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May 28, 2020 — BY Simcha Felder

Get Stuck or Get Moving

Get Stuck or Get Moving
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In business, much as in life, there are things outside our control. Sudden social, political or economic

change can dramatically alter the landscape. When that happens- and inevitably it does- many leaders are presented with similar difficult circumstances, and where some succeed, others fail. Valuable lessons can be learned by observing those who get stuck as well as those who manage to keep moving forward.

Talk to any transformational leader and they will tell you that failure is something you need to get comfortable with if you want to be great. If it’s true that the greatest leaders once failed, then what exactly does it mean to fail, and, more importantly, how do we measure success?

Sports psychology explains what top athletes all have in common: they are always competing against themselves. They don’t play to beat the other players; they strive to outdo their own performance. If they lose, they respect the competition rather than gripe about unfair conditions. Every match is an opportunity to hone their skills. After every game, win or lose, they evaluate the strengths and weaknesses of their performance and adjust their efforts accordingly.

This model works in business as well. The best business leaders are competing against themselves. They understand that in business there is no absolute winner or loser, because the game is infinite. The infinite‐minded player understands that sometimes you have the better product, and sometimes “they” do. And it’s okay because this game isn’t over until you say so; it keeps going as long as you keep going.

When the going gets tough, the only way business will get better is when you do something better. The markets, the economy and the competition are not in your control. You can hope for one, or all of those things to change, or you can change what is in your control‐ your attitude, your process and your effort. Jeff Bezos often muses about how customer obsession is key to Amazon’s growth. Basketball superstar Kobe Bryant wrote about being fueled by his obsession to be the best, and Dropbox CEO Drew Houston talks about how critical it is to be obsessed with solving a problem that matters to you. What inspires these kind of “obsessions”?

“The most successful, hardest‐working people I know don’t work hard because they’re disciplined,” says Houston. “They work hard because they’re enjoying solving a problem they really care about…it’s not about pushing yourself — it’s about finding the thing that pulls you.”

If you are going to focus on a problem, find one you are enthusiastic about solving and then get excited about pursuing your goal. To be a success, you don’t have to be the best, you just have to be committed to doing something a little better all the time.

 

May 28, 2020 — BY Simcha Felder

Get Stuck or Get Moving

Get Stuck or Get Moving
Back to industry updates

In business, much as in life, there are things outside our control. Sudden social, political or economic change can dramatically alter the landscape. When that happens- and inevitably it does- many leaders are presented with similar difficult circumstances, and where some succeed, others fail. Valuable lessons can be learned by observing those who get stuck as well as those who manage to keep moving forward.

Talk to any transformational leader and they will tell you that failure is something you need to get comfortable with if you want to be great. If it’s true that the greatest leaders once failed, then what exactly does it mean to fail, and, more importantly, how do we measure success?

Sports psychology explains what top athletes all have in common: they are always competing against themselves. They don’t play to beat the other players; they strive to outdo their own performance. If they lose, they respect the competition rather than gripe about unfair conditions. Every match is an opportunity to hone their skills. After every game, win or lose, they evaluate the strengths and weaknesses of their performance and adjust their efforts accordingly.

This model works in business as well. The best business leaders are competing against themselves. They understand that in business there is no absolute winner or loser, because the game is infinite. The infinite‐minded player understands that sometimes you have the better product, and sometimes “they” do. And it’s okay because this game isn’t over until you say so; it keeps going as long as you keep going.

When the going gets tough, the only way business will get better is when you do something better. The markets, the economy and the competition are not in your control. You can hope for one, or all of those things to change, or you can change what is in your control‐ your attitude, your process and your effort.

Jeff Bezos often muses about how customer obsession is key to Amazon’s growth. Basketball superstar Kobe Bryant wrote about being fueled by his obsession to be the best, and Dropbox CEO Drew Houston talks about how critical it is to be obsessed with solving a problem that matters to you. What inspires these kind of “obsessions”?

“The most successful, hardest‐working people I know don’t work hard because they’re disciplined,” says Houston. “They work hard because they’re enjoying solving a problem they really care about…it’s not about pushing yourself — it’s about finding the thing that pulls you.”

If you are going to focus on a problem, find one you are enthusiastic about solving and then get excited about pursuing your goal. To be a success, you don’t have to be the best, you just have to be committed to doing something a little better all the time.

May 26, 2020

Maximizing PPP Loan Forgiveness – Webinar Recap

Maximizing PPP Loan Forgiveness – Webinar Recap
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Updated May 26th, 2020

On Monday, May 11th, Roth&Co hosted a webinar on the topic of maximizing Paycheck Protection Program loan forgiveness. It was presented by Ahron Golding, our in-house tax controversy attorney, and moderated by Zacharia Waxler, Roth&Co Co-Managing Partner. There were opening remarks by Rabbi Abba Cohen, Vice President for Government Affairs and Washington Director and Counsel of Agudath Israel of America. You can view a full video of the webinar here.

Due to lack of guidance from the SBA, there were some questions left unanswered during the webinar. The SBA has recently released their PPP Forgiveness Application, which includes instructions and clarifies some of these questions. For a copy of the forgiveness application from the SBA, see here. For your convenience, we have recapped the conversation below and responded to frequently asked questions, including the recent clarifications from the SBA. For a copy of the forgiveness application from the SBA, see here.

Please note that we are sharing what we currently know about PPP forgiveness, however we are still waiting on guidance regarding the many unknowns. This material has been prepared for informational purposes only, and is not intended to provide, nor should it be relied upon for legal or tax advice.

Secretary of Treasury Steven Mnuchin has indicated that loans over $2 million will be reviewed or audited for compliance. With this in mind, we recommend keeping detailed documentation as you make use of PPP funds to ensure you adhere to the guidelines and maximize forgiveness.

Determining & Documenting “Necessity” 

The purpose of the PPP Program is to assist businesses and nonprofits facing financial difficulty with retaining workers, maintaining payroll or making mortgage interest, lease and utility payments. Each PPP applicant is required to sign a certification that specifies that: “the current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant.” The SBA guidance further clarifies that this takes into account current business activity and other sources of liquidity to support operations in a way that is not significantly determinantal to the organization. We therefore recommend documenting why the loan is necessary. This could be a memo or board meeting minutes where cashflow and forecasting are reviewed and makes clear that financial assistance to maintain operations is needed. The SBA has recently clarified that any loan under $2 million will be deemed to have been made in good faith.

If, upon further consideration, you determine that the PPP loan you received is not necessary under these guidelines, the funds can be returned under “safe harbor” amnesty until May 18th.

Note: PPP loan amounts may become public information as per the Freedom of Information Act, however this is not the case with tax information.

Maximizing Forgiveness – In General

The following guidelines were issued to ensure full or maximum forgiveness:

  • A minimum of 75% of received funds must be utilized for payroll.
  • The remaining 25% of the funds can be used to pay mortgage interest, rent, and utilities.
  • For full forgiveness, businesses must maintain employee headcount and salary levels.
  • Eligible expenses need to be incurred and paid over the eight-week period beginning from the day of the first PPP loan disbursement.

Payroll Costs: The Details 

  • Payroll includes salary, vacation, leave, health and retirement benefits. There is a $100,000 annual salary maximum per employee (which translates to $15,385 maximum for the 8 weeks) allowed for forgiveness.
  • Shuttered businesses may pay employees that are not currently working. They are considered full-time employees (FTE) if you pay full wages.
  • Wages paid as parsonage is a payroll cost, and is considered cash compensation which is subject to the $100,000 annual salary cap.
  • The $100,000 annual salary cap is only a cap on cash compensation. Therefore employee benefits such as retirement contributions and health insurance are not limited by the $100,000 cap and are allowable as an additional payroll cost.
  • Businesses may use PPP funding to pay employees’ sick leave, unless they are already taking a credit for Family Medical Leave or Emergency Paid Sick Leave made available under the Family First Coronavirus Response Act.
  • Payments to 1099 contractors are notconsidered payroll costs.
  • Sole Proprietors (reported on Schedule C) can take a salary, which is also subject to the $100,000 annual cap (resulting in $15,385 maximum forgiveness for the 8 weeks). Retirement contributions, State and local taxes and health insurance for owners/partners/Sole proprietors are not forgivable payroll costs.
  • Cash distributions to active partners reported on a K-1 are allowable so long as it is allocated during the eight-week period (subject to same $100,000 annual cap).
  • There is a maximum of $15,385 of forgiveness (8 weeks of 100k annualized) per individual. If the same individual is an owner of 3 business, he can only receive forgiveness once
  • If a husband and wife are both owners, they are each most likely subject to their own $100,000 annual salary cap.

The Unknowns: What SBA Has Yet to Clarify 

The following questions and considerations do not have clear guidance from the SBA.

  • Can we give raises or bonuses in order to reach the 75% payroll criteria for forgiveness? Yes
  • Is overtime pay allowed for employees? Is there a cap on the number of hours per employee based on other pay periods? Yes
  • Is an employer allowed to offer incentives to employees to entice them to return to work? Incentive pay has a good chance of being forgiven so long as it was paid during the eight-week period and documented correctly with concrete reasons as to why it was necessary? Yes, incentive or hazard pay is a forgivable payroll expense, as long as it was paid during the eight-week period
  • How is Qualified Tuition Reduction considered? This has not been clarified by the SBA. We have reason to believe that this falls under “other fringe benefits,” and would be included as an eligible payroll expense. QTR is not addressed on the newly released forgiveness form. We await further guidance from the SBA.

Expenses Paid & Incurred in the Covered Period 

The statute states that, “costs incurred and payments made during the covered period” are eligible for forgiveness. How do we determine “incurred and paid” for the purpose of forgiveness?

The SBA has now clarified that Payroll expenses do not have to be both “paid and incurred” in the exact eight week period (56 days) that begins on the day that the first loan proceeds are received. The borrower is allowed to select the “Alternative Payroll Covered Period,” to coincide with their payroll schedule. The alternative pay period begins on the first day of the borrower’s first pay period following the date that they receive their first PPP funds and goes for the next 8 weeks.

For example, if you received your PPP funds on May 7, 2020, and the first day of your next pay period is May 15, 2020, you may elect to count the payroll costs for the 8-week period beginning May 15, 2020, rather than from May 1. In other words, you can start your 8 week period for payroll costs on your next regular scheduled payroll date after you receive the funds. This guidance ensures that companies will get 8 full weeks to use their loan for payroll costs, and get forgiveness for it.

This would answer questions like:

If I receive funds on May 15th, can I use those funds to make payroll which covers the preceding 2 weeks?

Yes. According to the forgiveness application, Payroll is considered paid on the day the paychecks are distributed or the employer originates the ACH transaction. Therefore, you could receive PPP money on May 15 and immediately pay – as part of your regular payroll process – wages that had been earned by the employees for the previous two weeks, and include the amounts in the forgiveness calculation because the amounts have been paid within your 8 weeks.

What if my 8 week period ends on June 23, but I don’t usually process payroll for that period until June 30? Should I accelerate my last payroll (which is already incurred) to ensure that it falls in the 8-week period?

You don’t have to accelerate, and it will still be forgiven. This is because payroll costs incurred for your last pay period of the 8-week period are eligible for forgiveness as long as they are paid no later than the next regular payroll date.

Can I pay ahead for benefits (such as medical) in order to maximize the forgiveness?

We await further guidance.

Can I pay the previous month’s rent if I haven’t paid it yet? Yes

Can I pay May’s rent if we received funds on May 7th?

Yes. Since the rent will have been paid during the 8 week period, it will qualify for forgiveness.

Note: The “covered period” for expenses other than payroll remains the 8 week period from when the funds were received by the borrower, regardless of whether they chose the Alternative period for payroll purposes. Therefore, if you elect the Alternative period, you will have two different 8 week periods to keep track of.

Other Expenses (up to 25%)

  • The remaining 25% of the funds can be used to pay mortgage interest (not including prepayment), rent, and utilities in force before February 15th, 2020.
  • For non-payroll costs such as mortgage interest, rent and utilities, to qualify for forgiveness, these expenses must either be: 1) paid during the 8-week covered period, or 2) incurred during the 8-week period, and paid by its next regular due date, even if that due date is outside the 8-week period.
  • Mortgage Interest: Amounts paid in interest on a mortgage obligation that the company incurred in the ordinary course of business before February 15th, 2020.
  • Rent: Rent paid pursuant to a lease agreement in force prior to February 15th, 2020.
  • Utility payments: Payment for services including the distribution of electricity, gas, water, transportation, telephone and internet access for which service began before February 15th, 2020. This also includes payments of a business’s car leases, gas, cellphones, Internet and landline bills.
  • Keep away from anything that looks like business expansion.

Forgiveness Reduction Issues

For full forgiveness, businesses must maintain prior employee headcount and 75% of salary levels.

How to calculate your prior headcount:

Step 1: Calculate your average full-time equivalent (FTE) headcount by adding:

  1. A) Total amount of full-time employees (defined as those working 40+ hours a week), plus
  2. B) Total amount of hours worked per week by part-time employees, divided by 40 (to add up the part timers)

Step 2: Choose the time period with the lower average FTE headcount:

  1. A) February 15th – June 30th 2019
  2. B) January 1st – February 29th 2020

You must have the same level now, from what you had prior (based on the above calculation).

  • If an employer rehires previously laid-off or furloughed employees by June 30th, the employer will not be penalized for the reduction. However, employers should keep in mind that they still need to ensure that 75% of their loan be paid towards payroll costs, to maximize forgiveness
  • Businesses may “replace” an employee to maintain headcount. The total number of employees needs to remain the same – not the employees themselves
  • Employers may not reduce the salaries of those earning less than $100,000 annually by more than 25%. However, they can cure that issue by raising the salaries back up before June 30th.
  • The employer will not be penalized for reductions in the following circumstances: (1) any positions for which the Borrower made a good-faith, written offer to rehire an employee during the 8 weeks which was rejected by the employee; and (2) any employees who (a) were fired for cause, (b) voluntarily resigned, or (c) voluntarily requested a reduction of their hours. Employer will, however, still need to meet the 75% payroll cost requirement. They just won’t be penalized for reduction of headcount or salary.  In order to prevent being penalized for reduction of headcount or salary in such cases, the SBA is now requiring that the employer inform the applicable state unemployment insurance office of such employee’s rejected offer of reemployment within 30 days of the employee’s rejection of the offer. If the employee voluntarily requested a schedule reduction, the employer should keep documentation of such request.

Adding It All Up: Financial & Tax Considerations  

Here are some additional details on what can and cannot be included in your expense totals:

  • Employer-side payroll taxes are not forgivable.
  • The IRS has currently ruled that payroll and other expenses paid which eventually lead to forgiveness, will not be deductible as business expenses by the employer. Members of Congress are currently attempting to make a rule change to allow the expenses to be deductible. Stay tuned.
  • The CARES Act permits employers to defer the payment of the employer’s portion of payroll taxes. The employer will need to deposit half of these deferred payments by the end of 2021 and the other half by the end of 2022. If an employer receives forgiveness on a PPP loan, it is no longer eligible for this deferral. However, the deferral is still allowed until the date of forgiveness. At that point, employers will need to make regular payroll tax deposits.

Loan Forgiveness Timeline 

The lender is required to issue the loan forgiveness decision within 60 days from the application of forgiveness.

We will continue to keep you updated as more information becomes available.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any specific legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.

May 25, 2020

The Payroll Tax Credit Checklist

The Payroll Tax Credit Checklist
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While the entire business community spent the past few weeks focused on getting SBA loans, we want to make sure the significant tax credits and deferrals made available by the CARES Act and other regulatory changes are not overlooked. Below, we have compiled a checklist of the provisions and their eligibility requirements that can translate into substantial savings.

This material has been prepared for informational purposes only, and is not intended to provide, nor should it be relied upon, for legal or tax advice.

EMPLOYEE RETENTION CREDIT

Effective as of March 12th, 2020, the Employee Retention Credit under the CARES Act was created to encourage businesses to keep employees on their payroll. The refundable tax credit is 50% of up to $10,000 in qualified wages per employee who is paid by employers whose business has been financially impacted by COVID-19.

Who is eligible to receive this credit?

Anyone who has received a PPP loan, whether or not it is forgiven, is ineligible for this credit.

All employers, including tax-exempt organizations, that meet one of the following conditions are eligible for the credit:

A. Operations were fully or partially suspended during any calendar quarter in 2020, due to government orders. This includes government-mandated shutdowns, curfews/limits on hours and workforce or a lack of supplies due to vendor closures. This does not include voluntarily closure of a business.

B. A significant decline in gross receipts experienced in a calendar quarter. A significant decline is defined as a 50% decrease of gross revenue from the same quarter in 2019. The duration of a significant decline includes all quarters that follow in 2020, until the quarter after gross revenue surpasses 80% of 2019 revenue.

How do I calculate the credit amount?

The credit is calculated as 50% of qualified wages (including health insurance) paid to eligible employees in a calendar quarter, up to a maximum wage of $10,000 annually. Qualified wages vary based on the size of an organization:

Organizations with less than 100 employees:

Qualified wages are wages paid to any employee during quarters that meet the eligibility conditions above.

Health insurance expenses are included as a qualified wage.

Organizations with more than 100 employees:

Qualified wages are wages paid only to an employee that is not providing services due to partial or full suspension of operations, or reduction of income. This amount cannot exceed that of wages paid 30 days prior to March 12th. This credit can also be used to cover wages for employees working reduced hours where the employer continues to pay their full-time wages. However, the credit is proportionate to the hours of no service.

If an employer pays for health insurance for employees that are not working (whether or not they have received other wages), the entire health insurance premium is eligible. If the employee is working reduced hours, health insurance is prorated in proportion.

The maximum credit is $5,000 per employee per year.

How do I claim this credit?

To claim this credit, reduce your payroll tax deposits by 50% of your qualified wage. If the credit is higher than the tax deposits, an accelerated credit can be requested through Form 7200 without having to wait for your 941 filing.

Please note: This credit does not get calculated as income, but rather as a reduction of wages, and will therefore decrease your wages for 199A calculation.

PAYROLL (SOCIAL SECURITY) TAX DEFERRAL

The CARES Act allows a deferral of the employer’s share of the 6.2% Social Security tax that would otherwise be due from the date of the CARES Act’s enactment, through December 31st, 2020.

Who is eligible?

All organizations, including those that received PPP loans, are eligible.

When will the deferred taxes become due?

A payment of 50% of the deferred payroll taxes will be due on December 31st, 2021, and the remaining 50% by December 31st, 2022. If an employer receives forgiveness for a PPP loan, it is no longer eligible for this deferral. However, the deferral is still allowed until the date of forgiveness. At that point, employers will need to make regular payroll tax deposits.

How do I claim this deferral?

The way to apply this credit is as follows: reduce your payroll tax deposit by the employer portion of Social Security tax due. If you do not pay deposits, you can simply reduce the amount you pay when your 941 form is filed.

EMERGENCY PAID SICK & EXPANDED FAMILY MEDICAL LEAVE CREDITS

The Families First Coronavirus Response Act ensures that employees are eligible for two weeks of paid sick leave and use of 12 weeks of Family and Medical Leave Act leave for several circumstances related to COVID-19. Employers can claim a Social Security tax credit to offset the cost of providing expanded FMLA and emergency paid leave to their employees. The refundable credits would apply to all wages paid under these programs, effective from April 1st through December 31st, 2020.

Who is eligible?

Employers with fewer than 500 employees, with employees on leave due to:

  • COVID-19 illness
  • Quarantine
  • Caring for an individual in quarantine
  • Caring for a child whose school is closed, or whose childcare provider is no longer available due to COVID-19 illness

Please view this article for provision specifics.

How can I claim this credit?

Employers who pay paid sick and emergency family medical leave in accordance to FFCRA are entitled to a dollar-for-dollar tax credit. The credit is applied by reducing your payroll tax deposits by the amount paid to employees.

Employers can potentially take advantage of all three tax credits and deferrals. If the credit amount is higher than the tax deposits, an accelerated credit through Form 7200 can be requested without having to wait for your 941 filing.

We will continue to keep you updated as more information becomes available.

This material has been prepared for informational purposes only, and is not intended to provide, nor should it be relied upon for, legal or tax advice. If you have any specific legal or tax questions regarding this content or related issues, please consult with your professional legal or tax advisor.

May 18, 2020

Independent Assurance Inspires Confidence in Sustainability Reports

Independent Assurance Inspires Confidence in Sustainability Reports
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Sustainability reports explain the impact of an organization’s activities on the economy, environment and society. During the novel coronavirus (COVID-19) pandemic, stakeholders continue to expect robust, transparent sustainability reports, with a stronger emphasis on the social and economic impacts of the company’s current operations than on environmental matters.

Investors, lenders and even the public at large may pressure companies to issue these supplemental reports. But the information they provide isn’t based on U.S. Generally Accepted Accounting Principles (GAAP). So, is it worth the time and effort? One way to make your company’s report more meaningful and reliable is to obtain an external audit of it.

What is a sustainability report?

In general, a sustainability report focuses on a company’s values and commitment to operating in a sustainable way. It provides a mechanism for communicating sustainability goals and how the company plans to meet them. The report also guides management when evaluating corporate actions and their impact on the economy, environment and society.

During the COVID-19 crisis, stakeholders want to know how your company is handling such issues as public health and safety, supply chain disruptions, strategic resilience and human resources. For example:

  • How is the company treating employees during the crisis?
  • Are workers being laid off or furloughed — or is management implementing executive pay cuts to retain its workforce?
  • What is the company doing to ensure its facilities are safe for workers and customers?
  • Is the company donating to charities and encouraging employees to participate in philanthropic activities during the crisis, such as volunteering at food pantries and donating blood?

Stakeholders want assurance that companies are engaged in responsible corporate governance in their COVID-19 responses. Sustainability reports can showcase good corporate citizenship during these challenging times.

Why do you need an external audit?

There aren’t currently any mandatory attestation requirements for sustainability reporting. That means companies can produce reports without engaging an external auditor to review the document for its accuracy and integrity. However, without independent, external oversight, stakeholders may view sustainability reports with a significant degree of skepticism. That’s where audits come into play.

Many organizations have developed standardized sustainability frameworks, including the:

  • Carbon Disclosure Project (CDP),
  • Dow Jones Sustainability Index (DJSI),
  • Global Initiative for Sustainability Ratings (GISR),
  • Global Reporting Initiative (GRI),
  • International Integrated Reporting Council (IIRC),
  • Sustainability Accounting Standards Board (SASB), and
  • United Nations’ Sustainable Development Goals (SDG).

External auditors can verify whether sustainability reports meet the appropriate standards, and, if not, adjust them accordingly. In addition, numerous attestation standards govern the audit of a sustainability report, including those from the American Institute of Certified Public Accountants, the International Standard on Assurance Engagements and the International Organization for Standardization.

Need help?

Many companies agree that a sustainability report is an important part of their communications with stakeholders. But there’s little consensus on the approach, topics or non-GAAP metrics that should appear in sustainability reports. We understand the standards that apply to these supplemental reports and can help you report sustainability matters in a reliable, transparent manner.

May 12, 2020

Getting Back to Work & The Labor Laws That Apply – Webinar Recap

Getting Back to Work & The Labor Laws That Apply – Webinar Recap
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With businesses across the country preparing for a reopening, Roth&Co’s HR director Chaya Salamon held a joint webinar session with employment attorneys Joel Greenwald and Jessica Shpall Rosen, of Greenwald Doherty LLP, about recommended practices to keep our employees safe and protect our businesses from liability. You can view a recording of the webinar here.

Below, you will find a recap of our discussion. Please keep in mind that this is informational only and not legal advice. In addition, the laws and guidance both governmental and health authorities are in flux.

With conditions changing every day, it is important to take the time to make considered decisions and consult your advisors, employment attorneys and accountants as necessary. This is a prime environment for plaintiffs’ attorneys on the lookout for potential lawsuits ‐ the last thing an employer needs at this time. Here are some considerations that our panelists discussed:

Track Time Carefully

 Tracking time accurately may be difficult at this time, especially with non‐exempt employees working remotely without access to their usual timecards and oversight. However, it is essential to make sure they keep precise time records to ensure they are being paid for all time worked. In addition, there may be employees who are no longer exempt from overtime due to a decrease in wages below the minimum salary threshold, which means they will have to adjust to tracking their time.

Rehiring Furloughed & Laid‐Off Employees

 While bringing back furloughed employees a relatively easy process, recalling laid‐off employees is, essentially, rehiring them. When rehiring employees, keep in mind:

  • New employee documentation should be completed and signed once again (for example, arbitration agreements, restrictive covenant agreements, immigration forms, and legal notices).
  • Depending on their policy and applicable law, employers may need (or want) to restore paid time off balances upon For example, some jurisdictions that require paid sick leave ‐ like New York City – have specific requirements when an employee is rehired.
  • Try to be as objective as possible in deciding who to bring back, to avoid an appearance of For example, base your choices on objective factors like length of service, high billings and sales numbers, and run these by counsel.

Health & Safety Recommendations

 Employers should ensure the work environment is as safe as possible. This can be accomplished through measures such as:

Organizational Changes, for example:

  • Appointing a Chief Safety Officer or This could include the CEO, HR and other stakeholders who will take responsibility for health and safety.
  • Stay up to date on CDC, OSHA (Occupational Safety & Health Administration), EEOC (Equal Employment Opportunity Commission) and local and state guidance and standards of
  • Implement strong, clear, safety standards and policies (not just guidelines).

Personal Preventive Measures, for example:

  • Make sure that masks, gloves and hand sanitizer are available for your
  • Implement screening measures and return‐to‐work measures that are appropriate for your workforce (such as taking temperatures and testing), with guidance from counsel, as the laws and regulations in this particular area are changing
  • Monitor symptoms and send home employees exhibiting symptoms of COVID‐19.
  • Keep individual records tracking testing, symptoms or

Employment Infrastructure, for example:

  • Ensure social and physical
  • Stagger shifts so fewer employees are on site at one
  • Suspend large, in‐person meetings or extracurricular activities such as birthday
  • Allow employees to work remotely whenever feasible, particularly those who are high‐risk.
  • Establish common area

Physical Changes to the Workspace, for example:

  • Create more space around workstations to maintain social distancing
  • Erect walls and barriers among employees and clients
  • Update cleaning procedures to ensure regular disinfecting
  • Hang signage informing employees and visitors of new practices
  • Make stairways/hallways one‐way
  • Install hands‐free door‐opening

Responding to Illness, for example:

  • Report to health agency
  • Enact contact tracing
  • Disinfect office spaces

Business Changes, for example:

  • Establish rules regarding visitors, vendors and delivery
  • Cancel all non‐essential travel.

Potential Pitfalls

 Requesting or requiring employees to disclose personal health information leaves you open to claims of privacy and HIPPA violations. On the other hand, if you don’t collect this information or take proper safety measures, you are at risk of an employee contracting COVID‐19, and potentially, facing a wrongful death suit. It is also unclear whether workers’ compensation insurance would cover employees who get sick with COVID‐19. Employers will need to weigh all these risks in consultation with counsel.

Be careful not to assume that employees are too feeble to work because of age, disability or illness. Doing so can leave you open to discrimination claims. Allow employees to approach you with their concerns, at which time you should engage in an interactive process to determine whether and how to reasonably accommodate their needs.

The foregoing is a summary of the laws discussed above for the purpose of providing a general overview of these laws. These materials are not meant, nor should they be construed, to provide information that

is specific to any law(s). You should be aware that these laws are changing rapidly. The above is not legal advice and you should consult with counsel concerning the applicability of any law to your particular situation.

 

May 11, 2020

Business Charitable Contribution Rules Have Changed Under the CARES Act

Business Charitable Contribution Rules Have Changed Under the CARES Act
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In light of the novel coronavirus (COVID-19) pandemic, many businesses are interested in donating to charity. In order to incentivize charitable giving, the Coronavirus Aid, Relief and Economic Security (CARES) Act made some liberalizations to the rules governing charitable deductions. Here are two changes that affect businesses:

The limit on charitable deductions for corporations has increased. Before the CARES Act, the total charitable deduction that a corporation could generally claim for the year couldn’t exceed 10% of corporate taxable income (as determined with several modifications for these purposes). Contributions in excess of the 10% limit are carried forward and may be used during the next five years (subject to the 10%-of-taxable-income limitation each year).

What changed? Under the CARES Act, the limitation on charitable deductions for corporations (generally 10% of modified taxable income) doesn’t apply to qualifying contributions made in 2020. Instead, a corporation’s qualifying contributions, reduced by other contributions, can be as much as 25% of taxable income (modified). No connection between the contributions and COVID-19 activities is required.

The deduction limit on food inventory has increased. At a time when many people are unemployed, your business may want to contribute food inventory to qualified charities. In general, a business is entitled to a charitable tax deduction for making a qualified contribution of “apparently wholesome food” to an organization that uses it for the care of the ill, the needy or infants.

“Apparently wholesome food” is defined as food intended for human consumption that meets all quality and labeling standards imposed by federal, state, and local laws and regulations, even though it may not be readily marketable due to appearance, age, freshness, grade, size, surplus, or other conditions.

Before the CARES Act, the aggregate amount of such food contributions that could be taken into account for the tax year generally couldn’t exceed 15% of the taxpayer’s aggregate net income for that tax year from all trades or businesses from which the contributions were made. This was computed without regard to the charitable deduction for food inventory contributions.

What changed? Under the CARES Act, for contributions of food inventory made in 2020, the deduction limitation increases from 15% to 25% of taxable income for C corporations. For other business taxpayers, it increases from 15% to 25% of the net aggregate income from all businesses from which the contributions were made.

CARES Act questions

Be aware that in addition to these changes affecting businesses, the CARES Act also made changes to the charitable deduction rules for individuals. Contact us if you have questions about making charitable donations and securing a tax break for them. We can explain the rules and compute the maximum deduction for your generosity.

May 07, 2020

Subchapter V: A Silver Lining for Small Businesses Mulling Bankruptcy

Subchapter V: A Silver Lining for Small Businesses Mulling Bankruptcy
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Many small businesses continue to struggle in the wake of the coronavirus (COVID-19) pandemic. Some have already closed their doors and are liquidating assets. Others, however, may have a relatively less onerous option: bankruptcy.

Although bankruptcy obviously isn’t an optimal outcome for any small company, there may be a silver lining: A new bankruptcy law — coupled with an under-the-radar provision of the Coronavirus Aid, Relief, and Economic Security (CARES) Act — has made the process quicker and easier. It may even allow you to retain your business.

New law made better

The law in question is the Small Business Reorganization Act of 2019. That’s right, it was passed just last year and took effect on February 19, 2020, about a month before the pandemic hit the country full force.

The Small Business Reorganization Act added a new subchapter to the U.S. bankruptcy code: Subchapter V. Its purpose is to streamline the reorganization process for smaller companies and, in some cases, improve their odds of recovery.

When signed into law, Subchapter V applied only to companies or proprietors with less than about $2.7 million in debt. However, under the CARES Act, this amount has been temporarily increased to $7.5 million in debt. (Additional details apply; contact a bankruptcy attorney for a full explanation.)

Potential improvements

For small-business owners, Subchapter V could improve the bankruptcy process in several ways:

You may be able to keep your company. Under a Chapter 11 reorganization, business owners typically don’t receive an equity stake in the reorganized company until all debts are repaid. Subchapter V creates a pathway for owners to retain their equity if their disposable income is distributed to creditors over a certain period (generally three to five years) in a “fair and equitable” manner.

You may not need creditors’ approval to proceed. Small-business bankruptcies have long been stymied when one group of creditors object to the reorganization plan. Under Subchapter V, once a bankruptcy court approves the plan, the reorganization may proceed without creditors’ approval.

You may incur fewer costs and get it done more quickly. Subchapter V offers the opportunity to reduce the documentation and level of detail required under a traditional Chapter 11 proceeding. In turn, this can make the process less costly and more expeditious.

Prudent path

Given the extreme and sudden nature of this year’s economic downturn, bankruptcy has unfortunately become an option that many embattled small businesses will need to consider. Our firm can help you assess your company’s financial position and choose the most prudent path forward.Subchapter V: A silver lining for small businesses mulling bankruptcy

May 06, 2020

Do You Have Tax Questions Related to COVID-19? Here Are Some Answers

Do You Have Tax Questions Related to COVID-19? Here Are Some Answers
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The coronavirus (COVID-19) pandemic has affected many Americans’ finances. Here are some answers to questions you may have right now.

My employer closed the office and I’m working from home. Can I deduct any of the related expenses?

Unfortunately, no. If you’re an employee who telecommutes, there are strict rules that govern whether you can deduct home office expenses. For 2018–2025 employee home office expenses aren’t deductible. (Starting in 2026, an employee may deduct home office expenses, within limits, if the office is for the convenience of his or her employer and certain requirements are met.)

Be aware that these are the rules for employees. Business owners who work from home may qualify for home office deductions.

My son was laid off from his job and is receiving unemployment benefits. Are they taxable?

Yes. Unemployment compensation is taxable for federal tax purposes. This includes your son’s state unemployment benefits plus the temporary $600 per week from the federal government. (Depending on the state he lives in, his benefits may be taxed for state tax purposes as well.)

Your son can have tax withheld from unemployment benefits or make estimated tax payments to the IRS.

The value of my stock portfolio is currently down. If I sell a losing stock now, can I deduct the loss on my 2020 tax return?

It depends. Let’s say you sell a losing stock this year but earlier this year, you sold stock shares at a gain. You have both a capital loss and a capital gain. Your capital gains and losses for the year must be netted against one another in a specific order, based on whether they’re short-term (held one year or less) or long-term (held for more than one year).

If, after the netting, you have short-term or long-term losses (or both), you can use them to offset up to $3,000 ordinary income ($1,500 for married taxpayers filing separately). Any loss in excess of this limit is carried forward to later years, until all of it is either offset against capital gains or deducted against ordinary income in those years, subject to the $3,000 limit.

I know the tax filing deadline has been extended until July 15 this year. Does that mean I have more time to contribute to my IRA?

Yes. You have until July 15 to contribute to an IRA for 2019. If you’re eligible, you can contribute up to $6,000 to an IRA, plus an extra $1,000 “catch-up” amount if you were age 50 or older on December 31, 2019.

What about making estimated payments for 2020?

The 2020 estimated tax payment deadlines for the first quarter (due April 15) and the second quarter (due June 15) have been extended until July 15, 2020.

Need help?

These are only some of the tax-related questions you may have related to COVID-19. Contact us if you have other questions or need more information about the topics discussed above.

May 05, 2020

Benchmarking: Why Normalizing Adjustments Are Essential

Benchmarking: Why Normalizing Adjustments Are Essential
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Financial statements aren’t particularly meaningful without a relevant basis of comparison. There are two types of “benchmarks” that a company’s financials can be compared to — its own historical performance and the performance of other comparable businesses.

Before you conduct a benchmarking study, however, it’s important to make normalizing adjustments to avoid any misleading comparisons. This is especially important when looking at periods that include atypical financial results due to the novel coronavirus (COVID-19) pandemic. But there are a variety of factors that require normalizing adjustments.

Nonrecurring items

Some normalizing adjustments are needed to distinguish between historical results that represent potential ongoing earning power and those that don’t. A one-time revenue (or expense) or gain (or loss) will temporarily distort the company’s results. To more accurately reflect the company’s future earnings potential, you would add back expenses and losses (or subtract the revenues and gains) that aren’t expected to recur.

For example, if a retailer temporarily closed its brick-and-mortar stores during the COVID-19 pandemic, you’d add back the temporary losses to get a clearer picture of operating performance under normal conditions. Likewise, if a company won a $10 million lawsuit, you’d subtract the gain. Other nonrecurring items might include discontinued product lines or expenses incurred in an acquisition.

Accounting norms

Other normalizing adjustments compensate for the use of different accounting methods. Because companies’ accounting practices vary widely, comparing them without adjusting their financial statements is like comparing apples to oranges.

Even within the broad confines of Generally Accepted Accounting Principles (GAAP), it’s rare for two companies to follow exactly the same accounting practices. When comparing a company’s results to industry benchmarks, you need to understand how they report transactions.

A small firm, for example, might report earnings when cash is received (cash basis accounting), but its competitor might record a sale when it sends out the invoice (accrual basis accounting). Differences in inventory reporting, pension reserves, depreciation methods, tax accounting practices and cost capitalization vs. expensing policies also are common.

Related-party transactions

Another type of normalizing adjustment focuses on closely held businesses. They often pay owners based on the company’s cash flow or the owners’ personal needs, not on the market value of services the owners provide. Small businesses also may employ family members, conduct business with affiliates and extend loans to company insiders.

To get a clearer picture of the company’s performance, you’ll need to identify all related-party transactions and inquire whether they occur at “arm’s length.” Also consider reconciling for unusual perquisites provided to insiders, such as season tickets to sporting events, college tuition or company vehicles.

We can help

To complicate matters, normalizing adjustments can affect multiple accounts. While most normalizing adjustments are made to the income statement, some may flow through to the balance sheet. Our accounting professionals can help with these critical adjustments to a company’s financial statements, enabling you to make better-informed business decisions.