COVID-19 Weekly Digest - June 17, 2020
When the COVID-19 pandemic was just beginning to spread, many of us were hopeful that by mid-summer, things would return to normal. However, most people are realizing that the coronavirus will be with us for some time to come. That’s one of the conclusions from a series of short articles that the New York Times aptly titled Six Months of Coronavirus: Here’s Some of What We’ve Learned.
The pandemic has also exposed shortcomings of the American public health system, confirming what Laurie Garrett wrote in her 2001 book, Betrayal of Trust: The Collapse of Global Public Health. On the bright side, though, we have learned that the virus does not last long on surfaces, and doesn’t appear to mutate very quickly.
Scientists and medical professionals have also learned treatment methods that are reducing the fatality rate of the virus and staying inside dramatically and visibly improved air pollution around the world.
Seeking out information is the best defense in any crisis, and will help you keep your business, your community, your family, and yourself safe!
CARES ACT UPDATES
Portions of the CARES Act, including the enhancements to unemployment will be expiring at the end of July, but few parts of the country have returned to normal yet. Another stimulus program may be on the way, but since Congress is not returning to Washington until July 21, it’s hard to predict what that might look like. Changes to the enhanced unemployment payments, an additional round of stimulus payments to individuals, additional help for small businesses, and relief for student loan payments are all under discussion.
Paycheck Protection Program (PPP)
Once again, the SBA and the Treasury Department waited until Friday evening to release the latest guidance on the Paycheck Protection Program. The latest “interim final rules” formalize the changes made in the recent update to the law and the joint statement from SBA Administrator Jovita Carranza and Treasury Secretary Steven Mnuchin. Businesses now have 24 weeks, instead of just eight, to use the funds, and can spend up to 40% of the loan on non-payroll expenses, instead of the original 25%. Partial forgiveness will be available if the 60% threshold of payroll spending is not met. A new application reflecting these changes is also up on the website. Even though the terms of the PPP were relaxed, more than $130 billion is still available
Business owners are struggling to understand and complete the 11-page forgiveness application, and even bankers say the application is more complex than the CPA exam or the bar exam. Senate Democrats are urging the SBA and the Treasury Department to simplify the forgiveness process, especially for smaller loans.
As chaotic and confusing as the PPP has been, important lessons have emerged that will help businesses thrive long afterward. Keeping an eye on cash is vital, as is having strong relationships with a banker and your accountant.
Bookkeeping questions in the CARES Act
Recording proceeds from the various CARES Act programs on their books is another puzzle for business owners and accounting teams. Is money received from the PPP a loan or non-taxable income—or both? What about the Employee Retention Credit—is this income or a reduction to payroll expense? And if payment of payroll taxes is deferred, what will that do to balance sheets? Definitive answers to these questions have not yet been provided. While current accounting rules do not require disclosure of government support, both the Financial Accounting Standards Board and the AICPA recommend disclosing as much information as possible to stakeholders.
Economic Injury Disaster Loans (EIDL)
The SBA is still working through its backlog of loan requests and is still only accepting new applications from agricultural businesses.
Fraudsters taking advantage of the CARES Act
Some small business owners are reporting that fraudulent unemployment claims against their businesses have been made under the names of fake employees or under the names of still-employed workers. International fraud rings may be taking advantage of the flood of applications and the quick turnaround time required by the law. Other frauds include fake offers of SBA loans and official-looking requests for recipients to repay their stimulus by loading an Apple gift card. If in doubt, call an official phone number, or ask a tax professional to evaluate any fishy looking correspondence.
Watch your credit report if you’re deferring payments
Under the CARES Act, borrowers can defer payments on federally-backed mortgages for up to 12 months without any adverse impact on credit scores. Payments on student loans can also be deferred through September. However, lenders may not report that penalty-free deferral correctly, so borrowers should monitor their credit reports carefully. Fortunately, all three credit reporting agencies are making free weekly credit reports available through April 2021 at AnnualCreditReport.com.
LIVING WITH AND AFTER THE PANDEMIC
Going back to work
Facing a hodgepodge of guidance from federal and state government, employment regulators, health agencies, and other rule-makers, employers and employees alike are confused about what new rules apply to workplace safety. Employment lawyers and other experts answer common questions in this article in the Wall Street Journal. For example, while the White House guidelines call for a three-phase return to work with precautions in place to protect the most vulnerable of workers, these guidelines do not have the power of law, so employers are not prevented from asking most employees to return. However, employers who do not abide by the CDC guidance run the risk of an OSHA complaint from workers.
A recent report by McKinsey encourages businesses to apply a four-step process to re-imagine the office and work-life after COVID-19. First, consider whether the usual procedures and processes for getting work done should be reconstructed. Next, think about the degree to which future workers will be remote or not. Some jobs and some employees need not be on-site all the time. Third, evaluate whether the current workspace design supports the ways that productive work and interaction happen. Finally, consider how much and what type of space will be needed.
New CDC Guidance
The CDC recently updated its guidance for remaining healthy and safe. Topic areas include how to stay safe if you go out, including safe use of public transportation. The CDC recommends wearing a face mask when venturing out.
While mask-wearing has become a political marker in some parts of the country, an article posted by the Foundation for Economic Education makes the argument that mask-wearing may bring about a swifter economic recovery if consumers feel safer when venturing out.
