On Thursday, May 28^th, HBK and Gannon University SBDC presented the second installment of their “From Survive to Thrive” webinar series. In this session, Amy Dalen, JD, Chair of the HBK Tax Advisory Group, and Ben DiGirolamo, CPA, JD, provided a tax update for individuals and businesses. Below are some of the highlights from this session. Economic Impact Payments Amy provided an update on the Coronavirus Aid, Relief, and Economic Security (CARES) Act economic impact payments, indicating that a number of payments have been paid incorrectly to deceased individuals and individuals who have been incarcerated. The Internal Revenue Service (IRS) recently released Frequently Asked Questions (FAQs) providing information on how these payments can be repaid. While FAQs can provide us with valuable insight into the positions that the IRS is likely to take, if they are not otherwise published they should not be relied upon as authoritative. Amy pointed out that some of the FAQs provided by the IRS are more restrictive than the statutory language of the CARES Act. Retirement Planning Amy went through a summary of the CARES Act benefits provided for retirement plans, including a waiver of the 10% penalty for early withdrawals up to $100,000 for qualified individuals, and the increase to permissible loan amounts from $50,000 to $100,000. A qualified individual has either been diagnosed with coronavirus, had a spouse or dependent diagnosed with coronavirus, or been financially impacted by coronavirus. Qualified distributions can be recognized as income over a three year period, and can also be repaid to the plan during that time. The IRS is expected to issue additional guidance, and has indicated that the guidance provided will be similar to the guidance issued for distributions allowed in the wake of Hurricane Katrina. In the mean time, the IRS has provided FAQs. Charitable Contributions Amy pointed out that charities have been suffering from a decrease to charitable contributions in the wake of the Tax Cuts and Jobs Act (TCJA) of 2017, which increased the standard deduction and eliminated the charitable deduction benefit for many taxpayers. The CARES Act attempts to address this by making a permanent $300 charitable deduction for individuals that use the standard deduction, which will be an above-the-line deduction. Contributions must be in cash in order to qualify for this deduction. In addition, the CARES Act increased the adjusted gross income (AGI) limitation for cash contributions to certain 501(c)(3) organizations from 60% to 100% for tax year 2020, and increased the corporate charitable deduction limitation to 25%. Contributions in excess of these limits can be carried forward for up to five years. Excess Business Loss Limitation Amy explained that the TCJA created a new limitation for non-corporate taxpayers on business losses that exceed $250,000 for single filers and $500,000 for married filers that file a joint return. The CARES Act eliminates this limitation completely for farm losses, and suspends the limitation for non-corporate taxpayers for tax years 2018 through 2021. This provides an opportunity for taxpayers to amend their 2018 returns and use business losses that were limited. In addition, the CARES Act provided some technical corrections, clarifying that W-2 wages are not considered business income for purposes of the excess business loss calculation, and that capital gains included in the calculation are limited to a taxpayer’s net capital gain. Individual Planning Opportunities Amy pointed out that low interest rates and low market values are providing significant opportunities for taxpayers. Some of these opportunities include Roth IRA conversions, the use of Grantor Retained Annuity Trusts (GRATs) and other estate “freeze” techniques, and the use of related party loans. For any related party loans currently in existence, taxpayers should consider revising them to take advantage of the low AFR rates. Deductibility of PPP Loan Expenses Ben began his presentation covering one negative provision that came out of the CARES Act: the inability of businesses to deduct expenses that are paid for by PPP loan proceeds that are later forgiven. The CARES Act provides that the loan forgiveness is not taxable income, and the IRS is taking the position that any expenses related to that loan forgiveness are not deductible. This leaves businesses in the same boat as if the forgiven amount were taxable and the expenses were deductible. Ben pointed out that Congress may change this position to make the expenses deductible even though the loan is forgiven. Employee Retention Tax Credit Ben covered the new employee retention credit that was put in place by the CARES Act, indicating that it may be taken if a business was fully or partially suspended during a quarter in 2020 due to a government order, or if gross receipts were less than half of those from the same quarter in 2019. Ben pointed out that businesses that have received a PPP loan are not entitled to the credit. The credit is against the employer’s 6.2% share of Social Security payroll taxes, and is equal to fifty (50) percent of a) wages up to $10,000 per employee paid to the employees unable to work because of COVID-19 if the business had more than 100 employees in 2019, and b) all wages up to $10,000 per employee for businesses with less than 100 employees. The employer is allowed to reduce their otherwise required payroll tax deposits by the credit amount, and can file and get a cash refund if the credit exceeds the deposit. Employer Payroll Tax Deferral Ben went over the payroll tax deferral, which allows employers to delay payment of their side of the Social Security tax for deposits made from March 27^th through the end of the 2020 calendar year. Fifty (50) percent of the deferred amount will be due at the end of 2021, and the other half will be due by December 31, 2022. Employers are allowed to delay payments until they receive notice from the SBA that any portion of their PPP loan is forgiven. This deferral also applies to fifty (50) percent of self-employment taxes. Net Operating Losses Ben explained that the net operating loss carryback period was extended, which makes a change to the prior elimination of the two-year carryback period by the TCJA. Taxpayers are now allowed a five-year carryback period for 2018, 2019, and 2020 tax years, and the 80 percent limitation that was imposed by the TCJA has also been eliminated for carryforwards. Business Interest Expense Limitations Ben explained that the TCJA provided for a thirty (30) percent adjusted taxable income limitation on the deductibility of interest expense for businesses with $26 million or more in average annual gross receipts. The CARES Act increased this limit to fifty (50) percent for tax years 2019 and 2020, though partnerships are only allowed the increase in 2020. Qualified Improvement Property Ben provided a quick overview of a technical error found in the TCJA which required qualified improvement property (QIP) to have a 39-year life and not qualify for bonus depreciation, which was not the intention of Congress. The CARES Act reduced the life to 15 years and provided that it is eligible for 100 percent bonus depreciation. QIP applies to anything internal, non-structural, and after initial construction. The technical correction is retroactive to 2018 and can be applied using amended returns or by filing an accounting method change. Accelerating Disaster Losses Ben provided an overview of a potential benefit to businesses. When there is a federally declared disaster, businesses may be able to deduct certain financial losses as casualty losses, and may be able to accelerate those losses to the tax year preceding the year of the loss. Since the current situation related to COVID-19 is a federally declared disaster, businesses may be able to accelerate deductions for abandoned leaseholds, capitalized costs from abandoned business deals, contract termination payments, and unrefunded prepaid expenses in to the 2019 tax year. Qualified Disaster Relief Payments Finally, Ben pointed out that employers are able to make tax-free payments to employees during a federally declared disaster in order to reimburse them for certain expenses. These payments are still deductible by the employer. Expenses that employers may be able to reimburse include medical expenses not covered by insurance, medicine and sanitizers, costs to work from home, and childcare. The exclusion does not apply for ordinary wage payments.

One week after releasing the Paycheck Protection Program (PPP) Loan Forgiveness application, the Small Business Administration (SBA) posted additional guidance on loan forgiveness rules. On May 22, SBA released its Interim Final Rule on Forgiveness. While most guidance supported the instructions within the Loan Forgiveness Application, additional information was provided to Borrowers.

• Treatment of Bonuses and Hazard Pay: SBA clarified that these payments are considered payroll costs and are eligible for forgiveness. The Interim Final Rule says, “The CARES Act defines the term “payroll costs” broadly to include compensation in the form of salary, wages, commissions, or similar compensation.” It goes on to state, that “The Administrator, in consultation with the Secretary, has also determined that, if an employee’s total compensation does not exceed $100,000 on an annualized basis, the employee’s hazard pay and bonuses are eligible for loan forgiveness because they constitute a supplement to salary or wages, and are thus a similar form of compensation.”
• Prorated Non-Payroll Costs: The Interim Final Rule confirms that both non-payroll costs paid and also non-payroll costs incurred during the covered period and paid on or before the next regular billing date are eligible for forgiveness. For those costs incurred, only the portion of the bill incurred will be eligible for forgiveness. The Interim Final Rule provides the following example:

  “Example: A borrower’s covered period begins on June 1 and ends on July 26. The borrower pays its May and June electricity bill during the covered period and pays its July electricity bill on August 10, which is the next regular billing date. The borrower may seek loan forgiveness for its May and June electricity bills, because they were paid during the covered period. In addition, the borrower may seek loan forgiveness for the portion of its July electricity bill through July 26 (the end of the covered period), because it was incurred during the covered period and paid on the next regular billing date. The Administrator, in consultation with the Secretary, has determined that this interpretation provides an appropriate degree of borrower flexibility while remaining consistent with the text of section 1106(b). The Administrator believes that this simplified approach to calculation of forgivable nonpayroll costs is also supported by considerations of administrative convenience for borrowers, and the Administrator notes that the 25 percent cap on nonpayroll costs will avoid excessive inclusion of nonpayroll costs.”



• No Double Penalty: The Interim Final Rule clarified that SBA’s intention is to not double penalize a Borrower who has an employee(s) that could be included in both the FTE reduction calculation and the salarywage reduction calculations. The rule states, “The [CARES] Act does not address the intersection between the FTE employee reduction provision in section 1106(d)(2) and the salary/wage reduction provision in section 1106(d)(3). To help ensure uniformity across all borrowers in applying the FTE reduction provision and the salary/wage reduction provision, the Administrator, in consultation with the Secretary, has determined that the salary/wage reduction applies only to the portion of the decline in employee salary and wages that is not attributable to the FTE reduction.”
• Reporting to Unemployment: Previously, question #40 in the Frequently Asked Questions (FAQ) document stated that borrowers would not be penalized in their loan forgiveness reduction calculation if those borrowers made a good faith, written offer of rehire (for the same salary/wage and the same number of hours) to a laid-off employee if that employee rejects that offer. The FAQ also noted that employees who rejected offers of pre-employment may forfeit their eligibility for continued unemployment compensation. The Interim Final Rule on Loan Forgiveness also states that the borrower must 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.” SBA noted that it would provide additional guidance on this matter.

In addition to this guidance, a second Interim Final Rule covering SBA Loan Review Procedures and Related Borrower and Lender Responsibilities was also released on May 22. Highlights of this rule include the following:

• SBA may review any PPP loan (regardless of size), where reviews may include borrower eligibility, loan amounts and use of proceeds, and loan forgiveness amounts. Reviews may occur at any time in SBA’s discretion.
• If SBA determines that a borrower is ineligible for a PPP loan, the loan will not be forgiven. Further, “SBA may seek repayment of the outstanding PPP loan balance or pursue other available remedies.”
• For loan forgiveness, lenders will confirm receipt of the borrower certifications contained in the Loan Forgiveness Application Form, confirm receipt of applicable documentation, and confirm borrowers’ calculations. Borrowers are responsible for providing an accurate calculation of loan forgiveness, and borrowers will attest to the accuracy of the calculation on the Loan Forgiveness Application.
• Lenders must issue a decision on loan forgiveness within 60 days of receipt of a loan forgiveness application to the SBA.

For more information on PPP loan forgiveness or complying with program guidelines, please contact your HBK Advisor.

You’re not alone if you’re confused about the rules for getting your Small Business Administration Paycheck Protection Program loan forgiven. Rules and guidelines for completing the Forgiveness Application were released Friday, May 15, but discussions regarding changes or updates to those rules are ongoing in the U.S. Congress. There appears to be bipartisan support for extending the “covered period” for calculating loan forgiveness beyond the current eight weeks to at least 10 and perhaps longer, and for greater flexibility in terms of how the loan proceeds can be spent to qualify for forgiveness.

HBK is staying on top of the talks and we will keep you informed about changes as they are released. In the meantime, we are advising our clients to follow the current rules and guidelines as published in the May 15 SBA Forgiveness Application release.

For a thorough review of the requirements and procedures for completing the Application as of May 15, link to the recording of our May 18 webinar on the subject at: http://hbkcpa.com/ppp-loan-forgiveness/

On May 15, the Small Business Administration (SBA) released the Paycheck Protection Program (PPP) Loan Forgiveness Application with accompanying schedules and instructions. The release includes clarifications and new information on several key issues:

• Covered Period and Alternative Payroll Covered Period
  Question 20 of the SBA’s Frequently Asked Questions (FAQs) on the PPP defined the “covered period” as “the eight-week period beginning the day the lender makes the first disbursement of the PPP loan to the borrower.” However, the Forgiveness Application offers a second option. The eight-week Alternative Payroll Covered Period, available to those that have a biweekly or more frequent payroll schedule, begins the first day of the borrower’s first payroll period following the PPP loan disbursement date.
• Costs Incurred and Payments Made
  The CARES Act includes as expenses eligible for forgiveness “costs incurred and payments made during the covered period.” The vague language led to different interpretations of what expenses would or would not be eligible.

In its definition of “eligible payroll costs,” the Application states that “borrowers are generally eligible for forgiveness for the payroll costs paid and payroll costs incurred” during the eight- week covered or alternative covered period. In addition, payroll costs that are incurred but not paid during the covered or alternative covered period are eligible for forgiveness if paid on or before the next regular payroll date.

Similarly, eligible non-payroll costs “must be paid during the covered period or incurred during the covered period and paid on or before the next regular billing date, even if the billing date is after the covered period.”

• Reductions to Forgiveness
  The Application provides detailed instructions on how to calculate full-time equivalent (FTE) reductions and salary and wage reductions. The CARES Act noted that reductions in either the FTE count or salaries and wages would reduce forgiveness but was not clear how the calculations would work. The Application not only offers some clarity, but provides accompanying schedules to help borrowers calculate the reductions.
• True and Correct
  Also, borrowers must certify that “the information provided in [their forgiveness application] and the information provided in all supporting documents and forms is true and correct in all material aspects.” Making a false statement to obtain forgiveness is punishable under the law with imprisonment and/or fines ranging up to $1 million. The Application states that “eligibility for loan forgiveness will be evaluated in accordance with the PPP regulations and guidance issued by the SBA through the date of [the forgiveness] application.”
• More Guidance to Come
  The loan application process evolved as Interim Rules and FAQs were issued. We expect the forgiveness process will also change with additional guidance. While borrowers may use the Application to begin preparing documentation and estimating forgiveness, they should understand that guidance could change, or that the SBA could provide additional clarification on forgiveness calculation and documentation.

Borrowers can download the Application from https://home.treasury.gov/policy-issues/cares/assistance-for-small-businesses. For more information about PPP loan forgiveness, please contact your HBK advisor.

The Paycheck Protection Program (PPP) was created to provide funds to qualified small businesses negatively impacted by the COVID-19 pandemic. The loans are for specified uses, including payroll costs, rent, utilities, and mortgage interest, and may be forgiven if they are used in accordance with PPP terms and conditions. However, in efforts to disseminate money to struggling small businesses quickly, several requirements of the program were not initially clarified, leaving the SBA to provide additional guidance.

Recent news reports identified large companies that received PPP funds, then, in some cases, returned the money. These businesses were deemed to have adequate liquidity from other sources or to have violated the requirement that the money was “necessary” to their operations due to the “current economic uncertainty.” The companies were criticized—their ethics and integrity questioned— by the media and by small businesses that were unable to get loan funds they applied for.

On April 23, the SBA released an update to its FAQ document with the following:

• All applicants must certify in good faith that, “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” The economic uncertainty must be due to the COVID-19 pandemic.
• Per FAQ #31, “borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business. For example, it is unlikely that a public company with a substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification.”  To read the entire FAQ, visit https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf.
• The same FAQ goes on to state that, “any borrower that applied for a PPP loan prior to the issuance of this guidance and repays the loan in fully by May 7, 2020 will be deemed by SBA to have made the required certification [on the loan application] in good faith.”

The SBA also released an interim rule on April 24 that reiterated this information. The interim rule can be found at https://home.treasury.gov/system/files/136/Interim-Final-Rule-on-Requirements-for-Promissory-Notes-Authorizations-Affiliation-and-Eligibility.pdf.

As well, guidance warned that businesses qualifying for funds and later found to be ineligible and business that didn’t use the funds according to the terms of the program would be subject to legal or regulatory consequences. Then on April 28, Treasury Secretary Steve Mnuchin announced that the government would audit all companies receiving over $2 million in PPP loans. Such increased government scrutiny could eventuate in investigations for fraud and abuse. We also anticipate heightened public scrutiny as Employer Identification Numbers of loan recipients are revealed to the public.

As such, we recommend the following:

• Management and the board of directors of an organization that has applied for or received PPP funds should review their financial situation and consider whether their business is eligible in accordance with the spirit and intent of the PPP program.
• Any organization that has received funds and determines that it does not demonstrate necessity in accordance with the new guidance should repay the loan in full by May 7, 2020.
• An organization that has received funding and is eligible according to the guidance must keep comprehensive and accurate documentation on its eligibility, on how it is using the funds, and on complying with the forgiveness terms of the program.

As we expect additional guidance on the PPP program, we recommend that all PPP loan applicants and recipients monitor www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program and home.treasury.gov for more details.

If you have questions about PPP funds, or other economic relief programs, please contact your HBK Advisor.

Update: On May 5, 2020, the SBA released an FAQ indicating that the safe harbor date was extended to May 14, 2020. The SBA also indicated that it intends to provide additional guidance on how it will review the certification prior to May 14, 2020.

Updated guidance regarding the SBA’s interpretation of this provision and the safe harbor date may be found at http://hbkcpa.com/sba-releases-additional-guidance-on-ppp-certification/.

Accounting and finance managers in businesses that have received their proceeds from the Paycheck Protection Program are directing their attention to complying with the requirements in terms of how they use the money. There is no specific requirement on how funds should be tracked, as of yet. As a result, companies currently should choose from three options:

1. Set up a new bank account specific for Paycheck Protection Program funds. (Some banks are not opening new accounts at this time.)
2. Create a general ledger cash account that is specific to the Paycheck Protection Program funds and utilization.
3. Manually track Paycheck Protection Program fund utilization using a spreadsheet (such as Microsoft Excel).

New Bank Account. You can pay allowed expenses directly from the new account, or use it to fund other operating accounts set up for automatic withdrawals or other payments. Without guidance indicating otherwise, we do not suggest that you change those automatic withdrawals or payments to be made from the new account, since the account is intended only for the short-term management of the PPP funds.

While the account will help you track how much of funds are used, it is also important to track how funds are used. This may be difficult when using the new bank account alone, given the limited level of detail that can accompany the transactions. Consider employing a general ledger account or manual spreadsheet in conjunction with the bank account.

General Ledger Account. If you choose to create a general ledger cash account, do so by creating a new PPP-specific cash account or subaccount, whichever works best based on your accounting system. Use the cash in this account to either directly pay the qualifying disbursements or fund your primary cash account to make the disbursements. This is similar to using a new bank account, except your accounting software likely allows you to enter more transaction detail.

The benefit of a general ledger account is that it maintains all documentation in your accounting system and reduces the possibility of manual errors. In addition, you can use your accounting system’s reporting functions. The downside is that additional guidance could change the way you use your funds, and these changes may be difficult to incorporate into your accounting system. For example, you may need to reverse transactions instead of deleting them. As well, your bank reconciliations could be more complicated until your PPP funds are depleted.

Manual Spreadsheet. To track fund utilization using a spreadsheet, enter your loan proceeds balance and subtract each qualifying disbursement. Be sure to include details about the disbursements in the spreadsheet, so that you are tracking both how and how much of the funds are being used.

The benefit of using a spreadsheet is that, as more guidance is provided, you can make adjustments easily, adding or deleting expenses. There is also no limit of the amount of information you can include in a spreadsheet, allowing you to keep as much detail as you want regarding the expenses. You can also use a formula to track how much of your fund utilization is for payroll and how much to cover non-payroll costs. The downside of this method is that it is manual, which is time-consuming and potentially inefficient, subject to human error, and does not integrate with your accounting system which leaves you with limited reporting functionality.

Other Record-keeping for Forgiveness. In addition to tracking, loan recipients seeking forgiveness must have documentation proving loan funds are used as specified by the law. Section 1106 of the CARES Act states that loan recipients seeking forgiveness must submit documentation including:

• Verification of full-time equivalent employees on payroll and pay rates
• Payroll tax filings reported to the IRS
• State income, payroll, and unemployment insurance filings
• Cancelled checks, payment receipts, transcripts of accounts, or other documents verifying payments for covered mortgage obligations, lease obligations, and utilities
• Any other documentation the Administration determines necessary. Additional guidance on PPP loan forgiveness could require additional documentation.

If you have questions regarding your PPP loan or use of those funds, please contact your HBK advisor.

The COVID crisis has burdened manufacturers with challenges they have never before had to deal with. In addition to managing their businesses, leaders must now consider supply chain disruptions, employee health, how to use relief funds to support their companies, and how to accommodate constantly changing circumstances.

Here are seven tips to help your business weather the COVID-19 crisis and look toward recovery:

1. Follow relief program guidelines. A variety of programs are available for businesses affected by COVID-19, including loans, tax credits, and payment deferrals.


• SBA Economic Injury Disaster Loan (EIDL)
• Expanded Sick and Family Medical Leave
• Paycheck Protection Program (PPP)
• Employee Retention Credit
• Payroll Tax Deferral
• Main Street Lending Program (MSNLF & MSELF)
• SBA Small Business Debt Relief
• State, local, or vendor specific relief options

Companies using a relief program must have a process in place to ensure they follow program guidelines. You will be required to use loan funds in accordance with the program directives and to maintain proper documentation to support how you use loan funds or tax credits. In many cases, guidance continues to evolve. Keep up to date or engage your advisors to help you follow the changing guidelines.

For businesses that did not receive EIDL or PPP loan funding, Congress continues to negotiate legislation to add money to these programs. Remain current on program availability and details. Your advisors can help.

2. Reevaluate weaknesses in your supply chain. You likely evaluated your vendors’ ability to continue supplying you through the crisis. But the effects of the pandemic on businesses continue to evolve and spread. Globally, many manufacturers have suspended operations, while others have adjusted operations to satisfy new needs, such as for medical personal protective equipment. Manufacturers of food, cleaning products, and other household staples saw an unpredicted increase in demand. In some cases, shuttered businesses have begun reopening, or have plans to reopen in the coming weeks. These changes affect the availability of some goods.



It is important to understand how this evolution will affect your supply chain. As the U.S. strives to open its economy and more businesses return to work, will the goods and materials you need remain available?


• Communicate with vendors frequently, especially those that supply you with critical goods. Understand whether your supply is jeopardized. Ask how their operations may change as more businesses reopen. Also, ask about their plans should they be unable to obtain goods or have an outbreak of COVID-19 in their facility.
• If you have contracts in place, review those contracts and re-negotiate with vendors as appropriate.
• If you fear your supply is at risk, onboard new vendors. Waiting until there is an outage is waiting too long.
3. Focus on inventory management. Once you evaluate your risk in your supply chain, focus on inventory. Businesses can improve cash flow by putting off inventory purchases, safety stock or finished goods in return for committing to order or produce just-in-time. However, risks to your supply chain during a crisis could incline you to build up inventory if your cash reserves allow.


• Determine whether you should and can increase your safety stock to ensure you can meet customer demand.
• Has COVID-19 affected your product mix? If so, consider adjusting your inventory to accommodate current needs. Monitor changes in demand.
• If you have obsolete goods or materials, consider selling them, even at a discount, to raise cash as well as dedicate cash and warehouse space to items you can convert into sales.


4. Continue using your cash forecast. Update your forecast at least weekly and plan for a minimum of the next two to three months—ideally six months or longer. Identify trends affecting your cash flow, such as changes in sales revenue, slowing customer payments, or changes in your inventory buying patterns. Incorporate these trends into your forecast.



Identify your cash challenges for the upcoming weeks or months and determine what actions you need to take to maintain liquidity. Questions to address include:


• What capital expenditures or investments are planned? Do these expenses make sense given the current economic situation, or should they be delayed?
• Can you pay your bills on time? If not, what actions can you take to remain in good standing with your vendors?
• Should you look for ways to reduce costs?
• Will you need to pursue additional working capital support? If you would like assistance with cash forecasting or determining what actions to take to address a cash flow issue, we can help. Contact us.
5. Evaluate alternative revenue streams. Many manufactures have pivoted from their traditional business models to offer different goods, such as personal protective equipment for medical providers. However, manufacturers should exercise caution in considering significant change or investment, especially if your risks include possible inefficiencies or quality defects. Some opportunities may be easier to implement than others.


• Talk to your customers and determine their needs. Brainstorming and creativity may identify new opportunities—even if temporary—that can support you and your customers through this challenging time. As well, providing superior customer service can create loyalty that will serve you well in the future.
• Are you taking advantage of your resources? For example, if you have a piece of equipment that is underutilized or previously used only for internal purposes, consider ways you can use it to meet a market demand.
• Can you shift operations toward producing products in greater demand? Temporarily reducing or eliminating some products to focus on others in high demand can maximize efficiency and increase key products’ availability.


6. Continue protecting employee health. As COVID-19 continues to threaten the health of everyone, it is important to protect employees. Continue enforcing recommendations from federal, state and local governments, which may include monitoring employee temperatures, cleaning and disinfecting frequently touched objects, preventing group gatherings, limiting visitors, and encouraging sick employees to stay home. Additional recommendations can be found on the CDC’s website at https://www.cdc.gov/coronavirus/2019-ncov/community/guidance-business-response.html. Even the CDC’s recommendations are not all-encompassing; some states and municipalities have issued additional requirements.

Other health-related considerations for manufacturers:


• Stagger work start and end times to avoid heavy traffic at entry or exit points, time clocks, or locker rooms. If possible, encourage the use of multiple doors instead of a single point of entry.
• Stagger break times to reduce congregation in break areas or lunchrooms. Consider expanding available areas that can be used for breaks or meals.
• Provide single-use bottled beverages instead of encouraging use of a common water or sports beverage cooler.
• Reduce shared use of items, where possible. Consider purchasing additional supplies of lower-cost items such as pens, office products, small hand tools, or other shared items. Ensure proper cleaning for items that must be shared, such as equipment or larger tools.
• When appropriate, keeps doors open. This will reduce the amount that the employees touch the door, but in addition, opening outdoor doors can improve ventilation.
7. Take care of yourself. While we have weathered past business downturns, the COVID-19 crisis is unique. Instead of focusing solely on business and economic factors, business leaders are concerned about the health of their families, their employees, and themselves. The pandemic has affected many aspects of our lives and heightened levels of stress at a time we have been deprived of many traditional stress-relieving activities: social distancing prevents some gatherings; gyms and entertainment venues are closed; vacations have been cancelled.



Stress and uncertainty can hinder your decision-making ability, so do not make important decisions when you are experiencing high levels of emotion. Save critical business decisions for when you are calm and collected. Incorporate stress relieving activities into your routine. Eat nutritious meals, exercise, and take time away from the news and social media, which are constant reminders of the pandemic. And remember that your trusted advisors are available to support you during this chaotic time.

For questions or to discuss how COVID-19 is affecting your business, contact HBK’s Manufacturing Solutions Group at 330-758-8613 or manufacturing@hbkcpa.com.

The Families First Corona Response Act (FFCRA) and Coronavirus Aid, Relief and Economic Security (CARES) Act created three employer benefits claimed through payroll taxes, a 100% refundable credit against the cost of benefits paid under the FFCRA (FFCRA Credits), the Employee Retention Credit, and Employer Payroll Tax Deferral. The following is a list of FAQs and observations on these three provisions.

Who is eligible to claim the credit/benefit?

FFCRA Credits
Any business paying employees under the sick leave or expanded FMLA coverage provided by the FFCRA. Generally, all employers with under 500 employees are covered by the FFCRA. See the following Department of Labor FAQ for specific questions on eligibility and benefits. Department of Labor FAQ

Employee Retention Credit
Those that carry on a trade or business during the calendar year 2020, including a tax-exempt organization, that either:

• Fully or partially suspends operation during any calendar quarter in 2020 due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19; or
• Experiences a significant decline in gross receipts during the calendar quarter.

Employer Payroll Tax Deferral
Every business until they are approved for loan forgiveness under the CARES Act.

Can I take a Payroll Protection Program (PPP) Loan and receive the benefit?

FFCRA Credits
Yes. However, the benefits paid under the FFCRA are not included in payroll costs for the calculation of the loan amount or amount forgiven.

Employee Retention Credit
No. Employers receiving a PPP loan are ineligible for the credit.

Employer Payroll Tax Deferral
Yes. Businesses with loan amounts forgiven under the CARES Act are ineligible. According to the following IRS FAQ, all employers, including those applying for PPP loans, claiming FFCRA credits, and claiming the CARES Act employee retention credit, can defer the payment of the employer’s share of social security tax until they receive a decision from their lender that any portion of its PPP loan is forgiven. IRS Deferral of Employment Tax Deposit FAQ

When can an employer receive the credit/benefit?

FFCRA Credits
Employers can claim the 100% tax credit against employment taxes for benefits earned starting April 1st. The credit will be claimed on Form 941, Employer’s Quarterly Federal Tax Return. Employers may receive an advanced credit by reducing their otherwise required payroll deposits. If the total credit exceeds their payroll deposit they can file Form 7200 to claim a refund. Below is a link to the IRS FAQ on the FFCRA benefits and tax credits, including examples of how to claim the credit. IRS FFCRA Credits FAQ

Employee Retention Credit
The employee retention tax credit applies to wages paid after March 12, 2020, and before January 1, 2021. According to the IRS, 1st quarter credits earned for pay between March 13th and March 31st will be claimed on a second quarter Form 941. The credit will not be claimed on the first quarter payroll return. Employers may receive an advanced credit by reducing their otherwise required payroll deposits. If the total credit exceeds their payroll deposit they can file Form 7200 to claim a refund. Below is a link to the IRS FAQ on the employee retention credit, including examples of how to claim the credit. IRS Employee Retention Credit FAQ

Employer Payroll Tax Deferral
The deferral period starts on March 27, 2020, and ends December 31, 2020. Employers may defer payment of their share of social security taxes during this period. Employers receiving a PPP Loan will no longer be allowed to defer payment once they receive a decision from their lender that their loan is forgiven.

Join Frank Turocy, CPA, MSA, and Amy Reynallt, MBA as they give another update on the recently enacted Paycheck Protection and Loan Forgiveness Programs and changes to the SBA Economic Injury Disaster Loans.

Download the presentation.