Opportunities for Business Owners With No Employees
You’ve likely been receiving our email blasts in relation to the new tax credits and SBA loans available as a result of the Covid-19 virus outbreak and its related impact on the economy. While many of you business owners with employees have begun to take advantage of the following opportunities, some of you that are self-employed, independent contractors, farmers and partnerships may also be eligible for these credits and loans.
- Emergency sick leave credit – 100% credit for wages paid (limits apply) while employee is unable to work due to one of the specified criteria for up to 10 days. (see our previous email for details)
- Family leave credit – 100% credit for wages paid (limits apply) while employee is unable to come to work or telework because they are caring for a child while school is closed or they have Covid like symptoms. (see our previous email for details)
- Cares Act – SBA loan or Employee Retention Credit (but not both) – see below for discussion of SBA Loan. The employee retention credit give a 50% credit to employers who continue to pay their employees during a government imposed full or partial suspension of operations . This credit is available to employers with less than 100 employees, even if employees continue to work!
You may be eligible for the SBA Paycheck Protection Program loan, even if you don’t have employees. If you are self-employed, you can use your 2019 net income on your Schedule C or Schedule F to calculate your “payroll cost” on the application. Payroll cost will include amounts paid for health insurance and other employee benefits. If you did have employees, their gross pay gets added to the calculation as well.
The loan is fully forgivable, and forgiveness is pretty simple for self-employed, i.e. forgiveness is 2/12 of your 2019 net income reported on Schedule C or Schedule F plus loan interest, rent and farm utilities paid during the 8 week period after receiving the SBA loan.
The news indicates that while the first $350 billion of available funds has been disbursed to eligible businesses, Congress at the end of last week was close to freeing up another $250 billion to insure all eligible businesses were funded. We’ve attached the loan application used by the SBA. You may want to reach out to your bank to verify when they will begin accepting applications for the second round of funding. Don’t delay, you want to be at the top of their stack in order to get funded before the new money runs out.
The SBA also has an emergency injury disaster loan emergency advance that will provide up to $10,000 of economic relief to businesses that are currently experiencing temporary difficulties. While the funds were to be made available within days of online application, the SBA has delayed awarding the grants. If you’ve applied, but haven’t seen any funds hit your bank account yet, recent responses from the SBA indicated that funds will be distributed limited to $1,000 per employee, thus you won’t receive the full $10,000 unless you have 10 employees. At this time, the SBA is no longer accepting applications due to limitations on available appropriations funding.
The Cares Act provided other opportunities that may work for you including:
- No 10% additional tax for coronavirus-related retirement plan distributions
- Required minimum distribution from retirement plans waived for 2020
- Increased charitable deductions for 2020
- Extension of net operating loss carry back to 5 years
- Delay of payment of employer payroll taxes
- Changes in definition of qualified medical expenses – not limited to prescribed medicine or drugs
All of us at Westbrook & Co., PC have been reading and digesting the new legislature that is geared towards protecting businesses and employees from financial distress as a result of Covid-19. If you would like to discuss any of these provisions that may affect you or your business, please feel free to give your Westbrook & Co., PC contact a call. PPP App