Tips to Keep Your Business Afloat During COVID-19

COVID-19 has had an unprecedented impact on all aspects of American businesses, but perhaps none have been as severely affected as small business owners. Surviving this disaster will require more than just time: you will need to take a pragmatic view of what has happened and what steps you are willing and able to take to bounce back. Here are our suggestions:

1. Spending

Review what you’re spending now and what you were spending before to determine what you can eliminate. Efficient spending is going to make a substantial difference in your business’ ability to survive this crisis. If you can break your expenditures down into what is necessary versus what you can eliminate, you’ll be able to give yourself a cash flow advantage.

Perhaps you’ll find that you no longer need the same amount of physical space if you are comfortable with having workers telecommuting. That single example can lead to savings in electricity and other services that can boost your ability to cut expenses. Your goal is to run as lean an operation as possible but to do so without having your cuts impact your ability to provide the service that your clients expect and want.

2. Agility

Examine how the shifts that the pandemic has forced can be incorporated into your business in a more sustained way. Plenty of companies have shown tremendous flexibility and skill in the way that they deliver their products or services, or even in the products themselves. Every business’ success is based on what the market needs. Business owners who can assess how the pandemic’s unique dynamics can be used to their advantage, or how they can adjust to them, will be the ones that are most successful and most likely to survive.

3. Competitive Inspiration

If you’re stuck for what to do to transform your business, look to your competition for inspiration. Perhaps they’ve moved their in-store shopping experience to one that is entirely available online, or they’re providing a new way to use an old product. Maybe they aren’t able to open but are remaining engaged with customers via webinars, podcasts, or live sessions on Facebook or Instagram. Whatever is working for one company, whether in your industry or not, can serve as inspiration for you.

4. Planning

Take a longer view of your business than what is demanded by the immediate moment. Some companies will be able to return to normal, but that is not true of all of them, and taking a clear-eyed look at how consumers are going to look at spending money with your type of business in the future is time well spent. If your business is primarily dependent upon having lots of people gathered in a small space, then you have to think beyond getting back to work. Instead, spend time thinking about the changes you’re going to have to make to allow yourself to stay in business.

5. Learning

If your business operations have slowed or come to a stop as a result of the pandemic, one of the smartest things you can do is to use the time to expand your knowledge and education. There are many courses that you can take online, both free and fee-based, to make sure that you have sharpened your abilities and expanded your knowledge of your business and industry. Taking cues from successful business owners in similar sectors is a great way to boost your expertise. You can find inspiration from innovators and great thinkers, both current and classical. There is a lot more to be gained from the downtime offered by the pandemic than thinking about your inventory and your clients. Use the time to improve yourself, and it will provide a full advantage within your business.

6. Taking Care

Perhaps most important of all, stay healthy and stay positive. If you have extra time that you would have been spending on your business, take the time to make sure that you are taking care of yourself, your family members, and the people in your community. We are living through history, and when it comes to your business, work toward a resilient response that will advance your business beyond this setback.

If you have additional questions about how to keep your business going during COVID-19, please contact us.

3 Ways to Receive Payments in QuickBooks Online

If you crafted 2020 business goals in 2019, you’ve probably had to revise them due to COVID-19. Despite the disruption of the last six months, we hope that you have managed to stay healthy and keep your small business running.

It’s more important than ever to conscientiously record all of the money coming into your company and ensure that it gets deposited into your account(s). QuickBooks Online offers several ways to accomplish this. Whether you’re receiving payment on an invoice, documenting an instant sale, or selling on the road, the site provides tools to make sure that your receipt of the funds is entered in the correct place.

Delayed Payments

Do you send invoices for products and services? If so, there’s more than one way to record payments when they come in. You can, of course, just open the invoice and click Receive Payment in the upper right corner. We find, though, that going to the All Sales screen gives us a chance to check the status of other pending transactions. Click Sales in the toolbar, then All Sales.

If your list isn’t very long, you can just look for the invoice number. If not, you can use the Filter tool to find the original form. Click the down arrow next to Filter in the upper left to see your search options here (StatusCustomer, etc.).


If you have a lengthy list of sales transactions, you can search for the one(s) you want in this drop-down window.

Once you’ve found the invoice, look down toward the end of that row. In the Action column, you’ll see Receive payment. (While you’re there, click the down arrow to familiarize yourself with the other options.) When the Receive Payment window opens, select the Payment method that applies. Leave the Deposit to field showing Undeposited Funds and look over the rest of the screen to make sure everything is accurate. Print it if you’d like, or add an Attachment using the links at the bottom, then Save it.

Tip: Customers tend to pay invoices faster if you allow them to make payments online. If you’re not yet set up for this, your Tarlow advisor can help you.

Instant Payments

Your business may collect payments at the time you provide a product or service. When this happens, you’ll want to supply your customers with a sales receipt instead of an invoice (this is also important for your records). Click the +New button in the upper left and select Sales Receipt under Customers to open a blank form. You’ll fill this out just like you would an invoice by selecting the Customer first, then entering or selecting any data needed for the other fields.

If you don’t anticipate needing all of the fields on your sales forms, you can remove some of them and even add your own. Ask us how this works.

If you’d like to add custom fields to your sales forms, you can do so in QuickBooks Online.

When you’ve completed all of the fields in your sales receipt, you can preview and print it. You can also save and email it to the customer.

Going Mobile

If you generate sales on the road, you can still create sales receipts for customers using the QuickBooks mobile app. Just click the plus (+) sign at the bottom of the screen and select Sales Receipt. The form is similar to the one you’d use on your desktop computer, though the layout is different, of course.

Having a QuickBooks Payments account is especially helpful when you’re making mobile sales. You can even swipe your customers’ credit and debit cards if you order a card reader from Intuit. We can walk you through this process.

You don’t ever want to record a payment incorrectly, of course, but it’s especially important right now to ensure that you’re accounting for every dollar that comes in. Please stay healthy and safe, and contact us if we can help in any way with your accounting and your use of QuickBooks Online.

A Novel Way to Make COVID-19 Relief Donations

Article Highlights:

  • Donating unused vacation time, sick leave and personal time
  • Employer’s Function
  • Great Donation Opportunity

On March 13, 2020, the President issued an emergency disaster declaration under the Stafford Act as a result of the coronavirus pandemic. The disaster area covers all 50 states, the District of Columbia, and five U.S. Territories. As a result, and as was done in the past in the wake of major disasters, including Hurricanes Katrina, Sandy, Harvey and Maria, the IRS is providing special relief that allows employees to donate their unused paid vacation, sick leave, and personal leave time to COVID-19 relief efforts.

Here is how it works: if your employer is participating, you can relinquish any available and paid vacation time, sick leave, and personal leave for cash payments, which your employer will donate to COVID-19 relief charitable organizations. The cash payment will not be treated as wages to you, and your employer can deduct the amount given as a business expense. However, since the income isn’t taxable to you, you will not be allowed to claim the donation as a charitable deduction on your tax return. Even so, excluding income is often worth more as tax savings than a potential tax deduction, especially if you generally claim the standard deduction* or you are subject to AGI-based limitations.

This particular relief applies to all donations made before January 1, 2021, giving individuals plenty of time to forgo their unused paid vacation, sick and leave time and have the cash value donated to a worthy cause.

This is an excellent opportunity to provide sorely needed help in the ongoing COVID-19 emergency without costing you anything but time. Contact your employer to donate. If your employer is unaware of this program, refer them to IRS Notice 2020-46 for further details.

If you have questions related to donating leave time for COVID-19 relief efforts or other charitable contributions, please contact us.

 

*Normally, charitable contributions are deductible only if you itemize your deductions on Schedule A as part of your 1040 return. This means you wouldn’t get a tax benefit from your donations if you claim the standard deduction instead of itemizing. However, the CARES Act, passed in late March 2020, allows up to $300 of cash charitable contributions made in 2020 to be deducted from your income even if you use the standard deduction. Of course, as noted above, you can’t deduct the value of COVID-19 relief donations made through leave-based donation programs in any case. Instead, the leave time is non-taxable.

IMMEDIATE ACTION REQUIRED: Important Tax Filing Information for July 15, 2020

The Supreme Court has taken up a case that will determine the constitutionality of the Affordable Care Act (ACA). While it is highly unlikely that the Supreme Court will retroactively deem this Act unconstitutional, the decision to strike down the ACA would likely also invalidate two taxes on high-income individuals, including the net investment income tax and the increased Medicare tax rate.

High-earning taxpayers affected by these ACA specific taxes have the potential to claim a refund for 2016 through 2019 tax years; however, the request for a refund must be filed before the three-year statute of limitations expires. For 2016 tax returns filed before July 15, 2017, that statute of limitations runs out July 15, 2020.

July 15, 2020, is the deadline to file a “protective” refund claim for 2016-2019

Despite the lack of an official ruling by the Supreme Court and the impending statute of limitations, it is still possible for affected taxpayers to preserve their ability to claim a refund by filing a “protective” refund claim before the statute of limitations for each year expires. A protective refund claim is possible when a law is still in question, but the statute of limitations is about to expire, as long as the protective refund claim is filed before the statute of limitations lapses. Filing the protective refund allows the taxpayer to file an amended return and request a refund if the law is ultimately deemed unconstitutional. Taxpayers that filed after July 15, 2017, will have until later in the year to file this refund claim.

Simple filing requirements 

The only requirements for a valid protective claim include an explanation for the claim and the specific years for the potential refund, as well as the taxpayer’s name, address, signature, and legal identification, including either a Social Security number or taxpayer ID number. The protective refund claim must also be postmarked by the statute of limitations end date, but it is not required that the IRS receive the claim by that date.

Instructions and forms to file your “protective” refund claim

It is possible for taxpayers to file their own protective claims using our template; this process ensures the most expedient filing of the claim. Claim filing instructions and templates to expedite the process are included for your use below.

Print out the appropriate templates, fill them out and mail by the end of the business day on Wednesday, July 15, or later if you filed your 2016 income tax return later than July 15, 2017.

Protective Claim Filing Instructions.pdf 

Protective Claim Form – Individual.pdf 

Protective Claim Form – Trust.pdf 

If you believe that you may have paid Net Investment Income Tax, please print the form and mail it to the IRS. You do not need to contact us prior to mailing the form, but please contact your Tarlow advisor to share a copy of your protective claim electronically.

Thank you and please contact us with further questions. We are here to assist you.

Here’s What Could Happen If You Try to Short-Change the IRS

Article Highlights:

  • Self-employed taxpayers
  • Underreported income
  • Unscrupulous tax preparers
  • Phony deductions or credits
  • Inflating the Earned Income Tax Credit
  • Taking fake education credits
  • Petty cheating

Some refer to it as “creative accounting” or just “a little fudging here and there.” However, if your tax return is missing some income that should have been reported or includes overstated deductions, regardless of whether you prepared your return or had it prepared, you are the one who is ultimately responsible. If you get caught, there can be very unpleasant consequences, including substantial monetary penalties and the possibility of jail time for blatant cases.

Those who fudge on their taxes may think that they are just cheating the government out of money. In actuality, however, the government is going to get the taxes it needs from somewhere, so those who fudge on their taxes are causing others to pay more.

Currently, just short of 50% of all U.S. taxpayers pay no income tax. A large percentage of these folks get money back from the government because their income is low, and they qualify for certain refundable tax credits. How many of those not paying taxes are either not reporting all of their income or exaggerating their deductions? There are no statistics on the issue, but it would seem to be a large number.

One of the most significant areas of cheating involves self-employed individuals not reporting cash payments. Some will even go so far as to offer discounts for cash payments; these discounts, of course, are attractive, and customers often opt for them, thus enabling the self-employed individuals to cheat on their taxes. However, if self-employed individuals get caught, perhaps because their reported income doesn’t support their lifestyles, they can end up with a high tax bill and penalties. Additionally, when the IRS finds a cheater, that person’s returns, or their company returns, are often audited for other years.

Some individuals who underreport their income are not just avoiding income taxes, but qualifying for low-income tax credits and other subsidies meant for those who need them.

Unscrupulous tax preparers also cheat, and you could end up being the victim. Here are some of the schemes they pull:

  • Adding false deductions or credits – They do your return correctly and tell you what your refund is. Then, before they e-file it, the preparer adds false deductions or credits to inflate the refund. The refund amount you expect is direct-deposited to your account, but the extra amount is sent to their bank account.
  • Inflating the Earned Income Tax Credit – Earned Income Tax Credit (EITC) is a refundable tax credit for low-income taxpayers that is based upon the amount of the taxpayer’s income from working (earned income). The credit increases up to a point as the taxpayer’s earned income increases then phases out for higher-income taxpayers. This credit is the frequent target of scams, and one of the most common is to create earned income by fabricating self-employment income of an amount that will result in the maximum EITC. Even though this may create more taxes, the EITC is higher than the taxes, netting an increase in the taxpayer’s refund.
  • Taking fake education credits – Another frequent scam is to claim a higher education tax credit, especially the partially refundable American Opportunity Tax Credit (AOTC), using made-up education expenses. The AOTC can be as much as $2,500, and $1,000 of that amount is refundable.

If you were a victim of an unscrupulous tax preparer and need assistance, please contact your Tarlow advisor.

Petty cheating is also prevalent. The following lists common areas of fraud and the steps that the IRS takes to counter them.

  • Inflating the value of noncash goods donated to charity – This is probably one of the most commonly inflated tax deductions.
    IRS Countermeasures: The IRS requires documentation from the charity, and if the value of the donation is more than $500 for the year, a detailed list of the items that the taxpayer contributed. The IRS will generally include charitable contributions in every audit, no matter what triggered the audit in the first place. 
  • Claiming fictitious cash contributions – This typically involves claiming that cash was donated through a house of worship’s collection plate or holiday charity kettle.
    IRS Countermeasures: All cash contributions must be verified with a bank record or a written record from the charity. Without such a document, no deduction is allowed. 
  • Purchasing an item at a charity event – Generally, when you receive something of value for donating, the amount of that item is not a deductible charitable contribution. Thus, the cost of pancake breakfasts, charity auctions, Girl Scout cookies, car washes, and the like are not deductible as charitable contributions.
    IRS Countermeasures: The IRS requires charities to include the value of goods or services provided to the donor on the charity’s receipt, making it easy for the IRS to detect when improper deductions are taken when it examines the receipts during an audit.
  • Donating cars to charity – At one time, individuals were donating vehicles that were close to being scrapped and then deducting the blue book value for the car as if it were in good or better condition. This trend became so prevalent that Congress actually stepped in and limited the vehicle contribution to $500 (generally).
    IRS Countermeasures: The IRS now requires the charity to issue a Form 1098-C to the donor; this form includes the information that needs to be reported if the vehicle contribution meets the requirements for a contribution greater than $500. 
  • Using a business vehicle for personal purposes – Have you seen pickups and other trucks with company logos on their doors towing boats and trailers down the highway? There is a good chance that the drivers of these trucks are writing off the mileage through their businesses.
    IRS Countermeasures: The IRS generally requires businesses, primarily closely held ones, to verify the business use of their vehicles (particularly those that are suitable for personal use) with a log, including the odometer readings for the start and finish of each business use. 
  • Deducting more home mortgage interest than entitled – Tax law limits the amount that can be deducted for home mortgage interest to the interest paid on $1 million in debt ($750,000 for debt incurred after December 15, 2017) from purchasing or improving a home. This limit applies to a taxpayer’s first and second homes only. Many taxpayers simply take the mortgage interest from the Form 1098 provided by the lender without any regard to these limitations.
    IRS Countermeasures: IRS Form 1098 requires lenders to include additional information that will allow the IRS computer to determine whether the limits have been exceeded. 
  • Making repairs on a personal home and deducting the expenses on a rental or business property – It is pretty easy for landlords or owners of business real estate to make repairs on their homes and then deduct those repairs on their rental or business properties.
    IRS Countermeasures: An auditor will look at the dates and addresses on receipts to ensure that they make sense. If an auditor catches such a violation, expect him or her to become very aggressive in other areas and to possibly invoke substantial penalties due to the intentional disregard of laws and regulations.
  • Falsifying investment costs to minimize gain – Until a few years ago, it was up to taxpayers to track their basis in the securities they owned. Inflating the price was prevalent before the IRS required brokers to begin monitoring basis.
    IRS Countermeasures: The IRS modified Form 1099-B, issued by brokers when stocks, bonds, etc., are sold, to include the basis if known, and to indicate otherwise if basis was unknown. Then, the IRS developed Form 8949 to separate investment sales into those for which the broker was tracking the basis, and those for which the broker did not know the basis or wasn’t required to track it. The information on these forms allows the IRS to focus on the sales for which the taxpayer was tracking the basis. 

If you suspect your tax returns could be fraudulent, or if you know someone who has been the victim of a dishonest or inept tax preparer, please contact us.

U.S. House of Representatives Passes the PPP Extension and The Paycheck Protection Small Business Forgiveness Act is Introduced

On Wednesday, July 1, 2020, the U.S. House of Representatives passed a bill to extend the Paycheck Protection Program (PPP) application period by five additional weeks until August 8, 2020.  The U.S. Senate passed the bill by unanimous consent on Tuesday, June 30, 2020, less than four hours before the PPP application window was scheduled to close with more than $130 billion in unspent loan money. It is expected that President Donald Trump will sign the bill into law this week. Members of the House and the Senate are expected to adjourn for the Fourth of July holiday and are scheduled to return in two weeks.

On Tuesday, June 30, 2020, the U.S. Small Business Administration (SBA), which oversees the program with the Treasury Department, had approved nearly 4.9 million loans for a total of more than $520 billion. At midnight on June 30, 2020, the SBA stopped accepting loan applications. The unexpected extension is intended to provide small businesses additional time to apply for the approximately $129 billion in PPP funding remaining.

In addition to the five-week extension for the PPP application period, U.S. Senators Kevin Cramer (R-ND), Bob Menendez (D-NJ), Thom Tillis (R-NC) and Kyrsten Sinema (D-AZ), members of the Senate Banking Committee, introduced the Paycheck Protection Small Business Forgiveness Act to streamline forgiveness of PPP loans for small businesses. This bipartisan legislation includes forgiveness for PPP loans of $150,000 or less if the borrower submits a simple, one-page attestation form to the lender. It also ensures the lender will be held harmless from any enforcement action if the borrower’s attestation contained falsehoods.

Approximately 85% of PPP loans would be eligible for this simplified loan forgiveness process. The approximately 3.7 million PPP loans of $150,000 or less account for 85% of all PPP approved loans, but only 26% of the PPP funds delivered. The cost of applying for forgiveness for a PPP loan of this size is $2,000 for the small business and $500 for the lender. The bipartisan legislation introduced could save small businesses $7.4 billion and banks nearly $2 billion.

As background, in early April, Congress created the PPP as part of the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act.  The PPP was launched to aid the U.S. economy and assist small businesses facing economic hardships created by the COVID-19 pandemic. The program provides forgivable loans of up to $10 million per borrower that small businesses and other qualifying entities can use to cover payroll and other select costs, including mortgage interest, rent, and utilities.

PPP loan recipients can have their loans forgiven in full if the funds were used for eligible expenses and other criteria are met. The amount of the loan forgiveness may be reduced based on the percentage of eligible costs attributed to nonpayroll costs, any decrease in employee headcount, and decreases in salaries or wages per employee.

Tarlow is Here to Help – Please Contact Us with Questions

Tarlow Partners and staff members are closely monitoring tax-related legislation and regulations, and new guidance from the SBA and the Department of Treasury. We will continue to send updates and communications about relevant news and changing guidelines.

We are readily available to assist business owners in submitting Loan Forgiveness applications. If you have any questions about interpreting these new requirements and maximizing PPP loan forgiveness, please contact your Tarlow advisor for assistance.

The U.S. Senate Approved a Vote to Extend the Paycheck Protection Program Application Period

On Tuesday, June 30, 2020, the U.S. Senate approved a vote to extend the Paycheck Protection Program (PPP) application period by five additional weeks until August 8, 2020.  The vote was passed by unanimous consent less than four hours before the PPP application window was scheduled to close with more than $130 billion in unspent loan money.

The legislation will require President Donald Trump’s signature for the program to continue. It now heads to the House of Representatives, which had finished voting before the bill was approved by the Senate.  Members of both chambers are expected to adjourn by the end of the week for the Fourth of July holiday and are scheduled to return in two weeks. The House would have to pass the measure and President Trump would have to sign it before the extension would take effect.

As of 5:00 p.m. ET on Tuesday, June 30, 2020, the U.S. Small Business Administration (SBA), which oversees the program with the Treasury Department, had approved nearly 4.9 million loans for a total of more than $520 billion. At midnight on Tuesday, June 30, 2020, the SBA stopped accepting loan applications. The unexpected extension is intended to provide small businesses additional time to apply for the approximately $129 billion in PPP funding remaining.

In early April, Congress created the PPP as part of the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act.  The PPP was launched to aid the U.S. economy and assist small businesses facing economic hardships created by the COVID-19 pandemic. The program provides forgivable loans of up to $10 million per borrower that small businesses and other qualifying entities can use to cover payroll and other select costs, including mortgage interest, rent, and utilities.

PPP loan recipients can have their loans forgiven in full if the funds were used for eligible expenses and other criteria are met. The amount of the loan forgiveness may be reduced based on the percentage of eligible costs attributed to nonpayroll costs, any decrease in employee headcount, and decreases in salaries or wages per employee.

Tarlow is Here to Help – Please Contact Us with Questions

Tarlow Partners and staff members are closely monitoring tax-related legislation and regulations, and new guidance from the SBA and the Department of Treasury. We will continue to send updates and communications about relevant news and changing guidelines.

We are readily available to assist business owners in submitting Loan Forgiveness applications. If you have any questions about interpreting these new requirements and maximizing PPP loan forgiveness, please contact your Tarlow advisor for assistance.