The Unknown Unknowns: Preparing for the Future of Business During a Covid-19 Pandemic

The Unknown Unknowns: Preparing for the Future of Business During a Covid-19 Pandemic 

Credit: Donald J. Sauder, CPA | CVA

Written in 1742, one overlooked masterpiece from the most underrated century of English verse, Thomas Gray’s poem “Ode on a Distant Prospect of Eton College” concludes “And happiness too swiftly flies. Thought would destroy their paradise. No more, where ignorance is bliss, ‘Tis folly to be wise.”

The business world has changed since 1742, and so has the North American continent. Yet those timeless words still resonate today as a masterpiece. With the Covid-19 pandemic rapidly shifting reflections on both the macroeconomic and microeconomic landscape of business, entrepreneurs are increasingly likely to be entering an era where the business unknown unknowns are more evident than ever before. While ignorance is bliss, ignorance also has risk.

In recent decades, with a firm reliance and trust in the management of the US economy and economic policymakers, entrepreneurs have had an unparalleled opportunity to develop enterprises. The sunny business climate of past years has provided the best of resilient opportunities for enterprising entrepreneurs.

Approaching the new planning horizons of the Covid-19 business climate realistically, when we consider the reality that now we have a new classification of enterprises – essential and non-essential businesses, it should raise awareness that these quick shifts in trends and the business climate are likely not simply temporary. Today, for some businesses classified as many non-essential companies, strategic planning is merely a viable survival plan.

Too many businesses with aggressive growth strategies often fail to appreciate that business growth requires capital and access to capital financing; ultimately, growth involves a corresponding amount of cash. Companies that have continued to aggressively gain market share with the simple assumption that funding will always be available whenever needed should cautiously consider shifts in regulated lending practices and credit policies amidst a Covid-19 pandemic. Bottom line: Don’t pursue business growth if your financing funds are not assured.

Easy financing access in prior years has been a plain and straightforward vehicle that can transport any entrepreneur farther than they planned to go on the highway of commerce. The assumption, all risks are financeable in some fashion, is a truism until it isn’t. Perhaps you’ve never considered the fact your bank could get in financial trouble?

History tells us that companies confront financial trouble more often from a lack of cash flow than a lack of net income. This is no more apparent than when inventory is sold, and payment collection on contracts or accounts receivable is deferred because your customers are under financial duress. Increasing risk is supply chain disruption with just-in-time inventory margins, and the supply chain unexpectedly tightens. Too often, business owners are overly optimistic or unrealistic about real underlying micro and macroeconomic trends, hazards, and tensions, leading to unnecessary risks.

It would seem to be a reasonable expectation for many individuals, that Covid-19 pandemic business risks will perhaps last beyond the 2020 business year. For this cause, having a plan and cash equivalent reserves to continue to comfortably cashflow term debt and fixed expenses among variables in cashflows, is most prudent.

Envisioning what these Covid-19 business changes will look like in say even six months, would be folly for us to prognosticate with any credit as an expert. Plainly, we don’t know what we don’t know, and we don’t know what the unknowns are. On the contrary, considering possible business climate change and pandemic scenarios is advised.

The foreknowledge of the right business decisions in 2020 will only be known after the fact, and many necessary business decisions will be made with less than complete and perfect information. The words “Welcome to business speculation” should bring a degree of realistic awareness to current Covid-19 pandemic risk(s). Business leadership today must be increasingly decisive, and not be influenced by fear and concern.

If you’re a business leader and you’re fearful today or have more risk than you can handle or have prepared for, you know what you need to do. Begin immediately downsizing your enterprise risks. If you need help with this task, retain a trusted advisor. You are now aware that you exceeded your comfort zone of feeling appropriately equipped to navigate an economic storm. If you lack the necessary confidence both for yourself and those who look to you for business leadership, the voyage is unadvisable with your charted course. Do you see the lighthouse keepers? (More importantly, can you discern like a certain Apostle when you should be in the harbor?)

Many business industries are solely dependent on credit market access. In real estate, most buy | sell transactions, and more substantial construction activity is associated with loan financing. The real estate’s current and future value is pillared on the assumption that someone else will be able to access credit to purchase the property when the owner desires to sell.

The domino effect of the credit market reliance is the chief concern we need to consider for business strategy developing Covid-19 business plans. Instability in financial markets, and therefore credit markets, are a trusted forerunner of microeconomic business crisis developments.

When interest rates are near zero, it signals a leading indicator of the future value of that money. When interest rates are negative, banks will also be less likely to lend if they don’t pass on the additional costs to those customers who borrow. Correspondingly, the price to access credit can increase. It is not unrealistic to suppose fees can be placed on lines of credit and other financing sources. What would it look like to have to pay your bank a 1% or 2% fee simply to keep your business line of credit from being closed (without any amount drawn on financing)?

Restructuring balance sheets should be of top priority for businesses that want to avoid a potential risk of insolvency when counting the costs of a possibly longer-term planning horizon than expectation from a Covid-19 business climate. This includes downsizing inventory to pay off debt(s) and increasing equity either with additional capital or strategic downsize planning of the balance sheet. Paying off debt is the objective. When financing insolvency, financing experts will tell you that the last dollar of financing is the most expensive and may be too costly in business recovery.

Planning horizons should include all possible scenarios your team can think of with regards to risk including such things as a business shutdown or an off-line team. Events could occur for any number of reasons. Additionally, suppose government resources become strained and for peaceful discussion purposes a possible insolvency of local municipalities. In those instances, judges could rule that the property owners will make up the deficit in revenues. From a microeconomic perspective, when a homeowner’s association faces revenue deficits, who pays? (The appraiser thought those condos were worth $1.0m apiece, and now listed at $75,000 because costs rose to $5,000 per month payable to the HOA?) Or say real estate taxes doubled for any number of reasons, what would that do to local household budgets and, therefore, your customer’s discretionary revenue?

We are in a season when there are no perfect business decisions, and knowing the right choice is impossible to discern when complete information is absent until after the fact.

A business chief risk officer is increasingly vital to enterprise successes in a Covid-19 pandemic. If your business omits a meeting to assess Covid-19 business risk(s) regularly, you’re unprepared for the unknown unknows ahead. You should quickly be more diligent before it is too late. At a minimum, you should meet to examine and discuss pressures among other industries, resolutions, precautions, and plans to resolve potential tensions if they should reach your trade or enterprise.

Develop a list of the ten best events that could happen to your business, both during and absent a Covid-19 pandemic. Also, develop a list of the ten worse events that could occur, i.e., shutdowns, cashflow interruptions, or supply chain breaks.

After you successfully outline these twenty events, and develop workable and implementable solutions, you’ll be further prepared and ready for the future Covid-19 pandemic business unknown unknowns that may be encountered ahead.


The HEALS Act: A Boots on Sand Covid-19 Safeguard

Preface: Eight bills linked together comprise the pending HEALS Act legislation as a counter proposal to the HEROES Act, as additional Covid-19 relief measures are negotiated in Congress.

The HEALS Act: A Boots on Sand Covid-19 Safeguard

Credit: Donald J. Sauder, CPA | CVA

Staring this week’s Senate discussions, Republican Senators unveiled the next steps to safeguard the US economy from the possible risks of sinking sands amidst the coronavirus impact with a new bill – the Health, Economic Assistance, Liability Protection and Schools Act (HEALS). The new coronavirus relief provisions outlined in this pending legislation could bring $1.0 Trillion of additional economic relief funding.

The bills package includes a buffet of economic legislation including $306.0 billion in emergency appropriation from the SAFE TO WORK act introduced from Senator John Cornyn (R-Texas), the Safely Back To Work and Back to School Act from Lamar Alexander (R-Tennessee), the American Workers, Families, and Employers Assistance Act from Chuck Grassley (R-Iowa), the Continuing Small Business Recovery and Paycheck Protection Program Act from Marco Rubio (R-Florida) and Susan Collins (R-Maine), the Time to Rescue United States Trusts Act from Mitt Romney (R-Utah) and Restoring Critical Supply Chains and Intellectual Property Act from Lindsey Graham (R – South Carolina).

Relief Funds

First and foremost, the HEALS Act includes a second round of taxpayer stimulus checks like the CARES Act. This would provide qualifying taxpayers with $1,200 of relief funds for whatever spending purposes they so choose, with phase-outs on funds above $99,000 for individuals and $198,000 for couples. The Treasury announced these stimulus checks could arrive as early as August to qualifying taxpayers.

Secondly, economic relief with extra unemployment benefits proposed at $200 per week, as an extension to the original CARES Act $600 per week additional UC benefit that expired July 31. The federal supplement would not exceed 70% of previous wages when combined with both state and federal assistance, to incentivize workers to look for gainful employment.

The SAFE TO WORK Act proposal is designed to offer employers more durable protection from lawsuits brought from workplace coronavirus compliance risks. The Act would provide a guard to employers from personal injury lawsuits from coronavirus workplace risks. It would also place a ceiling on any awards, as long as employers did not demonstrate willful misconduct.

Update on PPP Loans

The famous Paycheck Protection Program would be extended to December 31, 2020, for bolstering treasuries of the forty-plus percent of small businesses that are concerned with making payroll without the aid of a PPP subsidy. The second round on these financings on the forgivable PPP loans would be limited to business with 300 or fewer employees with special funding channeled to micro-businesses with ten or fewer employees to ensure small business loan equality. Also, legislation is pending on automatic loan forgiveness on PPP loans below $150,000. The forgiveness features of the PPP loans are in a continued state of fluctuation, and borrowers should be patient as the trends are continuing towards reducing fears of inability or hassle to obtain forgiveness on PPP loans below $2.0 Million.

Also, a Long-Term Recovery Sector Loan facility would provide guaranteed long-term low-interest loans for working capital to businesses that equal up to two times annual revenues, with a $10.0 million ceiling. Maturity dates on these loans would be up to twenty years, with 1% interest rates. Eligible businesses would include 500 fewer employees that have seen declines in revenues of 50% or more in the first or second quarter of 2020 compared to 2019.

School Funding

School funding features in the HEALS Act provide for $105.0 Billion to education, with $70.0 billion allocated to grade schools and $29.0 for colleges and universities. The emergency funding would offer scholarships to parents to send children to private schools and funding for private schools based on certain stipulations and student numbers.

The bill proposed from Tim Scott (R-South Carolina) would provide a tax deduction of 100% for business meals to give relief to support America’s restaurant workers.


While the HEALS Act is pending, the significance of the additional relief package, if approved, will bring a new wave of economic relief awaiting a tide to turn on the Covid-19 tribulations.

This article is general in nature, and it does not contain legal advice.  Contact your advisors to discuss your specific situation

Is Risk Where the Reward Is?

Preface: “Twenty years from now you will be more disappointed by the things you didn’t do than by the ones you did. So throw off the bowlines, sail away from the safe harbor, catch the trade winds in your sails. Explore. Dream. Discover.” — Mark Twain

Is Risk Where the Reward Is?

Credit: Donald J. Sauder, CPA | CVA

Most people, including entrepreneurs, do not understand risk in entirety. Risk (say financial or business) is often a vague term with different connotations for many individuals. If you flip a quarter ninety-nine times, and it is heads on each, what is the probability it will be heads or tails on the next coin flip? Secondly, what if anything is at risk?

Many would like to say the world is becoming less risky – say continuous improvements in healthcare, job safety, and financial regulation. When you hear “It’s different this time,” consider that often when (business) leadership makes great decisions most don’t realize it; and the realization of a good or bad decision are often only apparent after the fact (consider the real estate decision on May 24th 1626, when Peter Minuit purchased the island of Manhattan for the equivalent of $24 worth of beads and trinkets.)

Insurance and banking are industries built on risk management. The tenure of an average Fortune 500 executive is five years, so why would a prudent CEO take risks with a longer-term payback where they will not receive the credit? What is your timetable for the rewards and payoffs of your business decision(s)? Are you effectively able to make a decision with no payoff rewards for at least three to five years?

Risk management can be painful – both to talk about and to perform. What if you’re wrong? “People who don’t take risks generally make about two big mistakes a year. People who do take risks generally make about two big mistakes a year.” — Peter Drucker.

Yet events of risk are sometimes similar but always different, and common sense is an oxymoron. For instance, the risk of a tulip bulb mania such as the Dutch speculation in 1637 where one bulb at the height of the market frenzy was worth the price of an average personal Dutch residence. And so again, high returns usually are generated from high risks.

Risk is not the same as gambling. Do you intentionally avoid risk? If you avoid uncertainty in business, there should be few to no expectations of rewards. Successful business owners manage risk expertly and deliberately or otherwise. Risk aversion is not exemplified with a swashbuckling cowboy dice roller. Yet without the “range rollers” risk riding on their ATVs say, you couldn’t enjoy a beef barbecue picnic, where you manage the uncertainty in the weather from a few possible sprinkles on your guests.

Are the risks in business more or less than they were fifteen years ago? Risk involves change, industry disruption, and automation. What new changes are coming, such as tax laws, product innovations, or financial regulation? To keep up, businesses need to effectively adapt and be prepared to adjust with workable solutions.

In the early years of computers, it was said that no executive was fired for purchasing an IBM mainframe because they worked flawlessly every time – a characteristic of the excellence in IBM products. Yet some well-intentioned and educated executives were fired because they purchased computer mainframes where the implementation risks didn’t proceed according to plan (i.e., they were not IBM models) and hence the risk of the blame for a wrong decision was reality. Most individual decisions are made with the best of intentions in reason. Now, what can IBM’s Watson do?

Studying the past often provides little helpful indication of when wilderness can result in (business) disruptions in the future. Economic and financial changes, wars and civil strife have been in the equation of life since the early days of history, and today companies have data loss risks too. If your business generates high rates of return, do you understand the risks? That’s what you’re being compensated for in the marketplace.

“What you have to do, and the way you have to do it is incredibly simple. Whether you are willing to do it is another matter.” — Peter Drucker.

After the fact, when we look at the history of what’s happened, we often think we would have been smarter than “those people”, made better decisions too, and appreciated more successful outcomes from the “wildness.” Data analytics and news channels today balm our concerns that we are perhaps ignorant or misinformed about business wilderness trends, developing risks, unpredictable disruptions, and quickly are completely engrossed in and reliant on these leading-world outlets to often give an oracle sense of perception to our managing of risks and astute decisions.

Risk and uncertainty are not the same things. There is never a zero-risk decision, and every decision you make, whether in business or daily life has risks, although not always monetary. Sometimes that risk is forfeiture of the rewards from an alternative choice. Today a decision to wear the emblem of the Covid-19 era, or not to wear a mask, can result in approval or appreciation from some to opposition, arguments, or worse.

Weather forecasters are also great examples or false negative and false positives on decision risk. If there is an 80% chance of rain or even 90% of rain, we immediately assume that it is 100% probability. Or if there is a 15% chance of rain, we believe it’s a zero percent probability, and the outdoor activities of the day will be enjoyable. In most instances, naivety to appropriate risk mitigation lowers the learning opportunity to understand and manage risk effectively. If you’re a farmer or work outdoors you appreciate weather forecasters as an easy example of variables in decision risk(s); and as you gain responsibility and success in your organization it only becomes increasingly complex. The best risk managers should wisely consider and remember Ahithophel and the fact that their is more to risk management than brilliant synapses.

And so, in life and business, weighing the risk(s) in the right balance, is the grand challenge.


Feast and Famine

Feast and Famine

Credit: Jacob M. Dietz, CPA

2020 just passed the halfway point and it could be called a year of feast and famine financially. The economy showed signs of strength early in the year, but then Covid-19 hammered the economy.

Many years ago, things were going very well in Egypt. In fact, there were 7 years of plenty. Those years of plenty, however, gave way to 7 years of famine. Fortunately, a very wise man providentially stored up resources during the years of plenty, which allowed him to feed his family and others during that time. Today there are also options to help business owners provide for their families.

Churches and Charities

If you are struggling to make ends meet, consider checking with your local church and charities to see if there is assistance available.

More importantly, if you are blessed and do not need assistance, consider donating to your local church and charities to help those that are in need. Some businesses may thrive through the Covid-19 pandemic. Local charities or churches may be able to inform you of the needs that are nearby if you are unaware of who needs help. “Give, and it will be given to you. Good measure, pressed down, shaken together, running over, will be put into your lap. For with the measure you use it will be measured back to you.” Luke 6:38 ESV

Lancaster County Small Business Recovery & Sustainability Fund Phase 2

Lancaster employers with fewer than 100 employees may apply for this grant. Companies may apply for this grant even if they received other grants, such as PPP, EIDL, and PIDA. They may not apply, however, if they already received this grant under phase 1. The application process begins 7/20/2020.

Covid-19 Relief PA Statewide Small Business Assistance

The second window to apply is intended to open in August. Eligible businesses must have at least 51% of their revenues in PA and are limited to 25 or fewer full-time employee equivalents as of 2/15/2020.

This program prioritizes certain businesses, such as those owned that are historically disadvantaged and those businesses owned by with low or moderate incomes.

Paycheck Protection Program (PPP)

We have written earlier about this loan program with the option of having the loan forgiven. The deadline to apply for this loan has been extended until August 8, 2020.

Economic Injury Disaster Loan (EIDL)

The Small Business Administration (SBA) is accepting EIDL loans. Applicants can have up to 500 employees, and possibly more in some cases. These loans are not grants, and they do need repaid.

Pennsylvania’s Covid-19 Dairy Indemnity Program

This program provides financial aid to farmers who had to dump milk during the covid-19 crisis. Farmers should apply for this by September 30th.

And the List Could Go On

We could continue to go on and name possible help available. Some of the options available might be just right for you, and some may not be a good fit. These programs may also have additional qualifications in addition to the summary mentioned here. If your business is struggling, feel free to call our office to discuss what options may be right for you.

CARES ACT: Qualified Improvement Property + Student Loans

Preface: Enacted to bring relief for those economically affected from the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security (CARES) Act provides roughly $2 trillion in economic relief to eligible businesses and individuals with legislation of historical magnitude. 

CARES ACT: Qualified Improvement Property Depreciation + Student Loans

In addition to numerous other provisions that provide cashflows to businesses, the CARES Act includes a modification to the recovery period for qualified improvement property.

Depreciation of Qualified Improvement Property

Under the CARES Act, a 15-year recovery period is retroactively assigned to qualified improvement property placed in service after December 31, 2017. Therefore, qualified improvement property may be depreciated over 15 years or, alternatively, qualifies for 100 percent bonus depreciation if all bonus requirements are met.

Qualified improvement property is broadly defined as an internal improvement to nonresidential real property but does not include improvements related to elevators and escalators, the internal structural framework, or an enlargement of the building. The improvement must be placed in service after the date the improved building is first placed in service. The improvement must be made by the taxpayer. Therefore, the 15-year recovery period and bonus depreciation does not apply to a taxpayer that purchases a building that includes qualified improvement property depreciated by the seller over 15 years.

Opportunity to Amend for Tax Refunds

As a result of the retroactive application of the reduced recovery period, if a taxpayer filed two or more returns using a 39-year recovery period for qualified improvement property placed in service after 2017 an incorrect accounting method was adopted and automatic consent to change to the correct method must be filed on Form 3115. Taxpayers who only filed one return using a 39-year recovery period (e.g., a calendar year taxpayer who has not filed a 2019 return) may file an amended return to correct the recovery period or may file Form 3115 with their current year return.

Generally, a taxpayer must elect out of bonus depreciation by the extended due date of the return for the tax year in which the property eligible for the bonus was placed in service. Some taxpayers may not want to claim 100 percent bonus depreciation on qualified improvement property that retroactively qualifies for the additional allowance. The IRS will presumably issue guidance allowing these taxpayers to make a late election out of bonus depreciation and to file an amended return or Form 3115, as applicable, based on a 15-year recovery period.

The reduced recovery period not only allows businesses to improve their cashflow by filing an amended return, but also encourages investment in further qualified property improvements to stimulate the economy.

Exclusion for Employer Payments of Student Loans

The CARES Act provides improved tax relief and tax incentives for individuals and businesses alike. Included in the numerous tax provisions is the exclusion of up to $5,250 from income for payments of an employee’s education loans.

Normally, employee benefits provided under an employer’s nondiscriminatory educational assistance plan are not includible in the employee’s gross income to the extent the benefits do not exceed $5,250 for the tax year.

Educational assistance means the employer’s payment of expenses incurred by or on behalf of an employee for education or the employer’s direct provision of education to an employee. Assistance includes, but is not limited to, tuition, fees, and similar payments, books, supplies and equipment. The employer’s plan must meet certain requirements to qualify.

Under the CARES Act, the definition of educational assistance has been expanded to include the payment of student loans. Payments made before January 1, 2021, by an employer to either an employee or a lender to be applied toward an employee’s student loans can be excluded from the employee’s income. The payments can be of principal or interest on any qualified education loan that is incurred by the employee for the employee’s education.

The $5,250 cap applies to both the new student loan repayment benefit as well as other educational assistance (e.g., tuition, fees, books) provided by the employee. Any excess of benefits is subject to income and employment taxes.

Double benefit denied. No deduction is allowed for student loan interest payments paid by the employer that are excluded from the employee’s gross income.

Please call our office with any questions on provisions of the CARES Act. We are here to answer your tax questions.

Safe Harbor Rule for Rental Real Estate Businesses with Section 199A

Preface: If all the safe harbor requirements are met, an interest in rental real estate will be treated as a single trade or business for purposes of the section 199A deduction.

Safe Harbor Rule for Rental Real Estate Businesses with Section 199A

The IRS has guidance on a safe harbor for certain rental real estate businesses to qualify as a trade or business for the qualified business income deduction under Code Sec. 199A.

Congress enacted Code Sec. 199A to provide a deduction to non-corporate taxpayers of up to 20 percent of the taxpayer’s qualified business income from each of the taxpayer’s qualified trades or businesses, including those operated through a partnership, S corporation, or sole proprietorship. Individuals, estates and trusts can also deduct 20 percent of aggregate qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership income.

Safe harbor requirements for a rental real estate business to be considered a qualified trade or business include maintaining separate books and records for income and expenses; participation in a minimum number of hours in rental services; and maintaining reports or logs for dates of service, description of services performed, and hours tracking.

Qualifying rental services under the safe harbor include:

  • advertising to rent or lease the real estate;
  • negotiating and executing leases;
  • verifying information contained in prospective tenant applications;
  • collection of rent;
  • daily operation, maintenance, and repair of the property;
  • management of the real estate;
  • purchase of materials;
  • supervision of employees and independent contractors;

The term rental services does not include financial or investment management activities (such as arranging financing), procuring property, studying and reviewing financial statements or reports on operations, planning, managing, or constructing long-term capital improvements, or hours spent traveling to and from the real estate.

It is essential to note that certain real estate types excluded under Code Sec. 199A are real estate used for personal residence by the taxpayer and triple net lease arrangements.

Please call our office to discuss these safe harbor requirements for rental real estate businesses. We can review your current business operations and organization to see if your rental real estate business qualifies for the Code Sec. 199A deduction.

CARES Act: Special Rules for Use of Retirement Funds + Unlimited Charitable Contributions Deductions

Preface: The Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed by Congress with overwhelming, bipartisan support and signed into law by President Trump on March 27th, 2020.  This $2+ trillion economic relief package delivers on the Trump Administration’s commitment to protecting the American people from the public health and economic impacts of COVID-19. This blog highlights two small tax benefits of the Act.

CARES Act: Special Rules for Use of Retirement Funds + Charitable Contributions

The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides relief designed to increase liquidity in the economy including modifications to the rules on the use and distribution of qualified retirement funds.


The CARES Act waives the 10-percent penalty on early withdrawals up to $100,000 from qualified retirement plans for coronavirus-related distributions. For purposes of the penalty waiver, a coronavirus-related distribution is one made during the 2020 calendar year, to an individual (or the spouse of an individual) diagnosed with COVID-19 with a CDC-approved test, or to an individual who experiences adverse financial consequences as a result of quarantine, business closure, layoff, or reduced hours due to the virus.

Any income attributable to an early withdrawal is subject to tax over a three-year period, and taxpayers may recontribute the withdrawn amounts to a qualified retirement plan without regard to annual caps on contributions if made within three years


The maximum loan amount is increased from the lesser of $50,000 or 50% of vested balance to the lesser of $100,000 or 100% of vested balance. This increase applies to loans made between March 27, 2020 (the date of enactment of the CARES Act) and December 31, 2020.

In addition, if a qualified individual has a loan repayment due date after March 27, 2020 and before December 31, 2020, on an outstanding loan, the payment due date is delayed one year (or, if later, until the date which is 180 days after March 27, 2020). Any subsequent repayments with respect to the loan will be adjusted accordingly and the five-year period for repayment is disregarded.

Similar to the rules on withdrawals, a qualified individual is an individual (or the spouse of an individual) diagnosed with COVID-19 with a CDC-approved test, or to an individual who experiences adverse financial consequences as a result of quarantine, business closure, layoff, or reduced hours due to the virus.

Required Minimum Distributions

The CARES Act also waives required minimum distributions, regardless of whether the taxpayer has been impacted by the pandemic. The waiver applies for calendar year 2020 to defined contribution plans, certain annuity plans, and traditional or Roth IRAs. The waiver allows seniors to hold on to their plan assets when they might otherwise have to sell at market lows.

Additional Modifications

IRA Contribution Deadline. The deadline to make an IRA contribution is extended to July 15, the extended due date for tax returns.

Mandatory 20% Withholding

The mandatory 20% income tax withholding on rollovers is also suspended for 2020.

Increased Tax Deduction Limits for Charitable Contributions

The CARES Act offers enhanced tax incentives for making charitable contributions for the 2020 tax year.


 In general, the itemized charitable deduction for individuals is limited to a percentage of the taxpayer’s adjusted gross income (AGI). The percentage is determined by the type of organization receiving the donation and the type of property donated. For the 2020 tax year, individuals can claim an unlimited itemized deduction for charitable contributions which are normally limited to 50 percent of AGI.

Also, beginning in tax year 2020, an individual who does not itemize deductions can deduct up to $300 in charitable contributions made to churches, nonprofit schools, nonprofit medical institutions, and other organizations as an above-the-line deduction in calculating adjusted gross income. This allows an individual to claim a deduction for a charitable contribution even if the individual does not itemize deductions.


 A corporation’s deduction is generally limited to 10 percent of the corporation’s taxable income, computed with certain adjustments. The percentage limit was temporarily waived for qualified contributions made by a corporation after December 31, 2017, and before February 19, 2020, for relief efforts in qualified disaster areas. Under the CARES Act, the percentage limitation on the charitable contribution deduction for corporations is increased to 25 percent for the 2020 tax year.

Food Inventory

Corporate and non-corporate taxpayers are entitled to an enhanced deduction for charitable donations of food inventory from any trade or business. The food inventory must consist of items fit for human consumption and be contributed to a qualified charity or private operating foundation for use in the care of the ill, the needy, or infants. Normally, a non-corporate taxpayer’s total deduction for food inventory donations during the tax year is limited to a maximum of 15 percent of the taxpayer’s net income from all trades and businesses from which the donations are made during the tax year. In the case of a C corporation, the deduction is limited to 15 percent of the corporation’s taxable income. Under the CARES Act, the deduction for the contribution of food inventory is increased from 15 percent to 25 percent for the 2020 tax year.

If you would like more information on how you may benefit from the CARES Act, please call our office.

Dig Your Well Before You’re Thirsty

Dig Your Well Before You’re Thirsty– Book Summary                                             Author: Harvey Mackay

Donald J. Sauder, (2016)

Harvey Mackay has been giving great business advice for years, speaking from both the head and the heart. In his book, Dig Your Well Before You’re Thirsty, Harvey gives solid advice on the value of networking, and how to do so effectively.

Building a network is a lot like digging a well. It begins with the realization that, “Guess what? I might be thirsty one day. I just might need a well to draw on. I think I will work on that.” Then the homework begins. “Like all new behavior, the more you practice the skills of networking, the easier it gets.” Up the proverbial creek? If you’ve got a network, you’ve always got a paddle.

“Why should you network? Well first, in today’s economy, talent alone will not save you. Secondly, the traditional advice, more training and education, will not save you. The government will not save you. In fact, the more successful you are, or prepared for the real world, you still cannot save yourself in some situations. You need a network”. Harvey states that he were to name the single characteristic shared by all the truly successful people he’s met, that characteristic is the ability to create and nurture a network of contacts. No matter how smart you are, no matter how talented, you cannot do it alone. A network replaces weaknesses of individuals with the strength of the group.

Your car just gets you to work, your network can determine whether or not you’ve got work to get to. When Harvey graduated from college he began looking for a job. After exhausting – unsuccessfully – all possibilities, his dad said he should go see Charlie Ward. Harvey had no idea his dad, an Associated Press reporter, knew anyone other than politicians and athletes. Charlie was president of Brown & Bigelow, the world’s largest manufacturer of calendars, playing cards, and anything else with a logo. Harvey called Wards office. At the interview he was ushered into a room with enough space to hold 250 for cocktails. Charlie did most of talking…and then uttered the magic phrase, “I’m going to put you to work in our ‘goldmine’ across the street”. It was an envelope company. The job consisted of using a wooden handle like a miner’s ax, only there was straw on the end of it. Decade later, Charlie is still in the envelope business, still looking for that goldmine, albeit very successful. Harvey’s dad helped Charlie when the chips were down, and as they say, the rest is history. The point is, Harvey’s career success and first job were from a network.

Your best network will develop from what you do best. For most people networking is a learned behavior, like learning to swim. It is gradual – and often painful, even scary – process of trial and error, small incremental steps, and finally a few breakthroughs. The more you practice networking, the easier networking becomes, and more successful you will be at networking. A network provides a path, a way of getting from point A to point B in the shortest possible time over the least possible distance.

Positive networking is things like helping others prepare for life events, helping people develop, thanking people for how they have helped you, doing the drudgery work when someone is snowed with work. Negative networking is sharing gossip or inside information that you learned in confidence, collusion, or work that violates federal laws.

The really big networking mistakes people make in their lives come from the risks they never take. People aren’t strangers if you’ve already met them already. The trick is meeting the people before you need their help.

Ray Kroc, the founder of McDonald’s, sold malted milk machines in California in the 1940’s. His best customers were two brothers who ran a drive-in, a relatively new concept. Kroc knew these brothers were on to something and tried to persuade them to expand so he could increase his sales to them. When that didn’t work, he persuaded them to sell him the entire business, and kept the name. Kroc found a Calvin Coolidge quote that expressed his business philosophy and posted it on the wall of every McDonalds. It’s important to every networker. “Press on. Nothing in the world can take the place of persistence. Talent will not. nothing is more common than unsuccessful men with talent. Genius will not, unrewarded genius is almost a proverb. Education alone will not; the world if full of educated derelicts. Persistence and determination alone are omnipotent.”

What do you have to offer that makes you memorable? What connects you with the person you most want to be remembered by? There are not dead-end jobs. There are only dead-end people. If you build a network, you will have a bridge to wherever you want to go.

In networking, you’re only as good as what you give away. It all comes down this: If you want one year of happiness, grow grain. If you want 10 years of happiness, grow trees. If you want 100 years of happiness, grow people. It takes years to become an overnight success. You can build a network with any set of tools, so long as you know how to use them. “Any competent carpenter can build a house, but no two carpenters have the same tool kit.”

“You can’t always be an expert. You can’t always know an expert. But you can always hire an expert”. Never assume a junior person is a meaningless person; he or she may be or may end up being more important than the big name. Treating everybody with dignity and courtesy is not only good manners, it is good business policy.

Two things people never forget: Those who were caring to them when they were at a low point, and those who weren’t. Elevators go up and down. “When God close a door, somewhere God always opens a window”.

In Harvey’s career, he has never once heard a successful person say he or she regretted the time and energy put into keeping a Rolodex file. Often the people who are closest to you, and those you need the most are the ones you most likely take for granted. What you are is God’s gift to you. What you make of yourself is your gift to God.

“I hope your network can help you find a job or earn a promotion or close a sale, or make money. But even if it never does, if your network can do what Mackay’s did – if it can help you help someone who needs it – then you have the best network of all”.

How to Discover Your Core Values

Preface: Just defining your core values is a huge step forward. But they will do you little good if you do not require each person in your company to live them out day-to-day. Culture is created by what people do, not by words on a page. 

How to Discover Your Core Values

Credit: Roy Herr

When you know your purpose, mission, and values, you can make good decisions quickly. The first step in knowing your roots is to discover and clarify what they are. Today, we will dive into Core Values. As a reminder, here are the definitions for each of the three Roots to a success enterprise.

Vision: This is your higher purpose. It is your why, the reason your organization exists. This primary root goes deep to the water source and provides energy to keep growing when the short term is dry. It is a clear picture of the new future you intend to create.

Mission: The practical way to move toward the vision. This is what we commonly see as business— building houses, repairing cars, or baking cakes.

Core Values: Priorities for decision making that everyone needs to follow so the vision and the mission can be realized. Core Value roots spread wide and stabilize the organization in the daily winds of external influence. These values are the foundation on which we perform work and conduct ourselves, the deeply ingrained principles that guide all actions.

As Anabaptist Christians, we like the sound of “core values”. We might even think we know what core values we hold. However, when we get down to writing our core values, we realize that we are foggy on the concept. Or at least foggy on how to write down what the core values are for our own business. Have you found it that way? If not, you are the exception!

There are two other types of values that are often confused with core values. This concept is taught by Patrick M. Lencioni in a July 2002 article titled Make Your Values Mean Something. Here are his definitions:

Core values are the deeply ingrained principles that guide all of a company’s actions; they serve as its cultural cornerstones.

Aspirational values are those that a company needs to succeed in the future but currently lacks.

Permission-to-play values simply reflect the minimum behavioral and social standards required of any employee.

Do you see the difference? Core values already exist in your company today. Aspirational values are the ones we wish existed. Permission-to-play values are the basic standard for employment in any company in your part of the world.

When defining what your core values are, it is not a matter of “coming up with them” or choosing them. They already exist. We just need to discover what they are.

Leaders often want to include permission-to-play values because they want to promote honesty, integrity, and a good work ethic in their businesses. Certainly, we want to promote those values. But that should be a given. You don’t need to list honesty as a core value to fire someone for stealing tools.

Leaders often push for aspirational values to be included in the core values list, because they believe it is important that the company becomes something it is not. The push for becoming something we are not is fine if indeed the change warrants the monumental effort required to change the company’s character. However, telling your team and customers that you value cheerfulness when you have a customer facing employee that is allowed to be somber or grouchy 60% of the time is not being honest with yourself or anyone else.

The problem with naming values that do not already exist at a root level in the company is that your team will not believe what you are saying. You come across as out of touch with reality and will lose credibility with your people.

What Core Values Are Not

        • Core values are not what you wish you were.
        • Core values are not a plaque on the wall or a list in an employee handbook (although both of those are good).
        • Core values are not a goal to achieve.
        • Core values are not identical for any two companies.
        • Core values are not just ideas or philosophy.

What Core Values Are

        • Core values are the beliefs that steer the behaviors of your people.
        • Core values are deeply ingrained and difficult to change.
        • Core values are priorities by which decisions are made.
        • Core values are the basis on which you should “hire, fire, reward and recognize employees.” -Gino Wickman, author of Traction
        • Core values are the GPS that will keep you traveling the right direction to realize the fulfillment of your vision.
        • Core values are the defining characteristics of your company culture.

If core values already exist, why do we need to call them out? When you understand clearly what your company core values are, you can be intentional in perpetuating good company culture. You can screen out a lot of bad hires without learning by experience that they don’t fit your team. You can use your employee development resources to train employees how to live out the core values. You can identify “people issues” and solve them quickly when you have clearly identified core values.

Just defining your core values is a huge step forward. But they will do you little good if you do not require each person in your company to live them out day-to-day. Culture is created by what people do, not by words on a page. As a company leader, it is your job to act when core values are not being followed. Your team will soon learn that you mean business. They will find a lot of security in knowing that the leaders mean what they say. It builds trust in the leaders when they praise actions that support the core values of the company. It also builds trust in the leaders when they refuse to allow actions that undermine the core values.

Defining your core values and communicating them to your team is a great leadership tool. You will find that the employees who share your core values don’t need someone looking over their shoulder every day. They are aligned in their core with the company. They want to make decisions and take action that supports the company core values. When they mess up, they feel bad about it. You can build a company with people like that.

Do You Know Your Core Values?

Pebbles Family Buffet’s core values are:
Joy – Friendliness bubbling from a pleasant,
peaceful atmosphere.

Neatness – Orderly, clean, and safe.
Teamwork – Working and learning together respectfully. Do unto others as we would have them do unto us.
Hospitality – Serving up comfort with genuine service and hearty homestyle cooking—scrum-licious every time.

Their vision statement is: A reflection of a contented family living by the Truth.

Their mission statement is: Pebbles Family Restaurant welcomes guests “home” to enjoy the comfort of homestyle food in a relaxed and refreshing atmosphere. 

Can you see how employees who live out the core values will be making good decisions every day that fulfill their mission statement? Then by accomplishing their mission their vision becomes a reality.

If you don’t have this clarity in your business, I want you to know that it is possible to get it. If you attempted this in the past and gave up, please try again. It’s worth the effort. In fact, creating all three of the Root Statements (Vision, Mission, and Core Values) is the best investment any company can make. If you don’t do this, you will continue to zig-zag and waste time and dollars without making significant progress.

Do you need a little guidance to get through this exercise? Please download a free copy of the  Root Development Guide Click here to help you get clarity on your business roots.

Roy Herr, founder of Rosewood Marketing, thrives in the challenge of leading the team and working alongside clients to solve their marketing problems. He especially enjoys consulting with clients to help them develop their niche, brand, strategy and marketing plan.

Roy’s passion for bringing Biblical values and Christianity into the workplace is a driving motivator in his business relationships.

Realistic Goal Posts

Preface: Now is a great time to take a second look at the business planning you’ve done in the past. Specifically look at how flexible and dynamic your planning has been.

Realistic Goal Posts

Credit: Donald S. Feldman, CExP™, CPA, CVA, MBA

Global economic disruption uniquely affects each business. Whether you are being hit with a hammer or expect to suffer a slow burn, your reaction to changes and proactive planning will play a major role in how your future unfolds. Signals indicate that once we start to get COVID-19 under control, the world economy will begin to recover, business will rebuild, and business owners will need to ask themselves if they want to go through another major disruption, or transition out of their business while they can. This is the most crucial time to plan so that your business has the best chance of supporting your personal and financial goals, even if those goals are changing. It’s likely that your timeline is changing too

To get a better idea of the urgency of planning, here is a breakdown of tasks that may be involved in planning for the future of your business and the time each might take to complete.

Setting (or Resetting) Your Goals

No matter what, it’s a good idea to revisit your goals periodically. During times of change, this review is even more important. It’s a good time to look at what your goals have been, especially concerning how much longer you want to stay involved in your business, how much you’ll rely on your business for financial security, and to whom you want to transfer ownership in the future. Have any of your previous goals changed? Are there partners, advisors, or family members with whom you want to discuss possible changes to your goals? This activity is important, so it’s a good idea to give it the time and space it deserves. This may take 30 to 60 days.

Plan Design

Start with your preliminary plan. What aspects of your previous planning still make sense and which of your plans will need to change given new circumstances? Your task here is to get ideas and strategies on the table and start to weigh your options and investigate alternatives. This may require assembling some new data and conferring with specialists. It’s likely that some options previously available to you no longer make sense; it’s just as likely that new alternatives are now worth considering. Depending on how much planning you’ve done in the past, plan on this phase taking anywhere from 90 days to 9 months.


Next you’ll start implementing the strategies you’ve identified that you believe will take you where you want to go and put you in a position to transition your business when and to whom you want. Preparing yourself, your business, your management team, and your personal situation brings your greatest chance of long-term success. Many business owners have a sizable gap between the resources they have and the resources they need to achieve their goals. Your gap may be changing. This is where the really important work gets done. It can take six months (if you’re trying to get out of your business soon) or five years (if you need to build value and prepare team members).

The Ownership Transfer

There are many ways to transition out of ownership when you are ready. Your options tend to fall into one of two primary categories: you can sell to a third party, like a strategic buyer or investor, or transfer to an insider, such as a child or your employees. If you and your business are prepared for the transfer, and you commit to pursuing a third-party sale, you can sell your business and be completely out within a year or so. On the other hand, it’s common for transfers to insiders to take longer, usually because new owners don’t have an immediate ability to cash you out. It may still be possible for you to get the value you want and need for your ownership interest, but it can take time. A well-prepared business can transition to insiders and deliver a fair value to a departing owner in three to five years.

Measuring the Goal Post

Planning for the future of your business, and taking the steps necessary to get there, will have a goal post that is unique to you and your company. It’s common for the process to take anywhere from one to ten years. That’s a pretty big range, but you are probably already applying the process to your situation and getting a sense of your personal timeline.

Now is a great time to take a second look at planning you’ve done in the past. Look at how flexible and dynamic your planning has been. Take this opportunity to build a new path toward your future. When everything is changing, it’s important to change too so that you can react to your situation instead of being a victim of your circumstances.

We strive to help business owners identify and prioritize their objectives for their business, their employees, and their family. If you are ready to talk about your goals for the future and get insights into how you might achieve those goals, we’d be happy to sit down and talk with you. Please feel free to contact us at your convenience.

Credit: Don Feldman is the founder of Keystone Business Transitions, LLC, a Lancaster, PA firm devoted to helping business owners smoothly exit their companies. He has been a CPA for over 25 years and a valuation professional for 20 years. For the last 15 years, Don’s practice has focused on succession and exit planning, including transfers of business interests to family members and key employees, as well as sales to outside buyers.