A multitude of tips for small business owners during coronavirus, including financial aid from the recently-approved U.S. CARES Act
The Coronavirus Aid, Relief and Economic Security (CARES) Act dwarfs prior efforts by lawmakers to take on economic crises and natural disasters. While key elements of this bill are untested -– and controversial — it, along with the Family First Coronavirus Response Act (FFCR) passed earlier in March, and the actions of the administration, created numerous programs to help chiropractors and their practices weather the impending crunch.
Of interest to most professionals, the bill will provide one-time direct payments of $1,200 per adult with income below a $75,000 ceiling, $2,400 per married couples and $500 per child. Above the ceiling, payments will be gradually reduced, disappearing after an individual’s income reaches $100,000.
The CARES Act established a $454 billion program for guaranteed, subsidized loans to larger businesses in the hopes of leveraging up to $4.5 trillion to distressed businesses, states and municipalities. Although there are restrictions, all would be up to the U.S. Treasury Department’s discretion.
The newly-passed legislation, while providing zero interest loans, tax breaks and other subsidies, include an increase in the deductions for interest paid by a practice or business from the 39% level created by the Tax Cuts and Jobs Act to 50%.
Tips for small business owners during coronavirus: health care providers
Under the CARES Act, hospitals and medical centers would get billions to handle surging caseloads and those treating coronavirus patients would also get higher Medicare reimbursements. Across-the-board Medicare cuts that were part of a previous deficit reduction agreements will be halted -– temporarily.
There is also increased funding for federal agencies to speed work on therapies and a potential vaccine, among other activities. When there is a vacine, Medicare beneficiaries would not have to pay to receive it.
The new law allocates $250 billion to expand unemployment insurance to more workers and lengthen the duration to 39 weeks (up from the normal 26 weeks). Six-hundred dollars extra each week would be provided for four months.
To help bring back workers already laid off, the eight weeks of unemployment assistance will be retroactive to Feb. 15, 2020. But, that’s not all, already on the books are the following:
- Until Dec. 31, 2020, some employers will be required to pay sick leave to employees. Fortunately, there is a compensating, 100% tax credit.
- An employee retention tax credit that is estimated to provide $50 billion to employers that retain workers on their payroll will cover 50% of workers’ paychecks up to $10,000. A chiropractic practice will also be able to defer payment of the 6.2% Social Security payroll tax for two years.
- The “Pandemic Unemployment Assistance” program is for self-employed professionals and contract workers who are typically not eligible for unemployment payments.
- Also included are incentives for work-sharing and a program to cover a portion of lost wages for workers whose hours have been reduced, designed to incentivize employers to retain workers by employing them for less time.
Paying for it all
The CARES Act contained a number of programs, funding and tips for small business owners during coronavirus to help every chiropractor and chiropractic practice weather the financial impact of the coronavirus pandemic, including:
- Zero-interest loans for practices and businesses with fewer than 500 employees -– loans that could be forgiven under certain circumstances such as not firing workers.
- Mostly for employers with more than 500 workers, the latest stimulus bill provides $500 billion to back loans. However, any employer receiving one of these loans will be subject to a ban on stock buybacks and curtailment of executive bonuses.
- Most notably, the CARES Act earmarks $349 billion for loans to small businesses and professional practices -– to be spent on rent, payroll and utilities treated as a grant that does not have to be repaid. That’s right, loans of up to $10 million will made available through preferred lenders of the Small Business Administraton (SBA), such as banks and credit unions. The government will pay off the loan balance if the employer either does not lay off workers or rehires already laid-off workers. Those chiropractic practices or businesses that have recently laid-off workers would be required to repay a larger portion of their loans, and loans covering salaries of more than $100,000 a year wouldn’t qualify for forgiveness. No qualifying employer will be required to repay loans covering up to eight weeks worth of payroll costs.
- The SBA now has the authority — and available funds -– to make over $7 billion in loans to qualifying small practices and businesses via SBA Economic Injury Disaster Loans. Each Economic Injury Disaster Loan assistance declaration issued by the SBA makes loans available to small businesses and practices in designated areas of a state or territory. These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate is 3.75% and, in order to keep repayments affordable, have term repayment periods of up to 30 years.
Losses and lost income
Keeping in mind that “lost income” is not a legitimate tax deduction, other provisions in the tax law may help chiropractors and their practices recover financially from the tax impact of the coronavirus pandemic and other disasters, especially when the federal government declares their location to be a major disaster area.
Both individuals and businesses in a federally-declared disaster area can get a faster tax refund by claiming losses related to the disaster on the tax return for the previous year, usually by filing an amended tax return. Regular losses must be deducted from this year’s income -– if there is any.
A Net Operating Loss (or NOL) occurs when a chiropractic practice has more tax deductions than taxable income in a given year. NOL carrybacks formerly generated a refund of taxes paid in earlier years that provided an often-badly needed infusion of cash. Today, most NOLs arising in tax years after 2017 can only be carried forward. What’s more, for losses arising in taxable years beginning after Dec. 31, 2017, the NOL deduction is limited to 80% of taxable income (determined without regard to the deduction).
And, don’t forget, while the chiropractic practice can’t get this tax break if it is a pass-through entity (such as sole practitioners, partnerships or S corporations), their owners can apply their NOL on their personal tax returns. Regular corporations are, of course, taxed at the corporate level and the NOL carryforward is applied on the corporate tax return.
Thanks to the FFCR Act passed early in March, employers providing paid family and medical leave to their employees may claim a tax credit, a direct reduction of their tax bill rather than a deduction. There are similar tax credits for self-employed individuals.
Among tips for small business owners during coronavirus it was recently announced that small and midsize employers can take advantage of two new refundable payroll tax credits. Both are designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing coronavirus-related employee leave.
Until Dec. 31, 2020, certain employers are required to pay sick leave to specified employees with compensating 100% tax credit. Under the FFCR Act, employers must provide 14 days of paid sick leave if workers are ill or quarantined because of the virus or have to care for an infected family member.
Although the provision requiring employers to pay sick and medical leave to workers has been extended to include the 2020 tax year, employers with fewer than 50 employees are eligible for an exemption.
To take immediate advantage of the paid leave tax credits, a chiropractic practice can retain and access funds that they would otherwise pay to the IRS in payroll taxes. If those amounts are not sufficient to cover the cost of paid leave, employers can seek an expedited advance from the IRS using a soon-to-be released, streamlined claim form.
Tips for small business owners during coronavirus: credit and deadlines
Many chiropractors who are busy attempting to fathom the steady stream of new government programs, plans and benefits, may be overlooking remedies that already exist.
- Line-of-credit. A pre-established line of credit allows the chiropractic practice to borrow in increments as needed, repay it and borrow again as long as the credit line remains open. Typically, the practice is required to pay interest on any balance borrowed and a lesser amount for having ready access to the unexpended amount of the line of credit.
- Business Interruption Insurance. Business Interruption Insurance is coverage that replaces income lost in a disaster. Business Interruption Insurance is not sold as a separate policy but is either added to a property/casualty policy or included in a comprehensive package policy as an add-on or rider.
- And don’t forget those extended deadlines for both filing tax returns and paying taxes. Although the March 15 tax filing deadlines for many chiropractic practices have passed, individuals including many chiropractic professionals and other small business owners, now have until July 15 to file. Best of all, if money is owed the IRS, delayed payments will be interest and penalty-free for 90 days.
As this ever-evolving fight against the coronavirus continues, attention must be paid to new developments and tips for small business owners during coronavirus. More are certainly on the way, and, as always, the ever-changing response the pandemic and the complexity of the rules when dealing with its economic impact make professional assistance advisable.
Mark E. Battersby is a tax and financial adviser, freelance writer, lecturer, and author located in suburban Philadelphia. He can be reached at 610-789-2480.
For the latest COVID-19 info for doctors of chiropractic, including upcoming webinars, updates, resources and articles from Chiropractic Economics, go to chiroeco.com/coronavirus-covid-19.