How Coronavirus is Affecting Small and Midsize Businesses
Over the past few weeks, news channels, social media platforms, radio stations, and casual conversations have been dominated with information relating to the novel coronavirus, COVID-19. We’ve seen a drastic shift in how we live our daily lives and every day brings updates and more uncertainty. What was concrete information yesterday is old news today and more people across the country are growing increasingly panicked. In addition to unexplainable toilet paper shortages, mandates to stay at home have caused people and businesses around the country to suffer. We’re all innately social and at the beginning of this pandemic, many people refused to make such drastic changes to their daily lives. No one wanted to stop seeing their friends or family, going out to eat, or even attending parties. However, as things have started to escalate, the government has stepped in.
Now, businesses across the country are forced to close their doors unless they can justify a reason to stay open during these times. Unfortunately, many small and midsize businesses do not fall in the category of “essential business” and were forced to either close completely or move online. For many businesses, a completely digital sector is impossible—they rely on customers coming in to brick-and-mortar stores for services, products, or general exposure.
While we can continue to hope that this lock-down and the debilitating effects of the virus passes quickly, the reality of it is that many businesses won’t have enough overhead to re-open. They’ve been pushed back to square one and without any outside help, so it makes sense that business owners everywhere are panicking. While many big businesses that are asking for handouts are publically discussed, there are thousands, maybe even millions, of small business owners who feel lost and helpless. How can one small business owner in a rural town of the Midwest get the attention of the federal government, especially at a time like this?
Luckily, the collective voice of small to midsize business owners everywhere has led to some promising news.
On March 20, 2020 the U.S. Treasury Department, Internal Revenue Service (IRS), and the U.S. Department of Labor announced that small and midsize businesses are eligible to take advantage of refundable payroll tax credits. This means that employers will be reimbursed for paying their employers during the COVID-19 closures and government mandated leave. This falls under the Families First Coronavirus Response Act (Act) that was signed on March 18, 2020. What exactly does this mean for you? Simply put, as an employer with fewer than 500 employees, you’ll be able to provide employees with paid leave during these times, either for the employee’s own health needs or to care for family members. You will not have to choose between paying out of pocket when you’re not making profits or laying off a majority of employees. One of the reasons that the government wanted to push for this act was to avoid people having to choose between public health and safety or their jobs.
Some Key Information
The Act allows for paid sick leave for workers, complete coverage, fast funds, small business protection, easing compliance, and more. Let’s break this down to get a better understanding of what this means for small to midsize businesses.
First and foremost, for any COVID-19 related reason, employees can receive up to 80 hours of paid sick leave and expanded paid child care leave during school closures or insufficient access to child care. Employers also receive 100% reimbursement for any paid leave that’s pursuant to the Act defined above. This includes health insurance costs and also covers self-employment. There will be no payroll tax liability for employers. When processing reimbursements, the government has developed a process in an attempt to send out refunds as fast as possible. All tax offsets against payroll taxes will be provided dollar-for-dollar.
Even smaller businesses are eligible for exemption from certain requirements. All of the requirements are subject to 30-day non-enforcement period for good faith compliance efforts. If you’re in need of immediate access to outside funds, businesses can use the funds that they would otherwise pay to the IRS in payroll taxes to cover paid leave. If this isn’t sufficient, small to midsize businesses can submit a claim for an expedited advance from the IRS.
Yes, there are a few hurdles in this, but at the end of the day this Act is great news for small and midsize businesses struggling to compensate their employees and stay open during these tough times. The hope is that this will help alleviate any pressing financial issues while the government and businesses continue to find a way to work together and avoid the impact of recessions. If these closures continue, small to midsize business are still going to continue to suffer.
The next step is finding ways, or pushing for laws, to subsidize storefront rent while closures are still required by law. While many landlords are offering deferments of expenses, it doesn’t solve the problem. Small to midsize businesses won’t be able to pay three to four times their rent a month after being closed without profits. It’s going to take a collective effort to work to save the economy and avoid backtracking on all of the progress that’s been made by small to midsize businesses around the country.
Hopefully, in the weeks to come, we’ll start to see more changes and acts being passed that not only support the people, but also all of the business affected by this pandemic. For now, it’s important to take safe measures in social distancing and try to stay healthy. For more information on COVID-19 and recent updates, check here.
More Information From a Certified Tax Coach
If you’re interested in learning more about how the novel coronavirus COVID-19 and associated government mandated closures are going to affect your small to midsize business, don’t hesitate in speaking with a certified tax coach. The certified tax coaches at Del Real Tax Group are ready to help you understand what your options are during these tough times. We’re one of a select number of companies that employees certified tax coaches and are dedicated to providing you with personalized services to help work through your concerns. At Del Real Tax Group, we work hard to give our clients the support they need, regardless of what’s happening in the world.
Our certified tax coach, Maribel Del Real, is a Chicago CPA with over a decade of tax and accounting professional experience. She’s been named as an up and coming leader in Latinas “40 under 40” and continues to advance her education. Maribel is committed to learning the best and newest strategies to share with her clients, year after year.
Del Real Tax Group specializes in helping small businesses maximize profits and each of our accountants work to give you personalized service and attention. Since we’re committed to working with small business owners only, we’ve developed a very specialized niche that allows us to concentrate on our clientele. Our primary goal is to help you save thousands of dollars in taxes a year and find solutions for tough times like those we’re currently experiencing. See how we can help by visiting our website or calling us at 708-788-0082 today.
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