Potentially Free Money for Small Businesses with less than 500 employees. Help to Get Through the COVID-19 Pandemic: Paycheck Protection Program via the CARES Act.



Free Money = (Potentially)

Help for Your Small Business to Ride Out the COVID-19 Pandemic

Small businesses can possibly really help themselves with a loan based on the Paycheck Protection Program. It appears to be a really strong incentive to maintain payroll in businesses that qualify for one of these loans and some or all of those loans could even be forgiven.

I know the ink on the Cares Act is still wet. But I have clients calling about it and they wanted to know what the deal is with the loan based on payroll that can be forgiven. From what I can tell based on the information that is out there, many of my clients can get loans and potentially not payback most of the loan if they can maintain at least 75% of their payroll.

The Loan Amount

Again, from what I have read, it may be possible for small businesses with less than 500 employees to get a loan for 2.5 times their average monthly payroll based on the last 12 months.

The Potential Forgiveness of the Loan

Assuming the business maintains at least 75% of its monthly payroll from the last 12 months, the business could get the loan forgiven in an amount up to what it pays in the eight weeks from the origination of the loan in payroll, rent, interest on mortgage obligations, and utilities.  And it appears that health care insurance is included. 

However, the amount of the forgiveness can be reduced if the business does not maintain its level of payroll. Here is the quote form the skadden.com posts that contains this information:
"The amount forgiven is lowered by reductions in full-time employment and in situations where total salaries and wages fall by more than 25% from the applicable prior period, but this can be mitigated by rehiring employees. Amounts not forgiven continue to be guaranteed and will have a maximum maturity date of 10 years from the date the borrower applied for loan forgiveness."

If a business can take out one of these loans and maintain at least 75% of their payroll it could be good deal for them because of the forgiveness of a substantial part of the loan and hence free money. Running some numbers for some of my clients today, the deal looks better for clients that have a good amount of rent and utilities. For my clients it looks like they could get these loans and wind up paying back only 8-20% of the loans. This can be a really good deal to help small business with their cash flow, retaining employees, and keeping their doors open. One key is to maintain payroll during the eight weeks following loan origination.

The Numbers

Let me add some perspective. It appears one of my clients who has payroll, rent, and utilities could get a loan for around $180,000 and if his payroll stays the same or around the same he will only need to pay back only about $30,000. If everything is as I have read so far is correct, my client could get about $150,000 of basically free money to help him through the COVID-19 pandemic and the resulting business crisis.

The question for the business owner is how much would they cut back payroll and other operating expenses without this loan and compare those costs to their net out of pocket with the loan. Would they have better cash flow one way or the other? Also, what will their market look like coming out of the pandemic?  Does the loan make sense to help the business get through this COVID-19 crisis?

To look at numbers for your business, use my email address below to contact me to arrange a consultation via a phone or Zoom or Skype call.


The CPA Superhero
jeff.jhtaxes@gmail.com
217-923-8007





Be careful when reading about tax law and its application, including my articles, because the wording and definitions are such a challenge and are influenced by writers perspective, specifically his own clients situations that he is mindful of and other situations the writer is not thinking of. The point is talk to your CPA about your situation and circumstances and don't rely on or make conclusions based on articles you read, including articles form irs.gov, because concepts and definitions are not very clear, and of course, they are subject to change. Now is the time to be having discussions about your situation and developing strategies for you and your business. Again, contact me using my information above to discuss your situation. I help business owners all over the U.S. and in foreign countries with their tax returns.

Delayed Tax Payment Due Date Opportunity to Make a Strategy for Your Business for 2020



News - It is now official: The IRS has extended the filing deadline per this release from the IRS:

The Treasury Department and Internal Revenue Service announced today that the federal income tax filing due date is automatically extended from April 15, 2020, to July 15, 2020. 
Taxpayers can also defer federal income tax payments due on April 15, 2020, to July 15, 2020, without penalties and interest, regardless of the amount owed. 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.
Taxpayers do not need to file any additional forms or call the IRS to qualify for this automatic federal tax filing and payment relief. 

What does it mean

Beyond the obvious, it means you now have more time to consider what will happen to your business this year, 2020, and plan tax strategy. Most businesses don't know what the pandemic will mean for their business and profits for 2020 and are worried about cash flow. You can delay for your first quarter estimated tax payments until July 15, 2020. This gives you time to assess how much that payment should be made for and if you need to make a payment. So while you are assessing your business now and delaying your tax payment for 2019 the planning for 2020 will be of greater importance than past years. I anticipate ongoing discussions with my clients about a strategy for making that payment on July 15th. There is a lot we don't know now but in the next few weeks to a month we may know much more.

Now is the time: Paying for 2019 Taxes and Making a Strategy for your business and your cash flow

Many may struggle to make their 2019 tax payments even though they are delayed until July 15th. For many they will need to work with the IRS to arrange an installment agreement and possible an Offer in Compromise. There may be some strategy in looking at your situation and timing an offer to the IRS. In some cases it may be good strategy to wait to negotiate with the IRS until filing your tax returns for 2020 which may show a lot less income and then request a payment plan based on that income. It could give you time to address cash flow issues and help your business to survive and thrive. The time to start thinking about this and planning a strategy is now and in the time leading up to the July 15, 2020 tax payments when hopefully things will have stabilized and we can know more about the present and future.

You need a CPA Superhero to help you through these times. I have been helping clients work out payment arrangements with the IRS and I can help you too. You may not need a payment plan but you might need the CPA Superhero to help you plan your strategy in this critical time. I work with many dynamic business owners and we regularly communicate virtually as a standard way of doing business which happens to be strategic now with this pandemic. So feel free to contact me now about your situation using my email address below to arrange a phone call or conference via Skype or Zoom.



The CPA Superhero
jeff.jhtaxes@gmail.com
217-923-8007



Posts:

Be careful when reading about tax law and its application, including my articles, because the wording and definitions are such a challenge and are influenced by writers perspective, specifically his own clients situations that he is mindful of and other situations the writer is not thinking of. The point is talk to your CPA about your situation and circumstances and don't rely on or make conclusions based on articles you read, including articles form irs.gov, because concepts and definitions are not very clear, and of course, they are subject to change. Now is the time to be having discussions about your situation and developing strategies for you and your business. Again, contact me using my information above to discuss your situation. I help business owners all over the U.S. and in foreign countries with their tax returns.

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