There is an absolute blizzard of email and information out there regarding the coronavirus (COVID-19) and the associated economic effects. Our goal here is to give you a one-stop-shop where you can get your personal and business questions answered. Knowledge is power and the more knowledge that you have the better decisions that you will make.

The CoronaVirus

The coronavirus is a virus that was first observed in China in Dec 2019. It has now traveled the globe and is in just about every country on earth. It attaches to the lung cells and starts a great immune reaction.  That immune reaction is what is oftentimes fatal. That is why masks are so important: you don’t want the virus cells to travel to the lungs. The scariest part of this virus is that it is new to humans, so we don’t have any immunity towards it. Most people who catch it will recover just fine, but those with health issues may have trouble beating the virus. Right now, it is estimated that the fatality rate is about 1%.  Testing is so limited that there just isn’t a solid grasp on the number of people who have had it. The virus will remain dangerous until there is a vaccine to help us produce our own immunity. 

Because it can be so dangerous, a lot of countries and individual states in the US have shut down all public gatherings. The economy is therefore taking a huge hit. There is a battle between the epidemiologists who want to stay closed until the virus burns itself out (summer or fall) and the economists (who want to open once the large wave of cases is over). No matter what happens, it is important to note that this is only the first round of infection. We will likely see another large amount of cases in the fall surge back up during the cold and flu season. The 1918 flu cases began in the spring of 1918 with a small number of fatalities. The largest number of fatalities happened during the winter of 1919. Experts have said that we may have to implement multiple rounds of social distancing in order to stay ahead of the virus.

How Bad is Coronavirus in My Area?

There are several ways to track the spread of the virus. My favorite, 1Point3Acres, does a good job of tracking testing, infection and fatalities by state AND county. We are beginning to get city data now as well. How well are we testing?

Where is the Coronavirus Going Next? 

Kinsa Health makes a smart thermometer that sends temperature data to the web every time someone takes their temperature with this special thermometer. Since fever is one of the first signs, you can see a few days head start on where you might see positive cases in the future on this US Health Weather Map.

How Long Will Businesses be Closed Due to COVID-19?

If I had to guess how long businesses will be closed I would say somewhere between May 1 and June 1. First of all, the governor or mayor of your town has the ultimate authority to open or close businesses. They are monitoring several data models to understand what is happening and when the crest of cases is likely to hit. The President can suggest the reversal of social distancing, but local governments have the ultimate say.

Most experts agree that the closures will remain until the largest numbers of cases are reported. The University of Washington did modeling by state to show when the peak of the cases were likely to occur.  That can give you an idea of when your governor or mayor may open your state or city for business again.

We have another hint: a lot of the aid passed in Congress last week expires on June 30. That would suggest that businesses would open again sometime before June 1 to allow them to get back on their feet before June 30. In fact, if you look at the modeling, the crest of cases in the early states will be in mid to late April. 

How Do I Survive Between Now and When Business Opens Again?

View Infographic:
How Your Business Will Survive COVID-19

 

 

 

 

 

A.  Congress Passed Three Pieces of Legislation

1.Coronavirus Preparedness and Response Supplemental Appropriations Act (passed March 6 for 8.3B)

What does the law cover?

• Vaccination developments and research
• Masks and other protective gear for healthcare agencies treating patients
• Health agencies across all levels of government to increase testing and implement measures to control coronavirus
• Loan subsidies for small businesses

2. Families First Coronavirus Response Act (passed March 18 for up to 100B)

What does the law cover?

• Food assistance for children reliant on school meals that now face closures
• Unemployment insurance for laid-off workers (this is where the extra $600/week came from) 

In addition to the state unemployment benefit, the federal government is kicking in $600/week for four months. Benefits are extended to 13 weeks beyond the number of weeks that the state provides. This will greatly increase the unemployment compensation that people will receive. Some states only pay $200-400/week. With an extra $600/week, some people will be receiving their regular salary. Learn more about unemployment insurance.

• Medicaid funds for state and local government workers
• Free Coronavirus testing for those who need it but cannot pay
• Reimbursements for businesses who give workers paid sick leave 

As part of the Phase II stimulus, full-time employees of businesses with fewer than 500 employees are granted 80 hours of sick leave (part-time workers are paid an equivalent amount.) Payments are equal to 100% of compensation or a maximum of $511/day. It is paid via a refundable employer tax credit.  Just in the last couple of days, the IRS has issued form 7200 for employers who want an advance on the credit amount.

• Paid Family Leave 

The Phase II stimulus created a paid family leave credit equal to $200/day or two-thirds of the employee’s usual pay. Employees are eligible if they have worked for the company for one month and cannot work or telework due to COVID-19. They are also eligible if they need to quarantine, care for a family member, or care for a child at home because of a school closure. 

Read Department of Labor family and sick leave rules

• Delays of payment of Employer Payroll Taxes – payroll taxes due to the IRS through the end of 2020 can be deferred with 50% due by December 31, 2021 and 50% due by December 31, 2022
• Changes to Net Operating Loss Rules to allow for refund of taxes from 2018, 2019 and 2020

3. Coronavirus Aid, Relief, and Economic Security (CARES) (passed March 27 for 2T)

What does the law cover?

Direct Payment to Individuals 

As part of the CARES act, the Treasury will send out checks in the next couple of weeks. They will send $1,200 to each individual and $500 for each child. 

The $1,200 payment is based upon the 2019 or 2018 tax return (whichever is filed later). PAYMENTS ARE NOT TAXABLE. The credit is reduced for any amount earned over $75,000 per individual, or $150,000 per couple, and will phase out entirely with people making $198,000 per year. The Treasury will send funds directly to the bank account used on the tax return. If there is no bank account on file, then they will mail a check to the address on the tax return. Kiplinger has a nice tool to calculate the amount that you will receive.

There are a few quirky things in the bill. Dependents are defined as children under 17. Everyone will receive some kind of check. People without taxable income will receive $600 per person.

NOTE: This is an advance of a credit calculation on the 2020 return. If you get less than the $1,200 and you are due the full amount, you can take the credit on the 2020 return. BUT if you got the full $1,200 and you were not supposed to receive that amount, it is unclear if you will need to pay that back on the 2020 return. The house bill says that you don’t, the senate bill is silent on the subject. As we get more detail on the program, we will share it with you. 

EIDL Program

The EIDL loan program is an existing loan program to help people who are subjected to a disaster get through the disaster period. It is administered directly by the SBA. Be careful with this program,  participating in the programs may make your PPP loan more difficult. I am advising my clients to go ahead and apply for the loan, but do not accept any funds until we have clarity regarding the PPP loan and how to separate out the payroll costs from the larger EIDL. 

• Loan size up to $2million
• Eligibility Small businesses (breweries must have less than 1,250 employees)
• Interest rate 3.75% for small business (2.75% to non-profits)
• Term length up to 30 years
• Apply directly to the SBA
• You can call the SBA disaster assistance customer service center at 800-659-2955
• Email disastercustomerservice@sba.gov
• Small Business Guidance and Loan Resources
• Emergency grant (advance of $10,000 within 3 days)

Small Business Interruption Loan or Paycheck Protection Program (PPP)

The Small Business Interruption Loan or ‘paycheck protection program’  was enacted through the CARES Act. It is administered by banks. You will need to contact the SBA department of your local bank to see how you can apply. Those of you who have active SBA loans will probably get a call from your bank with the steps needed to apply. Even though the CARES Act created the loan program, some of the rules have not been published yet.  We expect banks to take loan applications as early as April 3, 2020 and distribute the funds within a week or two. It allows for a 4% loan on 2.5 times the average monthly payroll cost. Payments are deferred for 6 to12 months, and pre-payment fees are waived.  

Payroll cost is defined by:

1. Direct deposit or checks given to employees
2. Employer paid health insurance premiums

The loans are eligible for forgiveness based upon the employee staffing levels.

The loan can be used to pay:

1. Employee salaries
2. Mortgage payments
3. Rent
4. Utilities

You cannot receive a loan for the same purpose. So, if you obtain an EIDL loan, you can not use it for payroll expenses. It is possible to refinance EIDL loans into PPP loans. You just need to track where you are spending the money. 

• SBA Loan Relief 

The SBA is paying six months of principal and interest payments for SBA guaranteed loans for six months. If you have an active SBA guaranteed loan, your banker should have reached out to you regarding this program.

• Employee Retention Credit

There is a new refundable tax credit equal up to $5,000 for each employee for wages paid after March 12, 2020 and before January 1, 2020 if your business lost at least 50% decline in revenue. The 50% decline is calculated by looking at the same quarter in 2019. The credit continues until it reaches $5,000 per employee. You can not claim the credit for any wages covered by an SBA loan. (EIDL or PPP) This is funded by a refundable tax credit of the employer portion of social security and Medicare. 

• Qualified Retirement Plan Withdrawls rules are changed 

Up to $100,000 can be withdrawn penalty-free from IRAs or employer-sponsored retirement plans. The income tax due will be spread over three years (2020, 2021, 2022). If you are subject to the RMD (Required Minimum Distribution) you can skip the RMD for 2020. This includes 2019 RMD that was delayed until April 1, 2020. We don’t know how to treat inherited IRAs. We are waiting for guidance from the IRS. The IRS has increased the permitted IRA loan amounts to 100% of the vested plan balance or $100,000. Any existing loan that was to be repaid can be paid in 2021.

• The Coronavirus Economic Stabilization Act (CESA)  the 500B program for employers with over 500 employees

 

B.  Other Government Actions

• Income Tax Filing and Payment
• Federal tax filing and returns will now be due on July 15, 2020. You can file an extension to October 15, 2020.
• Student Loans 

Student loans can be deferred until September 20, 2020 without penalty. The borrower MUST ask for a forbearance from their loan servicer. Interest rates on loans that are not in default will automatically set to 0% for at least 60 days. Read more about student aid during COVID-19. 

Check with your state to see if they have moved any deadlines for filing and payment

• State and local Relief Programs  

 

C.  Business Service Providers

Check with your business partners to see if they are offering discounts, payment deferrals, or grants to small business. I’m beginning to see media companies start small business grants programs. Beverage Business Builders will be watching and providing links when appropriate.