The coronavirus has had an impact on nearly every aspect of our lives. Social distancing has put a lot of strain on small businesses, and many people are no longer able to work, which is having a huge impact on our economy. Due to the massive scale of the coronavirus the federal government and local governments are doing what they can to help lessen the financial burden brought about by the coronavirus. Here are some helpful coronavirus resources for small businesses that span three major categories of tax, financing, and investment strategy.
Tax Due Date Extensions
In response to the coronavirus there have been several changes to the upcoming tax deadlines. As part of an effort to help small businesses recover from the economic downturn left in the wake of the coronavirus, the IRS has extended the tax filing deadline until July 15. This allows taxpayers an additional 3 months to prepare and file their taxes.
In addition to extending the tax filing deadline, the IRS has also extended the tax payment deadline until July 15. This includes income tax payments as well as first quarter estimated tax payments. It is important to note that although the first quarter estimated tax deadline has been extended until July 15, the second quarter payment is still due June 15. This may change, but as of yet, the IRS has not extended the due date for quarter 2 estimated tax payments.
Some Things to Keep In Mind
You don’t have to do anything in order to take advantage of the tax extensions. Simply file your taxes and pay your tax bill in the same normal fashion you usually do. If you are unable to file your taxes by the new July 15 deadline, which undoubtedly some small businesses may take longer to recover than others, be sure to file an extension by the deadline of July 15. Also keep in mind that just because you file an extension, your tax payment due date does not automatically change. If you are unable to pay your tax bill by the deadline, contact the IRS to set up an installment agreement.
Another key thing to keep in mind is that with the new tax deadline, you also have more time to make prior year contributions to your IRA. You now have up to July 15 to make contributions to your IRA for the previous tax year. You are allowed to deduct up to the maximum contribution limit of $6,000. By doing so, you can effectively reduce your tax liability, even if you don’t itemize. So if you are looking for some last minute tax savings, consider maxing out your IRA.
Your state and local taxes are probably also being affected by the coronavirus. While the federal government hasn’t issued an order for states to adjust their tax schedules, they have strongly suggested it. And in fact many states have already extended their tax filing deadlines and payment schedules as well. To learn the specifics in your state, contact your state board of equalization.
Small Business Loans and Grants
The extension of tax deadlines is definitely a big help to small businesses, however some small businesses may require more assistance. There are a lot of coronavirus resources available for small businesses some are government sponsored, while others are private organizations. The SBA has a lot of coronavirus resources for small businesses and so does the US Chamber of Commerce. Both of these organizations can help you secure short term loans and apply for available grants that can help you maintain the function of your business during this stressful time.
The SBA has several loans available to small businesses affected by the coronavirus. Some options through the SBA include:
- SBA Express Bridge Loan – This is a short term loan of up to $25k. This loan is intended to bridge the financial gap, while applicants are waiting on funds from an Economic Injury Disaster Loan. Funds can be available in as little as three days.
- Economic Injury Disaster Loan (EIDL) – This loan is designed to help small businesses who have suffered an economic disaster. Maximum loan amount is $2 million. Typically these loans are specific to regions that are hit by a natural disaster. This is the first time that an EIDL has been made available at-large and for a pandemic. Up to $10,000 may be provided as a grant for relief.
- Paycheck Protection Plan – This is a loan program intended to help small businesses maintain their workforce during an economic downturn. Maximum loan amount is up to $10 million, and payments are deferred for 6 months. The first 8 weeks will be forgiven by the SBA if your workforce is maintained. The loan amount can be calculated by taking your monthly average payroll and multiplying it by 2.5 or 250%. Applications for businesses with payroll came out on April 3rd and will also be available to sole proprietors and freelancers on April 10th. You can see the application here.
Note that for the EIDL, you can apply directly through the SBA.gov website. For the PPP, you will need to apply through a financial institution. In recent weeks, financial institutions have begun to roll out their criteria for processing applicants.
Because the expected application rush, many banks have restricted processing applications for their existing clients only and some banks, namely Bank of America, to only clients who have an existing lending relationship, barring existing clients with strong balance sheets.
There is certainly a propensity to move with the market when headlines change so quickly that in the same 3-day period, the stock market posted its biggest loss to date and its biggest single-day bounce.
The key is to hold steady during turbulent times. Over the life of the stock market, those that have ridden the storms and the boons (think Q4 2019) ultimately win out. While we can’t give financial advice, we do encourage you to take this time to get more familiar with the key economic indicators that move the market: Jobless claims, interest rates, and housing. All released around Q1 end. If you’re already familiar with markets, we encourage you to give context to someone who is thinking about liquidating their entire portfolio.
Another provision Congress enacted is that you can draw down from your retirement accounts penalty-free. Just note that these amounts are still subject to income taxes. In any event, your strategy is going to be based on your goals and capabilities, and of cours, timing.
Get Help With Your Finance & Taxes
Tax season can be a stressful time of year for many businesses, even without a worldwide pandemic. It is important to make sure you are getting the right advice when it comes to your tax preparation and also your tax planning. Contact the tax experts at Tax Hack today to schedule a strategy session and learn more about your options. For more coronavirus resources and updates subscribe to our newsletter.