Unemployment Insurance Vs. Returning To Work

Clients are growing increasingly worried that due to the Federal unemployment subsidy of $600 per week, employees may refuse to show for work or return to work once “work is available”. We have laid out some facts to help if you find your business in a similar situation.

While California is rushing to process unemployment claims, the EDD is not actively confirming eligibility at this time. As a result, employees may be claiming benefits when they do not meet the requirements. The key requirement is, if work is available for the employee they are not eligible for unemployment. To be eligible for unemployment the employee must experience a reduction in work hours or loss of employment. Simply “not wanting to work” is not a qualified reason for unemployment. The employer will be notified of the benefits employees received and through notice at a later time, the employer will need to provide information to confirm eligibility.

Beginning the week of April 6, the EDD began paying an additional $600 in addition to the weekly benefit amount, the funding comes from the federal CARES act. This program is currently in effect until July 31, 2020.

California’s UI program provides payments to workers who’ve lost their jobs or had their hours reduced, and who meet the program’s eligibility requirements.

UI eligibility requires that the displaced worker be:

* Totally or partially unemployed.
* Unemployed through no fault of their own. l Physically able to work.
* Available for work.
* Ready and willing to accept work immediately.

If an employee has refused to return to work they may not be eligible to continue unemployment based on the eligibility requirements. The offer to reinstate an employee should be in writing or in an email to document the reinstatement and the employees’ response. Every 2 weeks when reporting claim eligibility a “TRUE” response is required to question #4. “Did you refuse any work?”

UI claimants are legally responsible to follow the requirements set by state law. Collecting Unemployment Insurance (UI) benefits based on false, misreported, or unreported information to the EDD is considered fraud.

The EDD actively prosecutes fraud, fraud penalties can include:

l Repaying the UI benefits collected, plus penalties and fines.

* Loss of future income tax refunds.
* Losing eligibility to collect UI benefits in the future.
* Possible jail or prison sentences.
* Prosecution by government authorities.

If you have questions regarding this or any other HR matter call the experts at MCDA CCG, INC. we would be more than happy to help. We offer 100% free no obligation consultations.

Creating And Writing a Business Plan

A very crucial part of any business plan is spelling out your company history and telling your story to show potential teammates and investors how you landed on your business idea and why you are uniquely qualified to pursue it.

Sharing your business background goes far beyond simply telling a clever story of how you triumphed over adversity to launch your new business. What investors will care about is how your personal history, work experience, key skills, key strengths, and education will help you succeed in the business. As well, they want to see what you’ve already done to start executing and bringing your idea to life. Potential investors want to know you’ll be able to return their investment with dividends in the years to come.

What to Include 

Your company background could be very brief at the beginning stages of starting up, and that is 100% OK. Focus instead on your personal history and the journey that led you to start your business in the first place.

In a traditional business plan, your company background follows the executive summary.

Sharing the origin of the idea is valuable because it shows how you think and how you were able to take an idea, craft and mold it into something more detailed, and ultimately build a business out of it. Detailing your progress to date, including any relevant key milestones, is an important part of this, as are listing the problems you’ve faced so far and how you’ve overcome them. Do not be afraid to list the problems or hurdles that you’ve overcome, it is a real business problem. There is not a startup out there that is perfect, don’t shy away from disclosing the true picture to investment groups.

Describe the market opportunity you’re pursuing and why. A business plan to open a pizza parlor is not particularly creative or original, but if your idea is built around a specific market that is not being tapped, you need to emphasize this and discuss your short-term plans for growth and for reaching that market.

If you already have experience working with customers or you’ve used the basis for your business idea to generate results for yourself, highlight those figures in your business background section to showcase how what you’re doing does indeed work.

When Your Business Is Brand New 

For a brand new business, it is more important and relevant to investors to focus on your personal history that’ll help establish why you’re the right person to be running your business. Key topics to include are:

  • Your educational background
  • Other companies you’ve worked for and the roles you’ve held in those businesses
  • Previous businesses you’ve started and their outcomes/current status
  • Your technical skills
  • Your areas of expertise in your industry segment
  • Your areas of weakness or inexperience and how you plan to compensate for them
  • Any relevant professional clubs or associations you belong to

Even if you are still in the early stages of building your business, your professional background and the details of your business idea can give potential investors an image of what you are trying to accomplish. I cannot stress enough the value of being transparent to investors. Do not fluff up your educational background or technical skills. As your business develops things will be exposed and you will not be sitting in a favorable position with your investment group.

Be Creative 

Tell your story in a way that’s more engaging than just another page that leans on industry jargon, buzzwords, and trite platitudes.

To illustrate your company’s history, use images that show how you started, or charts and graphs to draw attention to key milestones, or incorporate customer testimonials or excerpts from news stories that featured you or your business. Take it a step further toward building connections with the people reading your company history by showing vulnerability and sharing some of your past failures (and the lessons you learned from them).

Remember to be concise and stick to just one or two creative approaches that best highlight your particular approach to business and your specific history.

How can mcda help?

At MCDA we have a solid model for helping new business owners create an explosive business plan to attract investors. Not only do we attract the investors, we help you all the way to closing the deal. Contact us today for a free consultation and let us help you get the funding needed for your business! Call Now (714) 872-2393

Should I Outsource My Accounting?

The growth of your business is exciting, but not without some growing pains. There will be a point usually around $1M in revenue, in some cases more – you can no longer be involved in every part of your business.

You have to focus on what you are good at and delegate the rest

Accounting is generally one of the first functions that many businesses will look to hand off to someone else. It is critical to maintain an accurate picture of your financials but it doesn’t do much to drive revenue.

Going out and hiring more staff isn’t your only option, though. In many cases, outsourcing your accounting is a better business decision. Here are a few reasons why:

focus on growth

Unless you happen to be an accounting firm, accounting is not what is driving your revenue, nor is it your area of expertise.

I would be willing to bet however that you are an expert in your specific industry.

Outsourcing your accounting services frees up more time for you to work on tasks you excel at, which happen to be the tasks that will bring in more revenue and lead to further business growth.

cut employee costs

The average salary for a CFO ranges roughly from around $120K-$220K and a financial controller will run you roughly $90-100K+.

In those numbers don’t incur some stick shock, consider this: employees also require hiring, training, benefits, and paying payroll taxes, all of which add to your costs.

Another consideration is supervision. If your accounting department grows large enough, you will more than likely need to hire managers.

In many cases, employee costs can eclipse those you’ll incur by outsourcing your accounting. Not to mention that outsourced firms provide you with more scaling flexibility.

scalability

If you need more employees that is a good sign as it means that your business is growing. But hiring more employees for your accounting process could take almost 24 days. On top of that, new hires have to adjust to your company, learning all your systems and processes.

Current staff may be pressed for time, trying to balance an increased accounting load with training and assisting the new employees.

Your rapid growth company doesn’t have months to onboard new accounting staff.

Outsourced accounting services are a much better solution, as they can increase the time and resources allocated to each client on demand. Of course, be sure the read your contract with the firm and see if they require a waiting period before making changes. At MCDA, we do not.

expertise and guidance

Outsourced firms are your go to experts for accounting and finance questions. Any firm you choose will generally have experience working with similar businesses in your industry. Consequently, the firm may have invaluable advice regarding growth and investment opportunities.

Also, they can help cut costs by analyzing your current budget and offer advice on areas where you my be spending more money than necessary.

reduce chances of fraud

Unfortunately businesses lose roughly $150K per year to fraud. A large chunk of your annual budget gone from right under your nose! Additionally, smaller companies are at an increased risk of fraud than larger organizations.

Fraud can happen to any business, even in you trust your employees.

Outsourcing your accounting reduces the changes of fraud since the firm is a third party. As a third-party, they keep the record keeping separate from other accounting or finance functions, like authorization and custody of assets.

Additionally, the outsourced firm has the accounting expertise required to audit your money trail and spot signs of fraud to minimize damage to your finances.

access your financial data everywhere

Accounting is moving like everything else, up to the cloud. As of early 2020 nearly 80% of small businesses use cloud based accounting. Outsourced firms use the latest cloud-based accounting software to provide you real time updates on your accounting records. Such flexibility makes decision making substantially easier and less stressful.

confidence

When professionals handle your accounting, you can make decisions with confidence. You’ll always have an accurate financial picture of your business, as well as an expert resource to consult with when you need advice.

HOW CAN MCDA HELP

MCDA has years of experience providing outsourced accounting and CFO services to several industries. We always tailor our accounting services to your specific needs so you can always make the best business decisions. We are here as your financial team!

Focus on what you do best and call us today (714) 872-2393

Ask about our COVID-19 Discount or deferred payment options.

Tips to Improve Your Business Acumen

It’s probably not a surprise to anyone but business acumen is one of the behavioral competencies in the Society for Human Resource Management (SHRM) competency model. It’s important to know the business, be able to talk about it, and make decisions to help the business grow.

It can honestly be a challenge to develop business acumen. Of course, a lot of people know how to throw around business buzzwords like “customer Journey” and “wheelhouse” but do they really know exactly what those terms mean? Things move very quickly in the business world, new ideas and concepts are being developed all of the time. It’s definitely a challenge to stay on top of it, especially when your plate is full of work.

Everybody has their own way of staying on top of business. I personally like lists that provide a reminder that I need to take a quick step back and get focused. So here is my quick list for building business acumen.

  1. Read (and listen to) the right stuff. I discovered an electronic newsletter called “Morning Brew” that helps me stay on top of business news. This Monday-Friday enewsletter provides a stock market overview and some commentary about the business headlines of the day. What I really like is the casual, conversational tone. Business acumen doesn’t have to be boring or stuffy to be effective.
  2. Develop a business book library. There’s no specific book that everyone needs to buy, find something that interests you. Cameron Herold is one of my personal favorites. Pick up, Meetings Suck or Double Double if you need a couple of kickstart ideas.
  3. Learn how your organization makes and spends money. If you haven’t bought your CFO/Controller a cup of coffee lately and asked about the profit and loss statement, now might be a good opportunity to do so. The good thing is there’s no rule that you’re only allowed to do it once. Consider scheduling coffee time with your controller right before budget time too.
  4. Join your professional association. I’m not here to tell anyone which professional organization(s) to belong to.  Everyone needs to figure that out on their own. But I do believe it’s valuable to be a member of a professional organization. I am a member of Vistage, and it has been a very positive and rewarding experience. And let me add that I feel it’s important for individuals to volunteer. Not only will you make friends, but you will learn from your colleagues. Part of developing business acumen includes developing both an online and an offline professional network.
  5. Step out of your regular responsibilities. The next time your boss is looking for a volunteer, consider raising your hand. Getting involved in project teams can help you 1) learn new knowledge and skills 2) build new working relationships and 3) get noticed by the organization. These types of special assignments might be worth it. Both from a learning perspective and your long-term career development.
  6. Know your customers. When I talk about customer here, I’m not referring to employees. Do you know who the top ten customers are for your organization? Not just their names, but do you know what they do? Years ago, my employer asked me to go on regular customer calls with the sales team. If you’ve never done it, consider asking a sales manager if you can tag along.

Over time, I’ve come to realize that business acumen isn’t something you learn once and you’re done. Business acumen is changing all the time. Yes, it’s true that terms like profit and EBITDA haven’t changed. We have new term now like blockchain, disruption, and light-bulb moment. If you want to be a contributor and partner to the business, then you have to know how to really talk the game.

Southern California Workplace Orders

Southern California Counties have released new workplace health orders regarding face coverings, effective this week.
City of Los Angeles: Effective April 10, 2020 a new Worker Protection Order requires employers provide and pay for nonmedical essential workers to wear nonmedical-grade face coverings while working.  The order specifies that reusable face coverings should be washed once a day, while single-use face coverings should be discarded after use.  Employers must also implement social distancing measures and permit their nonmedical essential workers to wash their hands at least every 30 minutes.  Customers must also wear face coverings when entering essential businesses and may be refused entry and service if they fail to do so.
City of Los Angeles Worker Protection Order

San Diego County:  Effective April 11, 2020, San Diego County has mandated businesses that interact with the public to provide employees cloth face coverings  and allows businesses to refuse services or entry to customers not wearing face coverings.
San Diego County Public Health Order

San Bernardino County and Riverside County: Effective April 8, San Bernardino and Riverside have issued Public Health orders that require all residents who leave their home to wear a face covering.
San Bernardino Public Health Order 
Riverside Public Health Order

Orange County: Effective April 9, Orange County issued arecommendation “strongly encouraging” employees at open businesses to wear face coverings, but not a mandate.
Orange County recommendation

BUILD CULTURE- CONNECT WITH YOUR REMOTE TEAM

With the sudden and somewhat overwhelming switch to remote work, many are finding ourselves trying to recreate the professional and social environments of our workplaces from our homes.

From the awkward uncomfortable Zoom or Skype calls with entire teams to the sudden absence of water cooler talk, participating in the workplace culture now feels like a job in itself. This rapid transition can be different levels of jarring depending how on remote-friendly your company is, but there’s no doubt some of us are bravely entering the remote world for the first time.

There are a ton of great resources out there on managing the logistics of remote work; running meetings, holding 1on1’s, setting up your home office, creating boundaries between work and home, and even getting dressed. At MCDA, we spend a lot of time thinking about building a culture of appreciation.

Most of our colleagues work from home two or three days a week, MCDA made the jump to a fully remote workforce two weeks ago. Created by our own experience, I wanted to share some thoughts on how gratitude and recognition can help your remote team stay connected and engaged.

A lonely world

A 2019 study by Buffers found that 19% of remote workers report loneliness as their biggest work struggle. And, if you’re used to working in an office most of the time, the problem might be exacerbated. Loneliness is problematic for a few different reasons:

  • Burnout: a command and very well-documented trap of remote work is longer hours, caused by the frail boundary between work life and home life. Being disconnected from your coworkers might hamper your expectations around productivity and availability, leading you to work unsustainable hours.
  • Disconnect: a recent study found a link between loneliness and decreased performance at work, a disconnect caused by a lack of information sharing and personal investment. Detachment from social connections and organizational goals leads to unhappier employees.
  • Loss of creativity: working remotely eliminates the unplanned interactions that happen when you bump into your coworkers in the office kitchen, hallways, or at the proverbial water cooler. As a result, lots of informal knowledge sharing and serendipitous idea generation dissipates without an intentional effort to connect with your colleagues.
  • Mental health: humans are social beings, and lack of social interaction has tangible downsides. Isolation has been repeatedly linked to poor mental health and higher morbidity and mortality rates. We spend a lot of our time at work—let’s make sure it’s not isolated time.

The first thing to realize is about loneliness: you’re not alone. Even experienced remote workers feel lonely without intentional interactions, first-time remote employees need to strive extra hard to create meaningful connections online. In the next section, we’ll explore some specific ways to go about this.

Staying connected: The basics

Let’s establish some ground rules for remote communication, both social and professional:

  1. Overcommunicate
    With so much information conveyed by tone and by body language (93%, according to a UCLA study), it’s essential that you overcommunicate your ideas when writing or even over video chat. State your assumptions, cite your sources, and be clear about your desired outcomes.
  2. Default to video
    Try to use and jump on a video call whenever possible, especially if there’s even a hint of miscommunication. Seeing your coworkers’ facial expressions and hearing their tone will make it easier to find common ground.
  3. Show extra empathy
    Many of us are facing new and additional responsibilities, from caring for our children, parents, and loved ones who may be sick or quarantined, to financial pressures and existential dread. A rule we try to follow at MCDA is: “assume positive intent.” Try to be extra patient and kind with your coworkers, and you’ll help create a culture of trust and encouragement, not pressure and shame.

Staying connected: ideas

“Okay, I got it!” you might be thinking, “It’s important I connect with my coworkers intentionally and in a kind-hearted way. But how do I go about it?”

Here are a few ideas you can bring into your organization.

Check in on your coworkers

With the missing luck of passing by your coworker’s desk or bumping into them in the kitchen, you’ll need to intentionally reach out to see how they’re doing. You don’t need a work reason to check in. While you don’t want to overdo it, a once-in-a-while, “hey, how are you doing?” can help you and your coworkers feel less alone. The advantage of doing this over an asynchronous communication tool like Slack or Skype (or email) is that you won’t interrupt their work – they can respond on their own timeframe!

Remember to listen actively, give your coworker the space to feel whatever they’re feeling, and don’t be afraid to share your own worries and frustrations. After all, trust is built through vulnerability.

Knowing someone out there cares about how you’re doing – not just your work product – can make all the difference.

Be explicit about recognition and praise

We spend a lot of time thinking about recognition at MCDA. We believe that when great work is visible, it keeps everyone informed and inspired and helps people understand why their contributions are meaningful. Positive communication helps employees feel more connected to and engaged with their work. So, be explicit about recognizing your colleagues – thank them publicly and in detail for their work via email, on Slack or Microsoft Teams, etc.

Create dedicated social spaces

Bring everyone together over Google Meet or Zoom for the sole purpose of hanging out and catching up! Holding virtual happy hours, team lunches, or even employee-led yoga classes is a great way to create low-stakes opportunities for meaningful connections. A social gathering can be a great way of bookending the workday, signaling that work is over, and helping prevent the remote burnout we mentioned earlier. Finally, tools like DONUT for Slack can randomly pair you up with your colleagues for informal small-group chats.

Have fun WITH IT!

A few creative employees have helped our team come up with all sorts of great and silly ways to have fun together over Slack.

  1. We played “guess this baby,” trying to match baby pictures with our teammates.
  2. We started a remote lunch-and-learn, where coworkers share their hobbies, passions, and learnings.
  3. One of our coworkers started a weekly remote yoga class.
  4. We made a video series for everyone to share their remote setup.
  5. We did virtual happy hour after Friday’s work day.

We’re in this together

At a time when more and more of us are isolated and trying to stay productive, it’s crucial that we intentionally connect with our coworkers. For all the awesome benefits of remote work (freedom, flexibility, focus), it’s important that your coworkers don’t have a feeling of out of sight out of mind. You can nourish your company culture and encourage employee engagement while everyone’s WFH by expanding meaningful relationships, publicly recognizing great work, and creating dedicated spaces for social connection.

Whether your team continues to work remotely or happily reunites back at the office in the distant future, you’ll be stronger for it. 

For even more tips, best practices, and strategies on how to engage your remote workforce, contact us today!

Restaurant Employee Relief Fund

We wanted to make you aware that your staff may be eligible for a $500 grant from the National Restaurant Association Educational Foundation’s (NRAEF) Employee Relief Fund

The Restaurant Employee Relief Fund (“Fund”) was created to help restaurant industry employees experiencing extraordinary hardship in the wake of the coronavirus disease (COVID-19) outbreak. Through this Fund, grants will be made to restaurant industry employees who have been impacted by COVID-19, including a decrease in wages or loss of employment. Grants will be awarded as soon as possible to those individuals who meet the prescribed eligibility criteria, as reviewed and verified by the National Restaurant Association Educational Foundation (NRAEF). This Fund is operated by the NRAEF, whose mission is to attract, empower and advance today’s and tomorrow’s restaurant and foodservice workers.

Your staff may be eligible for a $500 one-time grant if they: 

  • Worked on a part- or full-time basis in the restaurant industry for at least 90 days in the past year (this includes food delivery); and
  • Have had a primary source of income in the restaurant industry for the last year; and
  • Have experienced a decrease in wages or loss of job on or after March 10, 2020, which these grant funds will help offset; and
  • Live in the United States, an overseas U.S. military base, or any U.S. territory; and
  • Are over the age of legal majority in their U.S. state or territory.

Applications opened on April 2nd 
Applications for grants opened, Thursday, April 2, 2020. Grants will be awarded as soon as possible to those individuals who meet the eligibility criteria. The grants are subject to availability and are limited to one per person. Click here to learn more and apply: https://rerf.us/apply-for-aid/

Implications for Tax-Exempt Organizations :CARES ACT

The Coronavirus Aid, Relief, and Economic Security (CARES) Act (HR 748) was signed into law on Friday, March 27, 2020, and includes both tax and nontax measures. An overview of the act’s key provisions for tax-exempt organizations follows.

Please read our additional alerts for overviews of the act’s implications for business and individual taxpayers. 

Tax-Exempt Organizations Filing Form 990-T

Net Operating Losses

The act restores the five-year net operating loss (NOL) carryback for losses arising in any taxable year beginning after 2017, but before 2021.

This could be beneficial if your organization generated unrelated business taxable income (UBTI) in years preceding the year of generating an NOL. It could also be an opportunity to file a carryback claim for refunds. A taxpayer can also elect to forgo the carryback.

Special rules are provided for taxpayers that had a transition tax obligation under Section 965 in one of the carryback years.

Impact of Reporting Unrelated Activities

It’s not yet clear in the guidance if the tax reform law passed in 2017, commonly referred to as the Tax Cuts and Jobs Act (TCJA), of reporting unrelated activities separately could impact the carryback of certain activity losses to pretax reform years.

Carry-Forward Limit Suspension

Since the enactment of the TCJA, NOLs carried forward are limited to 80% of taxable income for the tax year. The CARES Act suspends this rule until the taxpayer’s first taxable year beginning after 2020.

This means 100% of UBTI for the tax year can be offset with an available NOL within the same unrelated activity.

Increased Limitation on Charitable Contributions for 2020

The act increases the limitation on a corporation’s deduction of charitable contributions from 10% of taxable income to 25% for 2020. The excess is carried over for five years. Eligible charitable contributions must be made in cash during 2020 and can’t be made to a Section 509(a)(3) supporting organization or donor-advised fund.

In addition, the limitation on donated food inventory during 2020 has increased from 15% of taxable income to 25%.

Employee Benefits and Employer Payroll Tax Relief

Payment of Employer Payroll Taxes Deferred

Employers can defer payment for the employer portion of payroll taxes incurred between the date the CARES Act is enacted through December 31, 2020.

If deferred, the employer would instead pay 50% of this amount by December 31, 2021, and the remaining 50% by December 31, 2022. The eligible payroll taxes are the employer’s portion of Social Security taxes—6.2% of an employee’s wages.

Employers that have indebtedness forgiven under Section 1106 of the act with respect to a loan under the Paycheck Protection Program—Section 1102 of the act—aren’t eligible.

Employee Retention Credit for Employers

Eligible employers may claim a credit against Social Security taxes, for each qualifying calendar quarter, equal to 50% of qualified wages, up to $10,000 of all quarters, per employee. If the credit for the quarter exceeds the employer’s Social Security tax liability, the excess is refunded.

Eligible employers operating a business during 2020 must have experienced either:

  • A partial or full suspension of the operation of their trade or business during the calendar quarter due to governmental orders that limited commerce, travel, or group meetings due to COVID-19
  • A significant decline in gross receipts from 2019

A significant decline is defined as beginning during the quarter in which the gross receipts for the quarter were less than 50% of those in the same quarter in the prior calendar year. The decline ends with the quarter in which gross receipts are greater than 80% of the gross receipts for the same quarter in the prior calendar year. 

In the case of an organization which is described in Section 501(c) of the Internal Revenue Code and exempt from tax under Section 501(a), the significant decline beginning and ending periods above apply to all operations. All operations isn’t defined within the act, so further guidance will be needed.

Eligibility by Employee Population Size

For employers with under 100 employees, the credit applies to qualified wages paid to all employees. For employers with more than 100 employees, eligible wages are those paid to employees who aren’t providing services due to circumstances described above.

Exclusions

This credit doesn’t apply to governmental employers including:

  • The US federal government
  • State governments or their political subdivisions
  • Any agency or instrumentality of any of the aforementioned

As a result, this excludes the following organizations from benefiting from the credit:

  • State colleges and universities
  • Public district hospitals
  • Municipal utilities
  • Federally chartered credit unions

Employers that take advantage of the payroll protection loan program—Section 1102 of the act—aren’t eligible. Also, qualified wages don’t include amounts paid for the sick leave credit or The Family and Medical Leave Act (FMLA) credit enacted by HR 6201.

Loans Available for Not-for-Profits

The CARES Act identifies a number of loan options available to not-for-profits. You can also reference this chart from the National Council of Nonprofits.

Paycheck Protection Program

The following organizations are eligible for government-guaranteed loans administered by the Small Business Administration (SBA):

  • Private colleges
  • Section 501(c)(3) organizations exempt from tax under Section 501(a)
  • Section 501(c)(19) veterans organizations
  • Tribal businesses

In some cases, number of employees is limited to less than 500 employees to be eligible. It’s not currently clear whether or not student employees in a higher education institution currently count as employees for purposes of this loan program. This could put the loan program out of reach for many institutions.

Allowable Uses of SBA Loan Proceeds

SBA loans can be used for:

  • Qualifying employee payroll costs
  • Paid vacation, and parental, family, sick, or medical leave
  • Insurance premiums
  • Mortgage and other interest
  • Rent
  • Utility payments
Required Substantiation

Borrowing organizations will be required to make a good faith certification that:

  • The loan is necessary due to the uncertainty of current economic conditions caused by COVID-19.
  • Loan funds will be used to retain staff and maintain payroll, lease, and utility payments.

Organizations will also need to show they aren’t receiving duplicative funds for the same uses from another SBA program.

Loan Timeframe and Exclusions

The covered loan period is from February 15, 2020, through June 30, 2020. Organizations receiving these won’t be eligible to also receive the employer retention payroll tax credit mentioned above nor will they be able to defer payroll taxes if they have taken advantage of loan forgiveness under the paycheck protection program. 

Loan Amounts and Interest Rates

The maximum loan amount will be $10 million through December 31, 2020. The act provides a formula by which the loan amount is tied to payroll costs incurred by the organization to determine the size of the loan. The maximum allowable interest rate on loans is 4%, and the maximum term is 10 years.

Loan Deferment and Forgiveness

Deferment of loan payments is allowed for at least six months, but not more than a year. The SBA is required to provide guidance to lenders on the deferment process within 30 days.

Borrowers may also be eligible for loan forgiveness for the first eight-week period after the origination date of the loan under certain circumstances.

Eligible payroll costs don’t include compensation above $100,000 in wages, compensation to employees whose principal place of residence is outside of the United States, or qualified sick and family leave for which a credit is allowed under the Families First Coronavirus Response Act.

Loan forgiveness under this program won’t be included in the borrower’s taxable income. For more information, see this guide on the US Senate Committee on Small Business & Entrepreneurship site and an article from the US Treasury.

Low Interest Loans for Mid-Size Organizations

Tax-exempt organizations with between 500 and 10,000 employees may have access to loans through the Federal Reserve. Interest rates for these loans won’t be higher than 2% per year and payments won’t be due for the first six months. 

This is a largely undefined program to be created by the Treasury Department to fill the gap between the Paycheck Protection Program for smaller organizations and the industry stabilization loans to big businesses.

Eligible borrowers must self-certify that:

  • The loan is necessary to support ongoing operations
  • 90% of its workforce will be retained until September 30, 2020
  • Jobs within the organization won’t be outsourced for two years following repayment of the loan

Economic Injury Disaster Relief Loan and Emergency Grants Program

Another program available for tax-exempt organizations is the Expanded Economic Injury Disaster Relief Loan (EIDL) and Emergency Grants Program or SBA 7(b) Loans. Please see our previous Alert for more information.

Student Loan Repayment Benefit

An employer may contribute up to $5,250 annually toward an employee’s student loans. These contributions would be excluded from the employee’s income.

The $5,250 cap applies to both:

  • The new student loan repayment benefit
  • Educational assistance such as tuition, fees, and books provided by the employer under current law

The provision applies to any student loan payments made by an employer on behalf of an employee after the date of enactment and before January 1, 2021.

Charitable Giving Incentives

Eligible individual taxpayers will be allowed an above-the-line deduction for taxable years beginning in 2020 in an amount not to exceed $300 of qualified charitable contributions made in cash during the taxable year.

This will allow individuals that elect not to itemize deductions to benefit from giving to qualified charitable organizations. Qualified charitable organizations don’t include organizations described in Section 509(a)(3) or the establishment of a new, or maintenance of an existing, donor-advised fund. 

The act also lifts the existing cap on annual cash contributions during 2020 for those who do itemize, raising it from 60% of adjusted gross income to 100%.

Corporations are allowed a deduction up to 25% of taxable income versus the lower 10% of taxable income for cash contributions during 2020.

Additional Provisions

Other notable provisions in the act related to tax-exempt organizations allow for:

  • Expanded unemployment benefits
  • COVID-19 relief funds for certain distressed businesses including air carriers, tribal governments, state governments, and units of local governments
  • Higher education funding and student aid support

We’re Here to Help

To learn more about how your organization can use the relief measures of the CARES Act, contact MCDA today.

Note on COVID-19

During this unparalleled time, we’re closely monitoring the COVID-19 situation as it evolves so we can provide up-to-date guidance and support to help you combat uncertainty. Contact MCDA representatives today for a no obligation free consultation.

Understanding the Paycheck Protection Program

As part of the CARES Act passed by Congress on March 26, the federal government is implementing many programs to help businesses. One such program is the Paycheck Protection Program (PPP), meant to incentivize business owners and decisionmakers to keep employees on their payrolls. Like many of the other loans authorized by the CARES Act, these loans will be disbursed through Small Business Administration (SBA) lenders. Here are a few of your questions about the Paycheck Protection Program, answered.

What is the Paycheck Protection Program?

The Paycheck Protection Program is intended to provide cash-flow assistance to businesses through federally guaranteed loans. The loans are disbursed to employers who maintain their payroll during the COVID-19 declared emergency. Employers who comply with payroll maintenance are eligible for loan forgiveness for certain expenses and 8 weeks of payroll forgiveness. Payroll forgiveness will be determined by employee retention rates and salary levels.

Unlike other loans provided by the SBA, the PPP loans are not subject to SBA fees. Payment can also be deferred for six to twelve months in an effort to ensure that businesses can make their other payments and keep their doors open in the wake of COVID-19.

Small businesses and other businesses, like nonprofits, can apply for the loans if they had economic injury as a result of the state of emergency. The dates of economic injury are between February 15, 2020 and June 30, 2020. The CARES Act also provides that the program be retroactive to February 15, 2020 to incentivize employers to bring laid off and furloughed employees back onto their payroll.

Who is eligible for the Program?

In order to be eligible for the Paycheck Protection Program, the business must have been in operation on February 15, 2020. This is a measure enacted by Congress to dissuade loan application fraud. In addition to being in operation on February 15, Congress and the SBA have given the following guidelines for who is eligible for the PPP:

  • Any of the following businesses with fewer than 500 employees or the applicable North American Industry Classification System (NAICS) standard provided by the SBA:
    • Small businesses
    • 501(c)(3) nonprofits
    • 501(c)(19) veterans organizations
    • Tribal business concerns
  • Independent contractors
  • Certain self-employed individuals
  • Any business that employs fewer than 500 employees per physical location with an NAICS code beginning with 72 will have their affiliation rules waived
  • Affiliation rules are also waived for businesses assigned a franchise identifier code by the SBA

How do you apply for the Paycheck Protection Program?

You can apply for a PPP loan through any of the SBA’s pre-approved 7(a) lenders. These include banks, credit unions and other financial institutions. The CARES Act also gives the SBA the resources to approve additional lenders to accommodate the influx of applicants. A list of SBA-approved 7(a) lenders can be found here.

To apply, you’ll need the following statements, reports and documentation:

  • Your 2019 IRS Quarterly 940, 941 or 944 payroll tax reports
  • The last twelve months of payroll reports beginning with your last payroll date
  • 2019 IRS Form 1099 for any independent contractors that would otherwise be your employee
  • Documentation showing total of all health insurance premiums paid by the company
  • Documents showing the sum of all company-paid retirement funding
  • Documentation showing employer contributions to 401K and IRA plans

What can I use my PPP funding for?

Funding disbursed from your Paycheck Protection Program loan can be used for any of the following:

  • Employee compensation, including:
    • Salary and wages
    • Commission, cash tips or the equivalent
    • Vacation time or Paid Time Off (PTO)
    • Family, medical or sick leave
  • Healthcare benefits and insurance premiums
  • Retirement benefits
  • State or local tax assessed on wage compensation
  • Interest payments on mortgage obligations, not including principal
  • Rent, including rent for a lease agreement
  • Utilities
  • Interest payments on other debts incurred before February 15, 2020

If the funding is used for anything other than a pre-approved expense dictated by the SBA and the CARES Act, the business owner will not be eligible for loan forgiveness.

Is the Paycheck Protection Program compatible with other CARES Act loans?

Your Paycheck Protection Program loan is compatible with other CARES Act loans and other loans you may have already had. Often, businesses that are eligible for the PPP are also eligible for other Economic Injury Disaster Loans (EIDLs) provided by the SBA. The SBA is allowing the disbursement of both to those that are approved, but the funding cannot be applied to the same expenses.

For example, say you are using your PPP loan disbursement for payroll and mortgage interest payments. Your EIDL could not also be used for payroll and mortgage interest payments. You would have to use the disbursement from your EIDL for another expense.

How do you get loan forgiveness from the Paycheck Protection Program?

You can apply for loan forgiveness through the lender you used to apply for the PPP loan. In order to apply for loan forgiveness, you must provide your lender with the following:

  • Documentation verifying the number of employees on your payroll. This document should include:
    • Each employee’s pay rate
    • IRS payroll tax filings
    • State income tax filings
    • Unemployment filings
  • Documentation verifying the payments you’ve made on mortgage interest, lease or rent payments and utilities payments.
  • Certification from an authorized representative of your company that states that the documentation you’ve provided is true. This document should also certify that any amount that is being forgiven was used in accordance with the SBA’s PPP guidelines.

The Paycheck Protection Program is one of many financial and economic stimulus options available to business owners. MCDA has representatives and CFO consultants standing-by to help your business secure funding through the stimulus options.

Working From Home…Beware of Scams!

Companies are continuing to make arrangements for employees to work from home, and others are fast tracking HR policies to meet the requirements of shelter-in-place orders by state officials.  These actions are making it an even higher risk for people being targeted by scammers, especially through phishing emails or through an unsecured network connection.

Employees transitioning from an office setting to a home office may find themselves more vulnerable to tech support scams.  With either limited IT resources or strained IT resources, employees may attempt to solve technical issues themselves when confronted with pop-ups and virus alerts.  I recently just read about a victim losing nearly $250 to a tech support scam. The report stated a pop-up window appeared when the user’s computer froze. The instructions on the pop-up window said to contact a company claiming to be affiliated with Apple. After following the directions, the consumer paid for what they thought would fix the problem and never heard from the tech support company again. Although this seems silly, under the stressful conditions and the fear of losing your job, employees are doing whatever it takes to keep operating as normal as possible, which may include them trying to fix a problem on their own to avoid, “getting in trouble.”

Another concern for employees transitioning to a work-from-home environment is Business Email Compromise (BEC) scams. BEC scammers impersonate emails that appear to come directly from the boss. These fraudulent emails are often used to request large payments to “vendors” via wire transfer. While this is a common scheme, scammers may change their approach and use current events as a way to convince the recipient to take action. Compromised business emails may be used to request payments for things such as reimbursements, bogus invoice payments, or office equipment.  You may have seen that this type of scam became a media sensation recently when Barbara Corcoran of Shark Tank was hit with a $400K loss.  She was one of the lucky ones, recovering almost all of her $400K loss.

Advertised work from home opportunities aren’t always what they seem, especially for people who have recently been furloughed or laid off.  Employment scams are ranked the top riskiest scam in both the 2018 and 2019 Scam Tracker Risk Report.  A common red flag to make note is the opportunity to work from home and what seems like a high hourly wage with minimal effort.  However, as more employers practice social distancing and require employees to work from home, differentiating between legitimate and fraudulent job opportunities will become more difficult.

While working from home and watching to see how the situation surrounding the COVID-19 outbreak develops, here are some tips from MCDA to avoid falling victim to scams:

  • Be aware of unusual procedures. Job offers without interviews are a red flag of employment scams, as well as employers that overpay and ask to wire back the difference. Take note of companies that promise opportunities or high income if you pay them for training.
  • Check official job postings. Scammers will often use emails, social media or online job boards to reach targets. They are also known to use actual company names, addresses and human resource contacts found on the internet. If a job posting seems too good to be true, go directly to the company website and check their career page directly. If a website is charging you for information about a job opening, it is probably a scam.
  • Set up work-from-home IT policies. When setting up remote employees, establish a plan to help them with technical problems they may face. Instruct them on who they should contact, and who to avoid, for tech support. A plan can protect employees, the business and your customers from having their personal and professional information compromised.
  • Maintain office billing policies at home. One of the best ways to combat business email compromise scams is to set a policy requiring employees to confirm payment requests in person or over the phone, rather than over email. If the employees that handle billing are working from home, have them maintain these policies by calling to confirm any payment requests made by email.
  • Review safety practices with employees. As employees are working remotely, remind them of the best practices to avoid scams. Practices such as avoiding clicking on pop-ups or links in unsolicited emails are encourage and if they aren’t sure of the origin of an email, have them contact a colleague or supervisor by phone. Make sure they know tech support professionals would never call them unless they had requested assistance first.

If you need assistance setting up a remote work policy please contact MCDA today for a free consultation. (714) 872-2393 or you can email directly to Mike@mcdaccginc.com