Businesses have a lot to consider when it comes to the implications of COVID-19. New rules and regulations are in place to keep employees and customers safe, new funding opportunities with varying guidelines and requirements are available, financial predictions and targets are in flux, and cybersecurity must be tighter than ever to mitigate risks with a remote workforce.
At Eide Bailly, we’ve put together a series of resources to help make sense of the evolving impacts of COVID-19 on businesses. These are the most pertinent topics to arise—and our guidance for each.
1. See what’s top-of-mind for organizations right now.
COVID-19 is generating a lot of concern and confusion for businesses. A few key questions are: What type of relief is available for my organization? And how does COVID-19 impact my state and local tax filings? Further, how do I track the screening of my employees per CDC guidelines? Take a look at the most frequently asked questions we’ve received to see the top concerns across organizations.
2. Get the latest tax updates for your state.
At this time, many businesses are seeking administrative and financial relief from state and local taxing authorities. And each authority is handling extensions and communications differently. As a business owner, it helps to have up-to-date knowledge of states’ conformity to the federal extension, state-specific extensions and relief, as well as any suspensions of collection efforts. With this information, you can better plan for your filings and financials.
3. Cover your bases for new international tax considerations.
As COVID-19 continues to disrupt our daily lives, many are asking how it will impact their international business. We’ve compiled key considerations and resources to assist companies and individuals with international tax and business aspects. These include considerations for foreign companies with U.S. business operations and for U.S. companies with foreign business operations.
4. Update yourself on IRS operations.
The IRS has changed their operations in response to COVID-19 and you may not be able to interact with them the way you have in the past. The best way to continue working with them is through irs.gov and filing and submitting information electronically, including fax. In most cases, you won’t be able to call the main IRS hotlines. However, the IRS also issued a new People First Initiative to provide immediate relief to taxpayers facing financial uncertainty over their taxes. This initiative suspends due dates for certain payments and documentation requirements. And it suspends or alters certain processes for collections and examinations. What do these changes mean for your business and what actions should you take?
5. Be prepared for an uptick in audits.
With the uncertainty of when the country will reopen for business, states are looking for ways they can generate revenue to replenish the non-budgeted cash outflow. Since legislative measures take time to pass and become effective, states will most likely turn to their quick and easy revenue generating tool: an audit. Proper documentation of state and local taxes is a key consideration for businesses to consider right now.
6. Understand how to account for PPP funding and loan forgiveness.
The Payroll Protection Program (PPP) has provided additional relief and resources to fund payroll and certain other expenses due to COVID-19. This has raised a lot of questions about proper accounting for funds and related loan forgiveness. What requirements and guidance should you be aware of for your business?
7. Prepare for a Single Audit before using PPP and/or EIDL programs.
Federal loan programs and federal grants subject to a Single Audit must be included on the schedule of expenditures of federal awards. Organizations are subject to Single Audit requirements when their cumulative federal expenditures, including loans, exceed $750,000. At this time, federal guidance has not exempted CARES Act funds from Single Audit requirements, which means your organization should prepare for a Single Audit before it starts using funds awarded under the CARES Act.
8. Stay up to date with FASB accounting standards delays.
On April 8, 2020, due to the COVID-19 outbreak, the Financial Accounting Standards Board (FASB) held a board meeting to discuss the delay of certain accounting standards. The FASB approved a proposal to amend the effective dates, delaying them for one year, for certain accounting standards. COVID-19 also presents financial reporting challenges and implications for businesses and organizations. Learn about accounting standards delays, financial reporting considerations and declaration considerations in the following article.
9. Get answers to your inventory observation questions.
COVID-19 is having a significant impact on inventory observation, which disrupts annual audits for many organizations. This is giving rise to several questions, such as: Do we have to complete an inventory observation for our audit this year if our facilities are closed? And how do I know what I can and can’t complete in relation to my audit? Get the answers to your questions, and learn about performing remote inventory observations, in the following article.
10. Ensure safety compliance with an essential employee screening tool.
Do you operate an essential industry that requires your employees to remain at work? Keeping your team safe during these trying times is no easy feat, which is why the CDC has suggested screening workers each day with survey questions. To make this process easier, our team built an unmanaged package for Salesforce that allows you to easily record answers to the CDC-approved questionnaire in your Salesforce.org. Available in both English and Spanish, feel confident you’re keeping your team safe while operating during the COVID-19 crisis.
11. Check business interruption insurance for requirements and deadlines.
One major impact of COVID-19 on businesses is the potential loss of business income due to closing and additional business disruptions. How can you potentially combat this loss? You might look to your insurance policy for coverage concerning loss of business income. The general purpose of business interruption insurance is to make the insured party whole following a damaging event. The losses must be supportable, however, so you need proper documentation.
12. Know key questions to address concerning COVID-19’s impact.
While business interruption insurance can help, there are still the practical problems of week-to-week payroll, payable run and cash receipts. Have customers stopped orders or withheld payments? Will you be able to meet next week’s or next month’s payroll? Should you withhold payments to vendors? To be sure you’ve covered all of your bases and are prepared for the short-term and long-term impacts of COVID-19, there are a number of important questions to ask yourself.
13. Use financial modeling to understand potential impacts.
Financial modeling is a key tactic for understanding the current state of your business and where it’s headed, even in times of uncertainty. It allows you to perform “what if” or sensitivity analysis, which can help you understand potential short-term and long-term impacts. Your financial modeling should include cash flow, fixed costs and asset management.
14. Find ways to improve efficiency and save money.
Right now, everyone is trying to do more with less. We have gone from a time of growth to a time of uncertainty, and organizations need to shift their focuses to operate lean and smart. Efficiency is no longer just the dream but the absolute necessity. Now is an ideal time to turn to your technology stack for efficiency and cost savings.
15. Develop or deploy a business continuity plan.
The world as we know it is changing, and many organizations are grappling with how to conduct their day to day in new ways. A critical component of any organization’s survival is business continuity planning. This involves creating processes and systems for the prevention, recovery and ongoing execution of an organization during times of threat or disaster. While COVID-19 may have thrust the need for a survival plan into the limelight, business continuity planning is essential beyond times of crisis. It must be part of your overall business strategy.
16. Critically analyze your exit plan.
Many business owners are concerned about how the current or lingering effects of COVID-19 will impact their organizations and their future transition to retirement. If you’re in this position, you should think critically about your exit plan and whether you need to develop one or reassess your current plan. Though it’s likely to be more challenging, exit planning is possible amid such market volatility and uncertainty.
17. Learn how the CARES Act applies to your business.
The Coronavirus Aid, Relief and Economic Security Act (CARES) provides substantive assistance to taxpayers affected by the coronavirus pandemic. This assistance comes in the form of new and modified tax provisions, as well as other loan programs. Provisions for businesses include an Employee Retention Credit, Small Business Administration (SBA) loans and several industry-specific items.
The Employee Retention Credit is a refundable tax credit of up to $5,000 per employee. It was created by the CARES Act to encourage employers to keep employees on their payroll.
The primary SBA loan program is the “7(1) loan program.” The CARES Act introduces significant additional financial aid—the Paycheck Protection Program (PPP)—for affected taxpayers through this program. The PPP offers loans to businesses to incentivize them to keep employees on their payroll.
You can learn more about rules and eligibility for the PPP, loan forgiveness and Economic Injury Disaster Relief Loans, and the Employee Retention Credit—and determine which relief provisions are right for you—in the articles and webinars below.
18. See if you qualify for credits for coronavirus-related paid leave.
The Families First Coronavirus Response Act, which reimburses employers who are required to pay sick and family leave to employees affected by COVID-19, became effective April 1. It requires private employers with less than 500 employees and all public employers to provide paid sick and expanded family and medical leave for a broad range of coronavirus-related absences. Additional wages and related health care costs paid by private employers as a result of the act are reimbursed through credits. What does this mean for your business?
19. Determine if your disaster relief payments are tax-free to employees.
On March 13, 2020, President Trump issued an emergency declaration under the Stafford Act in response to the ongoing COVID-19 pandemic. While there are varying interpretations, this declaration appears to meet the requirements of a declared disaster. Amounts paid to or for the benefit of an employee may be excluded from employee income under Code section 139 (but still fully deducted by the employer) if related to a qualified disaster. What expenses qualify and how should you account for them?
How do each of the relief provisions compare?
20. Consider cybersecurity and fraud concerns associated with remote work.
As the coronavirus pandemic has an impact on the way we do business, many organizations are making plans to address the safety and security of their employees and customers. One method is through remote-working arrangements. However, this new work environment creates challenges with internal controls due to limited employee interaction, new processes, and resources available outside of the office. It’s important to know and understand the common fraud and cybersecurity challenges organizations are now encountering.
21. Secure your network against cyber threats.
A lesser-discussed threat to your business security amid the tumult caused by COVID-19 is cybercrime. Cybercriminals are starting to use this to their advantage, preying on basic human weakness and counting on fear and panic to make us do unwise things—like visiting sites and links we normally wouldn’t trust. And with more businesses moving to remote workforces, security will be tested in new ways, leaving some organizations vulnerable to cyberattacks. Get informed about potential threats and how to stay protected.
Our COVID-19 resource center has information on new relief initiatives, changes in regulations and deadlines, updated government resources and more.