may be forgiven.

The problematic issue for many loan recipients will be the eight-week period during which employees need to be re-hired or retained. According to the law, this eight-week period begins on the date the loan is disbursed. But with shelter-in-place orders still in effect across much of the country, many businesses cannot reasonably bring their employees back until those orders are lifted. A better solution, as recommended by the AICPA, would be for the SBA to issue guidance that would allow the origination date to be interpreted as the date when a state’s shelter-in-place order is lifted.

Another potentially thorny point in the PPP concerns the deductibility of expenses used for loan forgiveness. The statute makes clear that the forgiven amounts will not be taxable income. However, the law says nothing about whether those expenses will be deductible. The IRS put out guidance on April 30, which states that the costs used to trigger loan forgiveness will not be deductible, to avoid a “double tax benefit.” 

However, the AICPA immediately pushed back, noting that the explicit statement in the statute that the loan proceeds would not be taxable, which implies that Congressional intent was to allow businesses to continue to deduct their usual expenses.

Employee Retention Credit

If your company misses out on the PPP, another option open is the Employee Retention Credit, as described in this Forbes article by CPA Tony Nitti. Under the CARES Act, businesses can use one of these options, but not both. The Employee Retention Credit provides a refundable payroll tax credit of up to $5,000 of wages paid to an employee between March 12 and December 31, 2020. Details on how the IRS has issued this credit works and how to take advantage of it.

HELP FOR SMALL BUSINESS

The Federal Reserve announced that they are changing the requirements for the Main Street Lending Program to make it easier for smaller businesses to receive funds from this program. Under the old rules, companies needed EBITDA (earnings before interest, taxes, depreciation, and amortization) of at least $250,000. When the expanded program comes into play, companies will only need EBITDA of $83,000 if they have no debt. 

This program offers business owners more flexibility regarding what they spend the proceeds on. Still, this program will be made available to larger companies, which means there may be more competition for funds. No launch date has been announced, so keep an eye on the Federal Reserve’s Main Street Lending Program website for details.

On the other hand, Gusto continues to update its state-by-state information on COVID-19 relief for small businesses. SmartAsset put together an exhaustive listing of financial resources.

As states begin to ease COVID-19 restrictions, people are venturing out, and businesses are creating new protocols for keeping employees and customers safe. Here are some tips from GoDaddy, which include adding additional physical space to keep people separated and switching to non-cash methods of payment.

Businesses planning on reopening might consider these tips from Inc. on how to support employees. Keeping lines of communication open helps employees remain engaged, and addressing health concerns individually is key to ensuring that people feel good about returning to work.

CASH FLOW TIPS

Lifehacker offers up reasons on why you might consider a budget, and why you should be skeptical of the great deals that cash-starved retailers may be pushing. For example, saving $20 on something that costs $100 might seem like a great idea, but you still have to spend $80, and perhaps that $80 could be spent on something more substantial. Keeping that cash in hand might be more valuable than saving money later.

Jira suggests that making a pivot to your business to capitalize on the new ways people are buying during the pandemic can help keep the cash coming in the door. To help small businesses learn new ways to keep more of that valuable cash on hand, an Entrepreneur is sponsoring an interactive webinar on May 14 on managing cash flow in uncertain times.

WORKING FROM HOME

Teamwork is the glue that keeps teams engaged and intact. But it is easy to lose that when everyone is working remotely. Forbes has some great ideas for maintaining workplace culture intact, including creating new daily routines that include both one-on-one and virtual group meetings.

Monitoring engagement among team members has never been as simple as walking around to peer into offices and cubicles. It is even harder when everyone is working from home. Entrepreneur offers up tips on how to monitor engagement in your remote team members plus ways to keep commitment at a high level.

Now that many of us have been working from home for a month or more, the cracks are beginning to show. Zoom meetings all day can be more fatiguing than working in the office all day. Fast Company has these tips for preserving your energy. CPA and yoga instructor Amy Vetter suggests these mindfulness and meditation apps as a way to remain focused and calm.

With everyone working, studying, and seeking entertainment online, your WIFI router may be showing its age. The Wirecutter has reviews of the best wifi mesh networking kits.

LIFE AFTER COVID-19

Nearly everyone agrees that a return to normal will be impossible. The Economist predicts that, at most, national economies will rebound to 90% of their possible capacity. This 90% economy will be more fragile than before, less innovative, and more unfair.

A survey by Fast Company’s culture consultancy looked at the ways companies have been (or have not been) supporting employees during the pandemic. The results suggest that businesses have the opportunity to make changes that will create better workplaces for everyone, and especially for parents. For example, they found that “36% of moms and 27% of dads want more flexible working hours. 20% of moms and 40% of dads want the ability to work remotely.”