Tax Tips
Volume 9, Issue 23
For distribution 5/4/20; publication 5/7/20

Options for the Business Owner During COVID-19 Pandemic

Many businesses are expected to see significant revenue losses due to COVID-19 and many individuals and business owners are overwhelmed with the choices of what they should do.  In addition to considering Disaster Loan Assistance (EIDL) through the SBA and the Paycheck Protection Program through your bank, here are some options to consider related to payroll and staffing:    

Employee Layoffs

Layoffs may be unavoidable for small businesses that are also employers.  This is where an employee’s job is terminated from the company they have been working for.  For the final paycheck to the employee, the employer needs to include their vacation pay and any severance package that they provide. 

A layoff is permanent. An employer could rehire a laid off worker, but there is no obligation to do so. The employer will have to hire new employees once their business picks up again. 

Furloughs

Furloughs might be a good alternative to laying off team members.  In a furlough, this is a temporary, unpaid leave for employees.  This option might give the employer time to weather the storm by reducing payroll costs, but also allows employers to bring back the furloughed worker where they left off.  At the time of furlough notification, the team member can file for unemployment. 

Reduce Hours or Pay Cuts

Before any hasty decision is made, an employer may want to consider reducing staff hours or cutting pay, if needed.  Employers are allowed to cut employee pay during a business or economic shut down up to 25%.  One option could be to reduce hours for hourly employees and have the team member file for unemployment to make up for the hours not worked.  For example, if you are an hourly employee working 40 hours a week, you can work 25 hours at your current job, but file for unemployment for the remainder of the 15 hours not worked.  

Unemployment

If you lay off, or reduce hours for any team members, please encourage them to file for unemployment immediately following the notification.  Unemployment is now also available for the 1099 worker, where it was not available to independent contractors before now.  Unemployment can also be filed by the one-person S-Corp owner.  The best news about unemployment is that employees will receive what they normally qualify for PLUS an additional $600/week. Unemployment is for 26 weeks, and an additional 13 weeks of pandemic emergency unemployment compensation through December 31, 2020 is available.     

Refundable Payroll Tax Credit

Employers that did not receive a Paycheck Protection Program loan can get a payroll tax credit of 50% of wages paid to employees if their operations were partially or fully suspended or their gross sales declined by more than 50% when compared to the same quarter in the prior year.  Credit is provided up to $10,000 per employee. 

There are also many more ways to boost cash and reduce taxes in your small business.  Give us a call or email us to find out more about the full list of options available to your business. 

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Our latest blog: Options for the Business Owner During COVID-19 Pandemic. Subscribe here: [link]

Overwhelmed about what to do about your business’s significant revenue losses during the COVID-19 pandemic? Here are some options: [link] 

Tax Tip: Employers are allowed to cut employee pay during a business or economic shut down up to 25%. [link]

Layoffs may be unavoidable during uncertain times. When a layoff is communicated to the employee, the employer needs to pay out their vacation pay. [link]

You can get a payroll tax credit of 50% of wages paid to employees if your operations were partially or fully suspended or your gross sales declined by more than 50% when compared to the same quarter in the prior year. [link]

If you lay off workers, or reduce hours for any team members, please encourage them to file for unemployment immediately following the notification! [link]

Not sure what the options are for employers are during this COVID-19 pandemic? Here are some options you may want to consider: [link]

Sign up for our newsletter: Options for the Business Owner During COVID-19 Pandemic. [link]