Helpful Considerations to Navigate COVID-19
By Michael Coletti, Marc Lion and Jason Pourakis
March 23, 2020
Over the past few days, we have seen an unprecedented velocity of change. Each day brings new issues and concerns. The federal, state and local governments have continuously altered regulations for who can and can’t go to work and what the ramifications will be for your employees and your business. Below are some critical action steps and informational items the Mazars USA team has identified to assist you through these uncharted waters. We are here to help in any way possible as your trusted advisors.
1. Immediate Business Considerations
- Forecast revenues out weekly for 13 and 26 weeks, evaluate the macroenvironment, and communicate with customers, especially your most profitable.
- Review your supply chain, identify risks, review return policies, and evaluate delivery options and methods.
- Communicate with your financial institution regarding available credit, deferring payments, and refinancing options.
2. Employee Matters and Compliance with Changing Regulation
On March 16, 2020, Congress passed legislation that expanded FMLA for employees. We’ve highlighted some of the key elements below but recommend consulting your legal advisor and/or payroll partner for further clarification.
- Paid sick leave applies to employees who are unable to work (or telework) and who meet the following conditions:
- Employee is unable to work (or telework) due to the need to care for their child under the age of 18if the child’s school or child-care provider is closed;
- Employee is subject to a quarantine or self-quarantine related to COVID-19;
- Employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis;
- Employee is caring for an individual subject to quarantine;
- Any other substantially similar conditions.
- Employers with 500 or fewer employees are allowed a credit against employer Social Security and Medicare tax liability equal to 100% of the qualified sick leave wages paid by the employer, and subject to limits. The credit is refundable (to the employer) to the extent it exceeds the employer’s total Social Security and Medicare tax liability for any calendar quarter. The Department of Labor will issue guidance for small businesses with fewer than 50 employees, if these requirements would jeopardize the business.
3. Evaluate Additional Financing Options
- If eligible, apply to the Small Business Association (SBA) for an Economic Injury Disaster Loan (EIDL). See below for further guidance.
- If eligible, apply for the Facebook Small Business Grant Program. Facebook has announced $100 million in cash grants and ad credits for up to 30,000 small businesses.
- Explore your state and local lending and grant options. New York, Los Angeles, San Francisco, Chicago, Texas, and others have introduced available funding programs.
- Stay informed with this Forbes link, for new Small Business Relief Programs (updates daily).
- For more information regarding COVID-19 relief at the state and local levels, please contact Mazars USA.
- Numerous banks have initiated disaster relief lending options. Click here for more information on these options.
4. Insurance Considerations
- Most credit insurance policies have language built in that states you have a “duty to notify” if you have a loss. Monitor your accounts receivable. Your insurance company may have the ability to reduce coverage if they feel the customer they are insuring is less credit-worthy.
- Review your insurance and current premium adjustments due to reduction in full time workforce (workmen’s compensation), sales (general liability) and fleet (fewer vehicles on the road).Consider having mid-year policy audits and deferral of premiums.
- Discuss with your broker the potential value of Supply Chain Disruption Insurance, as this is a relatively new product. Be certain to go over contingent physical loss (in this case COVID-19 related) and non-direct damage business interruption, which is geared towards contamination or regulatory shutdowns.
- Start preparing a business interruption insurance claim even though, from what we know today, it will be denied. Gather all relevant information and be prepared in case the government steps in and provides a bailout.
5. Tax Planning
- Federal income tax returns and payments due April 15, 2020, and 2020 first quarter estimated tax payments due April 15, 2020, are now due July 15, 2020.
- Internal Revenue Code Section 139 provides for employers to make tax free payments to employees to reimburse or pay reasonable and necessary personal, family, living or funeral expenses not otherwise covered by insurance.
- Analyze the pending stimulus package for opportunities to reduce current taxes and/or claim refunds if available.Keep monitoring your inbox for messages from Mazars USA for additional information when the stimulus package is released or refer back to mazarsusa.com for daily updates.
- Track state and local tax filing relief at the AICPA’s State Tax Filing Guidance Chart and contact Mazars USA for questions on how this impacts your tax filings.
SBA – EIDL (Economic Injury Disaster Loan)
This program is administered and funded directly by the federal government and not through a banking institution. The program is based on the state in which you are located. The following states are eligible; Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Illinois, Indiana, Louisiana, Maine, Maryland, Massachusetts, Michigan, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Virginia, Washington, and West Virginia.
We have highlighted some areas of the program below, however, please visit this link for more information. Funding up to $2,000,000; fixed rate of 3.75% (2.75% for private not-for-profit entities); up to a 30-year amortization.
- No fees or up-front costs (except for potential legal fees), and no prepayment fees.
- An EIDL can be used to pay all costs of operations as well as short term debt (debt due within the next 12 months).
- There is currently a 30-day approval process.
- The definition of small business is under $5M in net income and $15M in net worth. If you have several entities, each entity should apply.
If the above information does not answer your questions or cover concerns, please reach out to us. Additionally, stay up to date on future Mazars USA COVID-19 releases at MazarsUSA.com.
At Mazars USA, we are committed to seeing you though these difficult and stressful times and helping you protect your business.