COVID-19 SURVIVAL GUIDE FOR SMALL BUSINESSES

COVID-19 SURVIVAL GUIDE FOR SMALL
BUSINESSES

          This material should not be relied upon by you in evaluating the merits of grants,
          financing or a specific tax stance without being properly advised by a professional. It
          shall be the recipient’s sole responsibility to verify his / her eligibility and to comply
          with all requirements under applicable legal and regulatory regimes in receiving this
          communication and in making any borrowing or tax decisions.

INTRODUCTION & HOUSEKEEPING

              Holly Corcoran, CPA                         Tim Hegarty, CPA
    Holly began her public practice in 1991 and Tim started in 2004 after leaving
               corporate America. They joined forces in 2013 to form
                        Corcoran Hegarty & Associates, LLC.

                                      Housekeeping
•    Please use the text chat box to enter questions during the webinar. Everyone is muted
•    Take notes and we will discuss during our phone conversation
•    I will be sharing my screen to show the video, some may have joined by telephone &
     the slides were emailed last night.
•    Please check our website COVID19 (http://www.cpa-pa.com/COVID-19-Update.php)
     page as we are updating it as we have more information available and will load the
     recording of this presentation.

                     WEBSITE: www.cpa-pa.com

ACRONYM GLOSSARY
SBA - Small Business Administration
IRS - Internal Revenue Service
EIDL – Economic Injury Disaster Loan
PPP - Payroll Protection Loan
PAUC- PA Unemployment Compensation
NEPA- North East PA Alliance
SBDC - Small Business Development Center
CWCA - Pennsylvania’s Working Capital loan
CEDO – Certified Economic Development Organization (locally - Pocono Mountains
   Economic Development Corporation)
SE-Self employed

WHAT IS AVAILABLE FOR SMALL BUSINESSES
              TO HELP SURVIVE THE COVID 19 SHUTDOWNS?
                                  OUTLINE
1. $10,000 one-time SBA grant as a part of the Economic Injury Disaster Loan
   Application(EIDL)
2. Payroll Protection Program (PPP) (grant/loan)
3. Other loans under SBA Section 7a(b)(2)
4. Unemployment for employees, SE individuals and S corporation owners
5. PA disaster loans & local NEPA contact
6. Family leave act-accelerated
7. Employee retention credits
8. Delayed payments of employer payroll taxes
9. Business income tax provisions
10.Deferral on SBA 7a loan repayments
11.Deferral of IRS installment loans

EIDL $10,000 GRANT:
 Who/Why-
        All small businesses less than 500 employees & SE’s
        “Speedy” cash inflow, non repayable, tax forgiven
 If you have not done so already, file for the EIDL
  through the SBA at https://covid19relief.sba.gov/#/
 Funds expected to take 3-4 weeks and is added to PPP
  if you apply.
 Other SBA/EIDL options discussed after the PPP.
 However, if this is all that is received it is a nontaxable
  grant.
 If a PPP is received the overall forgiveness is calculated
  with this $10k added on.

PAYROLL PROTECTION PROGRAM (PPP) (GRANT/LOAN)
 Who/Why-
                All small businesses less than 500 employees. & SE w/o payroll
                Maybe all or partially non repayable, no guarantees or collateral, tax
                 forgiven
   Ave monthly payroll costs (Health Ins, retirement included) multiplied by 2.5
   Seasonal different calculation for monthly amount
   Excludes: compensation > $100000, residents outside US, Family leave law
   75% of the proceeds must be used for payroll costs
   Remaining 25% can be paid for Rent, Mortgage interest, Utilities, other
    interest on debt incurred prior to 2-15-20
   Head-count of employees- same or higher by period end
   If 100% of the proceeds are utilized as above the 8 weeks following the loan &
    employee headcount same or higher, then 100% of it will be forgiven
    …However, don’t forget the $10,000 EIDL is added to this loan and will be
    calculated in the above percentages.
   ------Portion of the loan not forgiven gets a 6 month deferral for repayment,
               18 months to be repaid (2 yr loan-total) at 1% interest

PPP LOAN “SIMPLE” EXAMPLE
                                           Maximum Loan Amount
                     Represents the maximum amount a qualified borrower may apply for.
                                                                                  Last 12 Months Average Monthly

Maximium Loan Amount:

 Payroll Costs:*

  Salaries, wages, commissions, vacation and sick pay (not to exceed $100K
                                                                                  $             $
   per employee) other than qualified sick or family leave                        120,000       10,000

  Group Health Insurance                                                          12,000        1,000

  Retirement Benefit Costs                                                        18,000        1,500

  State/Local Taxes on Employee Compensation (i.e., employer U.C. tax)            2,400         200

  Self-Employed Income (and subcontractors) not to exceed $100K per year

   per self-employed prorated for the period February 15, 2020 to June 30, 2020   84,000        7,000

                                                                                                19,700

                                                                                                 2.5
                                                                                                 $
Subtotal                                                                                      a) 49,250

                                                                                                 $
MAXIMUM LOAN AMOUNT [Lesser of a) or $10 million]                                             b) 49,250

PPP REDUCTIONS IN AMOUNT FORGIVEN
• Reduction of # of employees not restored
• Reduction in individual employee compensation
  by 25% not restored
• Utilizing less than 75% of disbursements for
  payroll
• Receive $10,000 EIDL & not utilized as above
• Restoration by June 30th resolves problem
• Borrower’s responsibility to provide
  documentation for loan and forgiveness amount

PAYROLL PROTECTION PROGRAM (PPP) (GRANT/LOAN)
                 CONTINUED …
 Suggestions:
    Seasonal business -use alternate calculation of to your benefit
    Project your cash flow needs for allowable expenditures (payroll, health
     insurance, retirement, rent, mortgage interest, utilities)
    Know up front what your estimated forgiveness v loan
    Determine if adding staff or approved expenditures will allow more of the loan to
     be forgiven
    Deposit funds in a separate bank account and disburse for approved expenses
    Monitor your recordkeeping monthly with forward projections to see where you
     will be at the end of 8 weeks – this is based upon cash flow, not accrued
     expenses.
    At CHA, for those clients we assist with their payroll, we will assist in gathering
     the appropriate data. We can work as your agent to apply for the PPP loans and
     receive a fee (up to $350,000 loan) that is paid from the SBA fees paid by the
     lender, not out of your pocket.

OTHER OPTIONS:
Disaster Loans under Section 7(b)(2) of the SBA
 Who/Why-
            All small businesses less than 500 employees. & self employed
            Need loans for operating expenses or capital items(equip, etc)
            If $200k or less-no personal guarantee
--- Loans of up to $2 million made directly from the SBA are available to meet working
     capital needs or normal business operating expenses when there has been a
     qualified disaster.
--- Current covered period is January 31, 2020 through December 31, 2020.
--- Term is 30 years, rate is 3.75% for for-profit businesses; 2.75% for a not-for-profit.
--- No longer required to be in business for 1 year before the disaster
-- Cannot double dip on expenses with PPP loans

PA UNEMPLOYMENT:

Employees laid off due to Covid-19 will
 not impact the employers contribution
 percentage

PA is working on a way to allow Self
 Employeds and owners of corporations to
 be eligible for UC Benefits. This has not
 yet been settled.

PA DISASTER LOANS:

 Working Capital Access Program (CWCA) – visit
  https://dced.pa.gov/programs/covid-19-working-capital-access-
  program-cwca/ for more info.
 These are up to $100,000 for working capital
 More formal loan application
 Personal and business guarantees and collateral requested
 As of April 8th, PA has suspended taking further applications.
 Monroe county CEDO= Pocono Mountain Economic Dev. Corp.
      Chuck Leonard: cleonard@pmedc.com
 NEPA has 11 local loans available . Contact:
  Stephen Ursich - (570) 891-4649 sursich@nepa-alliance.org
  Kenneth Doolittle - (570)891-4659 kdoolittle@nepa-alliance.org
  Donovan Klem - (570) 891-4668 dklem@nepa-alliance.org
  Dave Nat - (570) 891-4651 dnat@nepa-alliance.org

FAMILY LEAVE LAW COVID19 CHANGES:
 Makes effect on April 1, 2020 and now includes businesses
  with LESS THAN 500 employees.
     Makes more small businesses responsible
     COVID19 provisions:
         Employee is sick with COVID19
         Employee caring for a COVID19 ill family member
         Employee must stay home to care for child – no daycare
 Tax credits for employers for providing paid family and sick
  leave – provides $/$ relief.
 These areas are more in the HR area and while we are not
  experts in this area, we wanted to make you aware of the
  new guidelines.

EMPLOYEE RETENTION CREDITS
 Who/Why-
           All small businesses less than 500 employees. with payroll
           Gov’t shut down business due to COVID19
           Or still “open” w ith gross receipts down by 50%
 The amount of the credit is 50% of qualifying wages paid up to $10,000 in total.
  Wages paid after March 12, 2020, and before Jan. 1, 2021, are eligible for the
  credit. Wages taken into account are not limited to cash payments, but also include
  a portion of the cost of employer provided health care.
 Qualifying wages are based on the average number of a business's employees in
  2019.
    100 employees- only available if employees are paid and are NOT working.
 Form 7200 to be filed to show how credits were applied – but it is real time
  reduction of tax deposits to cover wages.

DELAYED PAYMENTS OF EMPLOYER TAXES.
 Tax portion of the Employee Retention credit- additional credit
  against employer share of Social Security tax.
 Defer employer 6.2% tax during 2020 until 2021 (50%) and 2022
  (50%)
 Can’t defer taxes if business has a PPP loan that is forgiven
 Self employed taxpayers can defer 50% of SE tax until 2021 (half
  of what was deferred) and 2022 (remaining half)– so they can
  reduce their estimated payments without penalty and will not owe
  it until 2021 and 2022
 CAUTION: the business does not want to get in trouble with payroll
  taxes, so a systematic savings for those taxes should be employed
  to make sure the repayment is available when necessary.

TAX PROVISIONS:
 Extension deadline to July 15th for federal , PA & Local
 Net operating loss carryovers
 Deferral of 1040 taxpayer loss limits
 Acceleration of corporation Alternative Minimum Credits
 Business interest deduction
 Tech correction for faster write offs of interior building
  improvements
 Delayed pension funding
 SBA loan forgiveness nontaxable
 Implementation of Code 139 for nontaxable disaster payments to
  employees

These are mentioned just as ticklers if some of it applies to your
   business and some may involve amending prior year returns to
   free up cash immediately.

DEFERRAL OF CURRENT DEBTS TO SBA & IRS

SBA deferral of 7a loans that were not in
 default: The SBA will automatically pay the
 principal, interest, and fees of current 7(a),
 504, and microloans for a period of six months.

IRS installment agreement payments between
 April 1 to July 15th suspended upon request.

HOW CAN CHA HELP?

• Act as your agent for PPP or EIDL Loans
• Review your taxes in relation to the new CARES act
• Cash flow planning and projections to monitor
  spending
• Scenario planning with small business owner
• Assist in creating a better recordkeeping system
• After this COVID19 crisis passes-disaster planning.
• Please note CHA fees may apply.

CONCLUSION:
The CARES act (all 880 pages) involves A LOT of
  new provisions in the hope of getting cash in
  the hands of small businesses to carry them
  through this crisis. Please reach out to
  schedule a complimentarily telephone call to
  assess your unique situation and determine
  what services you may need.
  Email info@cpa-pa.com
       Thank you and we hope this helps!