The past day generated more financial news affecting U.S. small businesses than any previous day of this pandemic. While the learning curve is steep, typically 1-2 hours each day, the time requirement today and for the rest of this week will be substantially more. No doubt that after I speak with some small business clients we will decide to change course on our action plans.
General Pandemic Response
There is no doubt that bankers are prioritizing larger customers so small businesses will need to wait. Most likely that wait will be until a next round of relief is appropriated by the federal and state governments.
Yesterday the president announced that his national economic recovery plan will focus on 200 larger powerful and wealthy company executives rather than typical small businesses. The members of the “Great American Economic Revival Industry Groups” announced yesterday includes 200 wealthy high tech, financial services and other industries but no representatives of small ‘Main Street’ firms like mine and all of my clients. That’s disappointing but not unexpected.
Pandemic-related scams are everywhere. They target individuals, small businesses and accountants. ‘Fake news’ on social media, apparently through fake profiles, is also thriving. As if there wasn’t enough confusion already, I see increasing numbers of outrageous and intentionally false and misleading posts in Facebook groups about the operation of CARES Act, apparently not from ‘real people’ that target small business owners.
Banks can seize stimulus payment money for past-due consumer debt or overdrawn accounts. Apparently that is why some folks are satisfied to wait for printed checks.
40+% of households are sweating because they don’t have money for groceries and/or have overdrawn bank accounts, past due rent and utility bills and maxed out credit. The stimulus check is a temporary survival tool. I saw a post elsewhere, unsure of its credibility, that said a majority of the stimulus payments will go toward groceries. Also unrelated), a significant portion of people in my life don’t get it either because they don’t file taxes and don’t get social security or because their incomes are too high (but they are still in major financial stress now).
The Paycheck Protection Program (PPP) loan clearly requires some work at termination. The real life issue here is that some who intend to keep their businesses open will not be able to do so. Some who intend to meet the requirements to have the loan forgiven will not be successful. Besides the risk of fraud issue raised in this post that might possibly need to be addressed, I don’t think that accountants are pricing the more typical terminal work scenarios of this part of the into their fee arrangements now.
We have reasonable evidence that some PPP loans are being given to sole proprietors. A 2019 tax return, typically Schedule C, is required. This is a burden because the tax return is not due until July 15. (Most sole proprietors have not prepared their 2019 tax returns yet. I am among them).
The shockingly strict fraud provisions of the PPP have been largely overlooked. Accountants need to pay attention and discuss this with clients.
I now see the total cost of accounting for these loans at $1,000 to $2,500 per small business.
Payroll Tax Relief
IRS issued more information. Small businesses with employees can and should act immediately.
All employers that pay social security taxes on behalf of employees are eligible to waive that for at least 8 weeks. If you do payroll accounting, this bookkeeping change should be made immediately, retroactive to March 27. If you file a quarterly Form 941 with IRS (as most small businesses with employees do or they have someone file it for your business) the form will be revised for this quarter to reflect the change.
The Economic Injury Disaster Loan (EIDL) that promises a $10,000 advance grant to small businesses is no longer. Now it’s $1,000 per full time employee if you can get it.
Again, bigger companies are making more progress than smaller ones.
Getting the right financial advice about Health care during this crisis can be the most important factor in surviving a lay-off. By “surviving” I mean figuratively , as in financial health, in addition to literally, where evidence suggests that wrong decisions can be deadly. Yet informed advisers are scarce a and misinformation rules the internet. I work with Freedom Benefits to provide this service to clients but we are a tiny spec in a huge sea of unmet need in this area.
Stories circulating social media that health insurance options are reduced (based on televised comments by the president) are not true. You still have every option that you did before and possibly even more options.