CANCEL unnecessary/discretionary subscriptions
CANCEL Auto-Pay - and lower monthly payments where possible
RENEGOTIATE credit cards for lower interest rates or balance transfers where possible. Confirm hold on loans and other debt relief on interest due to CARES ACT.
BUDGET your ongoing Monthly Expenses to what is critical. Eliminate the unnecessary.
PRIORITIZE and EVALUATE Cost/Benefit for Payroll Costs and Contractors spend in light of critical functions, reduce hours where possible, involving staff on reaching these decisions is necessary for long-term retention.
DEFER Tax Payments
Personal and Corporate Income Tax Returns – extended from April 15th to July 15th, or October 15th with an extension filed by July 15th.
Employer portion of Social Security Tax deposits that would’ve come due on period from March 27 to December 31st, 2020. (deferred to 2021 and 2022)
This info is 1 of 3 of NEW data components on the DRAFT Revised Form 941, TBU.
If SBA confirms PPP loan is forgiven, may not defer these taxes.
Deferment – 50% due December 31st, 2021, 50% December 31st, 2022
Self Employed may defer 50% of the Social Security Tax
COMMUNICATE with other Service/Utility providers and Vendors to push out/restructure payments. Keep details of all communications and changes to payment activity, and update contracts in writing by both parties.
The goal is to defer payment where possible until operational again and to not incur NEW operational expenses
***Criteria and Guidance is changing - be careful, keep notes, establish good reporting***
IRS Stimulus - $1200 per qualifying person + $500 dependents with reductions for higher Income earners (see FAQs below). Trick: To get status enter a ‘.’ after an abbreviated street name (Dr. Hwy. Ln.) to get status.
State Unemployment Insurance (Employees) Benefits
Pandemic Unemployment Assistant (PUA) available for business owners, independent contractors, self-employed, freelancers, gig workers that received a 1099 in 2019. Can apply for benefits beginning April 28, 2020.
Economic Injury Disaster Loan (EIDL) – SBA is unable to accept new applications at this based on available appropriations funding. Applicants who have already submitted their applications will continue to be processed on a first-come, first-served basis.
Paycheck Protection Program (PPP) – applications re-opened April 27th. Continue with your Business Bank/Lender – OR – other SBA 7a lenders such as Smart Biz Loans.
Key Points – Forgivable if payroll costs account for at least 75% of loan and mortgage interest, rent, utilities 25%. Must track these costs for 8 weeks following loan disbursement. Payment deferred for six months. If loan used for other purposes, SBA will require repayment.
Payroll costs calculated as 2.5 x avg mth payroll
Changes to guidance from early April:
Payments to Subcontractors (1099s) are to be Excluded because they can apply directly
Independent Contractors, Sole Props and Self-Employed can apply. Payroll Costs are net earnings.
Interest rate was changed from .5% to 1%
First Come First Serve
See Fact Sheet for additional info
Families First Coronavirus Response Act (FFCRA, Sick and Family Leave Pay Relief)
Wages paid from April 1st to December 31, 2020, see detailed criteria below
This is 2 of 3 NEW data components on the DRAFT Revised Form 941, TBU.
Refundable tax credit but must file Form 7200 in advance and fax Quarterly
Work with your payroll provider and document any Leave Pay paid including documentation from impacted staff
Employee Retention Tax Credit (ERTC)
A good Plan B for PPP but presents a Cash Flow issue
Must have had either fully/partial suspension of operations – OR – gross receipts drop of 50%+ vs comparable quarter in 2019
Payroll Tax credit of 50% of wages paid up to $10k maximum, so $5k maximum credit per employee for the entire period March 27th to December 31st, 2020
Begins with Q2 2020 (April-June). Ongoing guidance for last few days in March to be added to Q2 form.
This is 3 of 3 NEW data components on the DRAFT Revised Form 941, TBU. Will report employment taxes retained (instead of deposited, these = credits). Refundable tax credit but must file Form 7200 in advance and fax Quarterly.
Recipients cannot also receive a PPP loan.
Cannot double-dip, i.e., include wages for which employer received tax credit on FFCRA
Employees not counted if employer is allowed a Work Opportunity Tax Credit for employee
Rules change for over 100 FTEs (tax credit only on Employees paid that did not work)
Quick math establishing point where ERTC is better than PPP:
Assuming 3 FTEs or 6 PTEs at $25/hour, 40hours/wk, 4wks/month = $12k payroll per month x 2.5 = $30k PPP Loan (forgivable)
Equivalent $30k ERTC based on 6 Employees, their max wages $10k (for $5k max credit per employee) would be reached in approx. 2.5months ($1k/week).
ERTC a preferred option for >6 employees in this example.
Bookkeeping / Financial Reporting is critical for the entire loan process
Loan applications – summarize totals using .xls that justify with pertinent backup the # on application. Backup includes payroll journals, and/or owner draws details AND Bank Statements. It’s ok to make notes on the application and backup to tie it all together!
Loan disbursements tracking – for 8 weeks following receipt of loan proceeds
Due diligence – on employee related leave, business disruption, loss of Clients
Lessons Learned – Payroll vs Draws, Legal Structure (Sole Prop vs Corporation), Bookkeeping
Actionable steps – bookkeeping, financials, timeline based game-plan for funding
Growing your Biz / Attracting Investors and Outside capital – many of these takeaways will prepare you.
www.bigpicresults.com – newsletters spell out program details and IRS resources
Dropbox link - https://www.dropbox.com/sh/y3thqmsqaclrsar/AABQTpJk-KcHUZSKNdMhK8b5a?dl=0):
PPP Fact Sheet
RS Form 7200 – for advance credit against employer payroll taxes
.xls template to justify PPP Loan amount incl. sample Owner Draw report
.xls template to track 8 week disbursement period for Paycheck Protection Program
.xls template Cash Flow tracking against Monthly P&L (can forecast as well)