Episode 1: CPA Steve King, a partner with MK CPAs & Advisors, launches his new podcast. Today, he’ll focus on helping small business owners to understand the various COVID-19 programs, what they’re specifically for and how they work.
Guidance is the interpretation of tax laws and other programs. Congress has passed funding laws to help small businesses during the COVID-19 crisis. Unfortunately, from an accounting standpoint, the US Treasury still hasn’t thoroughly provided its guidance on the specific rules related to what Congress passed and how business owners need to properly handle any funds received. This is especially important considering any potential forgiveness. Improperly handling them can result in penalties and unanticipated consequences.
The Payroll Protection Program has an 8-week limit. The business must disperse the funds within this window. If the staff hasn’t fully returned, and the business hasn’t fully restarted, the business may not be able to use the funds within the guidelines.
Video Resources from MK CPAs & Advisors
Steve launched a video series called the COVID-19 Business Survival Update, available on his firm’s Facebook page (MKCPAsLouisville), YouTube channel (MK CPAs) and on LinkedIn (Meyerowitz & King). Today’s information will bring all of those programs together and provide additional background.
SBA Loan Funding – Current Loans
The Small Business Administration has ongoing loan programs available. If you have a current loan, it’s possible to get the SBA to pay 6 months of the payments. The interest will continue to accrue. You may have already received information about this. If not, contact your program lender and/or the SBA.
SBA Employee Retention Tax Credit (ERTC)
Employers can get a tax credit of up to 50% of wages if your business is shut down or partially shut down. Revenues also must be down 50% of same period last year. This second limitation may make it difficult for some companies to meet.
Payroll Protection Program (PPP)
This is calculated as 2.5 times your average monthly payroll. It’s forgivable, but has specific requirements for how the funds are used (i.e. payroll, rent and utilities). The funds must be spent in 8 weeks. The interest rate is 1% on this loan. You apply directly through your bank for this program. The payback period is 2 years.
SBA Economic Injury Disaster Loan (EIDL)
There are 2 parts to the EIDL. The loan and a potential grant. This is an established program and you apply for it directly through the SBA. It’s a 3.75% loan. The EIDL may qualify for the 6-month payment by the SBA. It will take longer to get the funds than the PPP. The EIDL loan proceeds can be used for whatever the business needs. The funds are restricted, as they are with the PPP.
SBA EIDL Grant
This is part of the Economic Injury Disaster Loan. The first $10,000 can be treated as a grant, depending upon your loan qualifications. The objective is to provide a quicker, interim source of funds. The grant is forgivable.
Payroll Tax Deferment Option
Businesses are currently able to defer the company-matching portion of the payroll tax (social security and Medicare) for up to 2 years. One half is due at the end of 2021 and the other half is due at the end of 2020. You should speak with your CPA to fully understand the process and requirements. This is designed to assist with cash flow for the business, but the risks are significant and will required planning to ensure you’re able to make the future payments.
Due Diligence
As a business owner, you need to evaluate each of these options to determine what’s best for your specific situation. Each of the above sources of funding and cash flow during COVID-19 are designed to help, but there’s not one particular program designed to help everyone.
The goal is to make sure you get through this economic crisis. Many small businesses are in survival mode. Steve King and the team at MK CPAs & Advisors is here to help by producing podcast episodes, concise videos and obviously, they are also available to speak with you, directly, about your company’s specific situation.
We’ll launch the next episode in 2 weeks. Please consider following the firm on Facebook and/or LinkedIn. Until then, remember that MK CPAs is here to help you to Make the Numbers Work.
