Author: dsauder

Great By Choice | How to Manage Through Chaos

Jim Collins and Morten T. Hansen | October 2011

“None of us can predict with certainty the twists and turns our lives will take. Life is uncertain, the future unknown.”

Preface: Great By Choice | How to Manage Through Chaos is a invaluable book that gifts readers with clarity and effective business guidance amidst future unknowns, while abetting faith in and achievement of the vision and energizing purpose of your enterprise.

“We cannot predict the future. But we can create it.

Think back to 15 years ago, and consider what’s happened since, the destabilizing events — in the world, in your country, in the markets, in your work, in your life — that defied all expectations. We can be astonished, confounded, shocked, stunned, delighted, or terrified, but rarely prescient. None of us can predict with certainty the twists and turns our lives will take. Life is uncertain, the future unknown.”

 “But when you 20-Mile March, you have a tangible point of focus that keeps you and your team moving forward, despite confusion, uncertainty, and even chaos.”

“In contrast, Scott would sometimes drive his team to exhaustion on good days and then sit in his tent and complain about the weather on bad days. In early December, Scott wrote in his journal about being stopped by a blizzard: “I doubt if any party could travel in such weather.”

But when Amundsen faced conditions comparable to Scott’s, he wrote in his journal, “It has been an unpleasant day — storm, drift, and frostbite, but we have advanced 13 miles closer to our goal.” Amundsen clocked in at the South Pole right on pace, having averaged 15½ miles per day.”

“…….Financial markets are out of your control. Customers are out of your control. Earthquakes are out of your control. Global competition is out of your control. Technological change is out of your control. Most everything is ultimately out of your control. But when you 20-Mile March, you have a tangible point of focus that keeps you and your team moving forward, despite confusion, uncertainty, and even chaos.”

Easter Greetings Clients and Friends

May this Season of Easter bring a time to reflect joyously with the significance of the New Hope, New Beginnings, and New Life, from our risen Savior.

Wishing you an Easter with an abundance of peace; and the Blessings of a Triumphant Resurrection.

God Bless you and yours,

Sauder & Stoltzfus, LLC

Preface: “Wisdom knows the right path to take. Integrity is taking it.” M.H. McKee

The Coronavirus Stimulus Package Segment II

“Wisdom knows the right path to take. Integrity is taking it.” M.H. McKee. For entrepreneurs, whether newcomers or seasoned executives, the path forward for entrepreneurship has quickly reached perilous terrain more challenging than most could have envisioned a few months earlier. For some, it may seem like this month it is going where there is no path, and blazing the trail, e.g., entrepreneurial trailblazing.

The passage of the new CARES Act in late March brings with it revised tax laws that provide improved trailblazing tools to help navigate the uncharted terrain. In this Segment II, we’ll discuss some more specific individual and business tax features of the Coronavirus Stimulus Package.

CARES Act Provisions for Individual Taxpayer

Firstly, the CARES Act provides individual taxpayer a rebate check of $1,200 per taxpayer, or $2,400 for those married filing jointly, plus $500 for each child. The in-process rebate checks begin to be reduced above $75,000 for individual taxpayers and $150,000 for those married filing jointly benchmarked to 2018 or 2019 adjusted gross income. These rebate checks are from the US Treasury and require a social security number to be eligible for the taxpayer appropriations.

In addition to rebate checks, the CARES Act provides an exclusion from income payments of W-2 recipients for student loans. This legislation offers employees the opportunity to receive tax-free earnings and subsequent payments to be made directly on student loans for either a taxpayer or child up to $5,250.

The CARES Act waives the minimum distribution requirement. It also waives the 10% penalty on early withdraws up to $100,000 from qualified retirement plans for coronavirus reasons for the 2020 tax year.

Therefore, those with retirement savings who experience adverse financial conditions from layoffs, reduced hours, quarantine or employment shutdowns can finance the emergency costs from their retirement account. If these distributions result in taxable income to the account holder, they can recontribute the withdraw, or it is subject to tax over three years.

For those enjoy charitable contributions, the CARES Act provides an increased benefit with a $300 above the line deduction for contributions from individual taxpayers. Therefore, even for those who do not itemize, a $300 cap deduction is now permitted.

Also, enhanced Pandemic Employment Assistance Programs effective immediately will be available through December 31, 2020.

CARES Act Provisions for Businesses

A tax credit is now available for employers who retain their employees and pay them if operations are suspended due to business shutdowns, or from declines in sales revenues. This credit is equal to 50% of the qualified wages paid to employees, including health benefits, and is limited to $10,000 per employee for the quarters. This credit applies to wages paid from March 13th to December 31, 2020 for qualifying purposes.

Secondly, the CARES Act, legislates deferral of payroll taxes to improve employers’ liquidity and help retain employees during adverse conditions and business shutdowns. This feature permits 6.2% of payroll taxes to be deferred for employers and paid 50% on December 31, 2021, and 50% December 31, 2022. Note of caution, with the trust fund features of payroll taxes, employers who apply for this tax benefit, may add operating risks with future liquidity.

The CARES act increases the number of permissible deductions for business interest to 50% of the taxpayer’s adjusted taxable income for 2019 and 2020. The CARES Act also permits a five-year carryback of net operating losses for 2018, 2019, and 2020 tax years. This revises the current NOL carry-back for farmers only. With the revised NOL carryback, businesses will be able to amend back to 2013 to capitalize on the carryback benefits.

So as the entrepreneurial trailblazing begins anew this month, a song can be worth more than million words. We’ll conclude with an especially good word of wisdom in verse from William M. Golden penned in 1918.

“Each day I’ll do a golden deed

By Helping those who are in need

My life on earth is but a span

And so I’ll do the best the I can.”

Thank you for your time to read our blog. If you’d like to be entered to win a $10 Amazon gift card, please participate in our readers survey on the current Coronavirus business climate.

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The Coronavirus Stimulus Package (Segment I)

Preface: Although we are accountants and not bankers, the following is provided for informational purposes only from the new CARES ACT. It should not be construed as tax or accounting advice. Contact your trusted advisor before making any loan decision.    

The CARES Act signed into legislation on March 27, 2020 provides two methods of government working capital loan outlets for small-businesses I) Economic Injury Disaster Loan 2) Paycheck Protection Program.

The CARES Act has revised the loan eligibility requirements for Small Business Loans (SBA). The CARES Act firstly with financing conduits, provides for qualifying small-businesses an Economic Injury Disaster Loan (EIDL). For these purposes, a qualifying business for the loan approval must have fewer than 500 employees or say be a sole proprietorship or an independent contractor;

Qualifying small businesses can forward applications directly to the SBA with the CARES Act legislation. The following loan application information will be required to be supplied: A) The applicant’s credit history; B) proof of the financial ability for loan repayment; C) proof of business jurisdiction in a Disaster Area; and D) proof the enterprises working capital losses are due to the COVID-19;

The CARES Act plan is designed for an SBA loan to be quickly approved for a business in a cash shortage. This feature is hinged on cashflow needs of the business and repayment terms with subsidized interest rates for qualifying small businesses. Loan fees are 5% for up to $350,000; from $350,000 to $2.0m of financing the rate is 3%; and from $2.0m and above the rate is 1%.

Loans of more than $25,000 may require collateral. The CARES Act provides a clause, so personal guaranties will not be needed for loans under $200,000.

The CARES Act also lifts the requirement that an applicant must not be able to obtain credit elsewhere. These loans will not be declined due to insufficient collateral or lack of collateral.

These emergency loan proceeds can be used for business working capital, payroll, and other general and necessary expenses that the business would pay if the disaster had not occurred. But loan proceeds are not intended to be used to replace lost profits or to finance business expansion.

Also, the CARES Act provides that during the period from January 31, 2020, through December 31, 2020, the SBA may advance an up-to-$10,000 grant to each applicant, funded within a three day period  after completing the application and forwarding for approval.

The grant is not required to be repaid, even if the business does not obtain a loan under the EIDL program, or say should the company possibly receive a grant under the CARES Act’s Paycheck Protection Program.

But if the applying business does receive approval for a grant under the Paycheck Protection Program, the amount of the advance will be reduced from the forgivable amount of such Paycheck Protection Program loan. The advance may be used to pay allowable costs:

I) providing paid sick leave to employees unable to work due to COVID–19;

II) maintain regular payroll to keep employees on payroll during the emergency payroll timeframe;

III) meeting increased costs to obtain supply chains failures;

IV) paying rents or amortizing mortgage payments;

V) repaying other long-term or current liabilities that cannot be met due to revenue losses.

Certain loan terms and restrictions apply, including retaining 90% of pre-crisis level employment. Loan application paperwork required include at least two years complete company tax returns, 2019 year-end financials and 2020 financials as of the current month-end.

Paycheck Protection Program

With payroll pressures avalanching for the small business community, the Paycheck Protection Program in the CARES Act is designed to infuse cash quickly into the small- business community to keep payroll checks rolling on the presses.

Loans are limited to the lesser of $10.0 million or the sum of 2.5 times the average total monthly payroll costs for the prior twelve months with the CARES Act loan package.

Payments from the CARES Act Paycheck Protection Program loan packages can include:

• • • 1. Employee salaries, vacation pay, and PTO to family, medical, or sickness, severance payments, payments required for retirement, or state and local employment taxes.
      2. Interest payments on any mortgage or debts on the balance sheet before February 15, 2020.
      3. Rent(s)
      4. Utilities

This newly minted Paycheck Protection Program requires no personal guarantees on behalf of borrowers or collateral pledges. These express loans contain non-recourse features for financing if used for qualifying purposes.

Also, even if other credit sources are available, qualifying businesses can still be approved for express funding. Payments of principal, interest, and fees will be deferred for six months, but not more than one year.

Chances are your business can likely qualify for an express loan package.

The Paycheck Protection Program loans qualify for forgiveness with certain conditions, and forgiveness is not taxable. Credits have a ten-year maturity date. Employees funded on these payrolls must have wages less than $100,000 on an annualized basis to qualify.

Immediate cash infusions on loans for payroll up to $1.0M with seven-year terms can be approved or denied in less than 36 hours. Stock buybacks are prohibited during this loan repayment as well as dividends.

While for many it may seem the economic caramel factory machine has been abruptly halted in and around the nation from Covid-19, these CARES Act loan features are designed to help with the task of restarting it; and that will be a unique challenge for everyone likely.

 

Managing Your Cash Flow During the Coronavirus Crisis – A Webinar 

Ami Kassar, is the founder and CEO of MultiFunding LLC, and author of The Growth Dilemma. He is a nationally renowned expert on access to capital for entrepreneurs. He’s committed to ensuring that business owners have the best possible access to the capital structures to help grow and manage their businesses. Kassar is regularly featured in the national press and writes a regular column for Inc.com. He has advised the White House, the Federal Reserve Bank and The Treasury Department on the business credit markets. In addition, Kassar is a regular speaker at universities and business events across the country on topics including entrepreneurship and access to capital.

Managing Your Cash Flow During the Coronavirus Crisis  Webinar Link

Covid-19 Business Update II

Donald J. Sauder, CPA | CVA

The Families First Coronavirus Response (FFCRA) legislated on March 18th, 2020, provides revisions to employment laws for employers who employ fewer than 500 employees, including both full-time and part-time positions. It takes effect on April 2, 2020.

The revised employment laws provide both sick pay with the Emergency Paid Sick Leave Act and paid leave to employees under the Emergency Family and Medical Leave Expansion. Employers are provided an employment tax credit to compensate for the costs of both the paid leave and sick pay.

Benefits of Families First Coronavirus Response include:

• • • • Free coronavirus testing;
      • Nutrition waivers, to allow students who receive meals at school;
      • Emergency paid sick pay;
      • Emergency unemployment insurance stabilization;

Families First Coronavirus Response does not apply if employees are furloughed or with the lay-off of employees before April 2, 2020.

State and local laws may have separate implications. Contact a labor attorney before making any decisions that could subject to employment law risks.

Emergency Paid Sick Leave Act

Emergency Paid Sick Leave requires employers with fewer than 500 employees to provide paid sick leave. Businesses with fewer than 50 employees may claim an exemption from the paid sick leave requirements if it would jeopardize the business. This definition is yet to finalized for what qualifies an employer for the exception.

Except for health care providers and first responders, all employees are eligible to take paid sick leave under the FFCRA regardless of their duration of employment.

Full-time employees are entitled to take up to 80 hours of paid sick leave. Part-time employees also qualify for pay based on the average hours of equal to hours worked over two weeks.

Qualifying reasons for employees to be entitled to paid sick leave include:

• • • • • Advised by a health care provider to self-quarantine due to concerns related to Covid-19;
        • They are subject of a federal, state, or local quarantine or isolation, i.e., business shut-down;
        • Experiencing symptoms of Covid-19 and are seeking medical diagnosis;
        • Caring for an individual who is subject to an isolation order or is quarantined;
        • Caring for a child if the child care provider is unavailable due to a Covid-19 precaution, or the school or place of child care is closed;
        • They are experiencing any other substantially similar conditions outline by the Secretary of Health and Human Services;

Paid sick leave will be paid at the employee’s regular compensation rate capped at 100% of wages up to $511 per day, or a total sum of $5,110 for employee’s subject to reasons one, two, and three above. Then for employees in categories four, five, and six, the wages are up to $200 per day or a total sum of $2,000.

This sick pay is added to any existing sick leave the employer provides. Employers may not require employees to use other sick before the newly legislated Emergency Paid Sick Leave.

Employers will be entitled to a tax credit for the amount of paid sick leave paid

The Emergency Family and Medical Leave Expansion Act

The Emergency Family and Medical Leave Expansion Act require employers with fewer than 500 employees, and exclusions may yet be issued for small businesses with fewer than 50 employers when it would jeopardize the viability of the company.

With this Act Employees are entitled to take up to twelve weeks of job-protected leave.

Reasons employees can take job-protected leave include caring for a child under 18 if the child’s school or place of care is closed or the child care provider is unavailable.

The first ten days of this job-protected leave can be unpaid. An employee can elect, but not be required to use accrued vacation, personal, medical, or sick leave for those days. Paid leave is subject to a limit of $200 per day, and up to a total amount of $10,000.

Today is today, and after all, tomorrow is another day. With the rapidly speeding changes in the business landscape, please talk with a labor attorney before making a labor decision in the current business climate.

DISCLAIMER: The above text does not constitute legal advice and has been prepared for informational purposes only. Please contact your legal advisor with questions about how this relates to your specific situation.

 

Covid-19 Business Update

Credit: Jacob M. Dietz, CPA

March has been an unusual month with unforeseen changes.  Changes will likely continue as March progresses, and beyond March.  This update will not go into the medical aspects of Covid-19, but will cover some of the changes that affect small business and individual tax payers.

Tax Deadlines Extended.

The federal government extended the tax return payment and filing deadline from April 15 to July 15.  Furthermore, federal 1^st quarter estimates that would have been due April 15 are now due July 15.

Most taxpayers, in additional to federal filing requirements, also have state and possibly local filing deadlines.  Pennsylvania, as well as various other states, also extended the deadline.  If you do not live in PA, consult with your tax preparer about your state tax deadline.  The York Adams Tax Collection Bureau and the Lancaster County Tax Collection Bureau also extended the deadline.  If you live in another local taxing jurisdiction, contact your tax preparer.

Not all taxes are affected by these delays.  For example, the York Adams Tax Collection Bureau states that “At the present time there are no extensions for the filing and payment of Local Services or Mercantile and Business Privilege Taxes.”

If you are hoping to benefit from the extensions that are available, please contact your tax advisor and ask if and how they apply to your specific situation.

Pennsylvania Shutdown

Various states have enacted some form of shutdown, including Pennsylvania.  Pennsylvania Governor Wolf has prohibiting operating “a place of business in the Commonwealth that is not a life sustaining business regardless of whether the business is open to members of the public. This prohibition does not apply to virtual or telework operations (e.g., work from home), so long as social distancing and other mitigation measures are followed in such operations.”

The police are empowered to enforce this shutdown.

March-21-2020-Industry-Operation-Guidance is a list of industries that may and may not continue physical operations.  If you cannot determine if your business needs to close or not, you can email ra-dcedcs@pa.gov.

If your business does not qualify to remain open, you could apply for a waiver.  The form can be filled out online here https://expressforms.pa.gov/apps/pa/DCED/Waiver-process-keeping-physical-locations-open.

Alternatively, you could email RA-dcexemption@pa.gov to request a waiver.

Families First Coronavirus Response Act

This act was signed by President Trump and takes effect in early April.  This blog will not provide full coverage of the new act, but will point out the law has a requirement for paid sick leave for Covid-19 for companies that employ less than 500 employees.

If you have employees who are affected by Covid-19, including employees who are off work because of family members affected by the virus, consider calling a labor attorney very soon.  There could be changes to this coming.

What’s Next?

There have been many changes recently, and likely more changes will come.  Stay alert to the changing conditions.  Be aware of possible needs of your employees, friends, family, and neighbors.  Walk in peace.  Look up and lift up your heads. Ps 91:15 “He shall call upon me, and I will answer him: I will be with him in trouble; I will deliver him, and honour him.”

Preface: These are genuinely “uncharted waters,” as Governor Wolf said. The  economic expedition employers and employees have involuntary embarked on does not promise an easily charted path forward.

Surviving Amidst A Business Euroclydon

Credit: Donald J. Sauder, CPA | CVA

It is a year for the history books—a global pandemic with unparalleled complexity for the globe, nation, and each state community. The continuing pandemic developments are surreal for both business and individual families.

On Thursday, Pennsylvania Governor Wolf ordered a shut-down of non-life sustain businesses. Valid on that day, enforcement is scheduled to begin on Monday the 23rd at 8:00 AM. This Governor’s proclamation is planned to be strictly enforced. Remote business activities are permitted to continue, so employees who can work from home, you can supposedly continue business as usual.

The individual list of Pennsylvania life-sustaining businesses and non-life sustaining businesses can be read on this link. March-21-2020-Industry-Operation-Guidance. If you have a question, please contact your trusted advisor. If you need an opinion on the specifics for your business or the risks of disregarding this crisis order, contact your attorney.

The Families First Coronavirus Response Act was signed into law on Wednesday, March 18th, and goes into effect on April 2nd, 2020. The new law specifics have been expanded requirements for family medical from work. This crisis law extension remains in effect until December 31st, 2020.

The Family Medical Leave Act is for emergency paid sick leave: Full-time employees of employers with fewer than 500 employees that are unable to work due to COVID-19 are eligible for 80 hours of emergency paid sick leave. Part-time employees are eligible to receive the equivalent of the number of hours they would work, on average, for two weeks.

The crisis law extends to the FMLA for an employer with fewer than 500 employees, expands the definition of a covered employee to include all employees who have worked for covered employers for at least 30 days. So now, your employees will be eligible for up to twelve weeks of unpaid leave if they are seeking a diagnosis or have quarantine instructions from a doctor. Or if they are caring for a person under quarantine, self-quarantine, or say for children unable to attend school or childcare, or any similar condition. So, if an employee has a dependent home from school or childcare, they qualify for the FMLA extension parameters.

Any full-time qualifying employee is entitled to 80 hours of paid leave, and a part-time employee is entitled to pay for regular hours worked in two weeks. Employers with one to forty-nine employees must provide qualifying paid time off under the above circumstances. An employee may apply for sick leave before opting on the extension to the Family Medical Leave Act.

There is a clause that employees laid off before April 2nd do not qualify for the new crisis laws. Consult your labor attorney before making any crisis decision.

To quote Albert Einstein, “A true genius admits that he/she knows nothing.” Ernest Shackleton was a genius explorer. Also consider what you can learn from the book Endurance: Shackleton’s Incredible Voyage.

These are genuinely “uncharted waters,” as Governor Wolf said. The  economic expedition employers and employees have involuntary embarked on does not promise an easily charted path forward.

Will you be safe in a crisis with a significant cash position? Remember the trivial concern with the Cypriot Financial Crisis 2011 haircuts? Maybe not?

And to our friends, Godspeed. Feel free to call if you want to chat.

Preparing a Business Optim-20 Plan
Donald J. Sauder, CPA | CVA    

Watching current and continued developments with the Coronavirus Pandemic? Begin early to prepare for a potentially prolonged economic recovery. The implications of the disruptions to business cash flows, revenue, and market declines highlight the importance of appropriate strategic business plans.

Many businesses are experiencing new challenges on a surprising frontier, and a comparison may be to embarking on a financial “Ernest Shackleton expedition.”

Cash is king. Planning to maintain liquidity levels should be top of mind. Remember, though, that cost reduction measures in aggregate, will lead to a longer economic recovery because of the shift to a slower velocity of money.

Prepare for challenges in supply chains, slower payments on accounts receivable, changes in confidence, or potential defaults. These cash implications will have a ripple effect on the economic domino chain of interdependent business.

Special payment relief is now available to individuals and businesses in response to the Coronavirus Pandemic. The filing deadline for tax returns remains April 15, 2020. The IRS urges taxpayers who are owed a refund to file as quickly as possible. For those who can’t file by the April 15, 2020 deadline, the IRS reminds individual taxpayers that everyone is eligible to request a six-month extension to file their return.

Income tax payment deadlines for individual returns, with a due date of April 15, 2020, are being automatically extended until July 15, 2020, for up to $1 million of their 2019 tax due. This payment relief applies to all individual returns, including self-employed individuals, and all entities other than C-Corporations, such as trusts or estates. IRS will automatically provide this relief to taxpayers.

If you sense that you will need relief from secured or unsecured creditors, begin discussions before the cash need is critical. Prepare a cash flow analysis of why your creditors should see that your business cash flow risks make sense.

A genuine business expedition is before us. Cash will be king. The greed of yesterday may turn to fear. We are working in uncharted territory. The wisdom of your Guide will be crucial from today forward.