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Guide to CoronaVirus Programs for Small Businesses and Individuals
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The CoronaVirus economic and school shutdown has dramatically affected nearly everyone in the Bay Area. I have tried to put together a guide below with respect to programs available, etc., regardless of your situation. I have tried to cover both programs for people with prior issues and programs for those experiencing financial issues now. Note that for some of the programs referenced, I am still waiting for additional guidance from the government. For those of you that have small businesses, make sure you read the small business section; there are several really good programs that can get you essentially free financial help relatively quickly. If you need help with any of these items, just call or email me; I am trying to do this on a low, flat fee basis.
Free Money from the IRS – Pretty much everyone who makes less than $75k as an individual or $150k as a couple will be getting $1,200 / $2,400 plus $500 per child. You generally don’t have to do anything to get unless you have not filed income tax returns for 2018. If you have not file 2018, get it filed ASAP. https://www.irs.gov/newsroom/economic-impact-payments-what-you-need-to-know
2019 Income Tax Filing and Payment Deadlines – The deadline to file your 2019 Federal and State of California income tax returns and pay the taxes owed without additional interest or penalties has been extended to July 15, 2020. No extension form needs to be filed.
IRS Tax Collection – The IRS has suspended virtually all collection efforts on back taxes owed except for egregious cases presumably until July 15, 2020. Liens and levies (including any seizures of a personal residence) initiated by field revenue officers will be suspended during this period. However, field revenue officers will continue to pursue high-income non-filers and perform other similar activities where warranted. New automatic, systemic liens and levies will be suspended during this period. The IRS will suspend new certifications to the Department of State for taxpayers who are "seriously delinquent" during this period.
FTB Tax Collection – The FTB has issued no guidance on this issue; my educated guess though is that they will tone down collection efforts as well.
Taxpayers with current installment agreements with the IRS – You have the option of suspending payments until July 15th without defaulting the agreement. If you have a direct debit agreement, you probably need to cancel it though I doubt you will be able to get through to anyone at the IRS. I would check with your financial institution for options.
Taxpayers with pending Offer in Compromises - These are still being processed and if additional documentation is requested, you will have until July 15, 2020, to provide it. You should be able to wait to file and pay your 2019 taxes until July 15, 2020, without defaulting your Offer. In general though, you need to stay current with all filing and payment obligations subject to specific relief you may be entitled to with respect to payroll tax obligations (see below)
Taxpayers with accepted offers in compromises – You can temporarily defer any required offer payments and defer any required filing and payment obligations which the IRS has allowed to be deferred without losing your accepted offer.
Taxpayers currently being audited - Some auditors are still working though all seem willing to extend the time deadlines for providing documentation.
Taxpayers with pending Tax Court cases – Both the Appeals Officers and Tax Court have generally put these on hold at least for the foreseeable future.
Debtors currently in Chapter 13 Bankruptcy cases – If you no longer can afford your Chapter 13 plan payment and your plan provides for payments to creditors other than secured debts or priority taxes, you may be able to modify your plan to as little as $100/month, convert your case to Chapter 7 or potentially ask for a hardship discharge. If you are only paying secured creditors and/or priority taxes, you may also be able to extend your plan to as long as 7 years in order to lower your plan payment.
Debtors in Chapter 7 cases in Northern California District with upcoming 341 meetings – The 341 meetings are being postponed on a rolling basis. My guess is that none will take place at least until May.
Mortgage Borrowers having trouble paying their current mortgages – If you lost your job or income and can’t pay your mortgage, most loan servicers are required to allow you a forbearance agreement which will allow you to postpone payments. I recommend looking online at your servicer’s website to find out how to apply.
Student Loan Borrowers - Deferment of payment obligations: https://studentaid.gov/announcements-events/coronavirus
Renters having trouble paying their rent – I would first try to work something out with your landlord. There is also an executive order in CA allowing localities to temporarily ban evictions. https://www.gov.ca.gov/2020/03/16/governor-newsom-issues-executive-order-to-protect-renters-and-homeowners-during-covid-19-pandemic/ Check on your County’s website for more information.
Employees who lost their employee jobs – Most are entitled to an additional $600/week above what your normal unemployment benefits would be. Apply ASAP.
Gig Workers who lost their independent contractor jobs – Supposedly you are entitled to unemployment benefits too but my understanding is that the mechanics are still being worked out. https://www.edd.ca.gov/about_edd/coronavirus-2019.htm. Schedule C businesses may also qualify for the paycheck protection loan program. (see below)
Programs for small businesses with less than 500 employees, including, to the best of my knowledge, S-Corporations with only their owners as employees and self-employed business. Note that some of these programs are either/or and all are evolving.
a. Extension of time to make certain payroll deposits – It appears that the CARES Act allows employers the ability to defer payment of their share of social security taxes (not Medicare taxes) Section 2302 of the CARES Act permits employers to delay the required deposits of the employer share of social security tax or the railroad retirement tax up to the amount of tax equivalent to the social security tax. In general, employers are required to deposit 6.2% of the amount of wages up to the social security wage base ($137,700 for 2020) relatively quickly after making a wage payment. This amount is in addition to any federal income tax withholding, the employer share of Medicare taxes, and the employee share of social security and Medicare taxes. The timing varies from once per month for very small employers to twice weekly. In addition, large employers are often “next-day depositors,” because the accumulation of payroll taxes exceeding $100,000 on any day requires the electronic deposit of those taxes, so that they satisfy the tax obligation by the close of the next business day. Under Section 2302 of the CARES Act, the employer may significantly defer the deposit of the employer share of social security taxes (but not Medicare taxes). Specifically, all employer social security taxes otherwise required to be deposited between the date of enactment and December 31, 2020, are not required to be deposited on the normal deposit schedule. Instead, half of such taxes would be required to be deposited by December 31, 2021. The remaining deferred social security taxes would be required to be deposited by December 31, 2022.The IRS is expected to revise Form 941, Employer’s Quarterly Federal Tax Return, to track the employer’s decision to defer tax deposits. Employers must be mindful that wage payments late in 2020 might trigger a deposit requirement based on the employer’s usual deposit schedule, because the deferral is not triggered by the liability date (e.g., a payroll date on December 31) but instead by the deposit deadline (e.g., January 2, 2021). In other words, the deadline for depositing the employer share of social security tax for wage payments made in late December 2020 is not deferred if the deposit deadline occurs in early 2021. It is important to note that Section 2302(a)(3) provides that this deferral provision will not apply to the employer if it has indebtedness forgiven under section 1106 with respect to a loan under paragraph 36 of section 7(a) of the Small Business Act, as amended by section 1102, or indebtedness forgiven under section 1109
b. REFUNDABLE Payroll tax credits to cover wages paid to employees on leave. This program gives you a refundable payroll tax credit beginning April 1, 2020, to offset a portion of wages paid to employees on sick or family leave.
c. FORGIVABLE loans to cover payroll and rent for 8 weeks up to 2.5 times your monthly payroll. This looks like a great program; the only caveat is that you can’t lay any employee off for a set time and may have to rehire those you laid off. You will need documentation though so make sure your income and payroll tax returns are current
https://www.sba.gov/funding-programs/loans/paycheck-protection-program-ppp
d. Refundable Payroll tax credits to retain workers. This appears to be an alternative to the loan program. If you are an impacted business and you keep your workers, you are eligible for a refundable payroll tax credit for 50% of your payroll up to $10,000 per employee.
https://www.irs.gov/newsroom/faqs-employee-retention-credit-under-the-cares-act
e. SBA disaster loans. You have to pay them back but at low interest and good terms.
https://www.sba.gov/disaster-assistance/coronavirus-covid-19
The efforts to contain the CoronaVirus have had and will continue to have a disastrous effect on a wide variety of businesses and their employees. Impacted industries have already seen a tremendous drop in revenue and interruptions in supply chains; and as things unfold, the disruptions are expected to get much worse. The good news is that a strong recovery is expected to begin this summer, but it is imperative that businesses and people affected develop a plan to financially survive until we get there.
The components of a successful survival plan for both small businesses and individuals for this type of disaster are essentially identical. The first step for both small businesses and individuals impacted is to assess what effect the current and expected disruptions will have on cash flow and what options are available to mitigate the damage.
On the revenue side, both businesses and those individuals employed in affected industries should prepare for substantial declines in revenues and income for at least 4 to 16 weeks and the potential for a complete temporary loss of revenue or income in the event of a shutdown, quarantine or illness. To make up for this potential loss of revenue, businesses and individuals should assess their current cash reserves, credit lines and other credit sources and ability to qualify for government and private revenue assistance, including SBA emergency disaster loans.
Both businesses and individuals should also look for ways to supplement their income. For businesses, they should look for ways to alter how they do business to overcome the challenges of social distancing efforts to contain the virus; i.e. home delivery, telephone and video conferencing, increasing physical distances between customers. For individuals, they should look for ways to supplement their income in industries unaffected or bolstered by current conditions.
On the expense side, both businesses and individuals should immediately prioritize ongoing expenses, and in the event that there is the possibility that will not be enough revenue or income to cover them, determine what should be paid and not paid. It is also paramount that both business owners and individuals being effected take steps as soon as possible to ensure that no matter what happens, they protect their home and retirement assets.