From the Chicago Department of Cultural Affairs and Special Events:
Today, Mayor Lori E. Lightfoot joined Governor JB Pritzker to announce the Arts for Illinois Relief Fund, providing financial assistance to artists, artisans and cultural organizations impacted by the Coronavirus (COVID-19).
The fund is a partnership between the City of Chicago, the State of Illinois and the broader philanthropic community. Arts for Illinois Relief Fund is administered by Arts Alliance Illinois in partnership with 3Arts and Arts Work Fund.
Grant applications for artists, artisans and cultural organizations open today. Individual artists and artisans – including stage and production members and part-time cultural workers – experiencing an urgent need will be able to apply for one-time grants of $1,500 distributed by 3Arts. Grants will be awarded through a lottery system and will be disseminated quickly. Additionally, nonprofit arts and cultural organizations of any size will be able to apply for relief through the Arts Work Fund. Based on their demonstrated financial need, organizations will be awarded grants from $6,000 – $30,000. Artists, artisans and cultural organizations impacted by COVID-19 are urged to apply for grants through www.artsforillinois.org.
To date, more than $4M has been committed from public and private sources to seed an upcoming statewide campaign that will provide additional funding to meet the growing and critical needs of the state’s creative sector. DCASE has contributed $1 million to the relief effort, along with leadership gifts from Walder Foundation and John D. and Catherine T. MacArthur Foundation. Fundraising activities will be co-chaired by First Lady MK Pritzker and First Lady Amy Eshleman, with support from other civic leaders. Individuals, corporations and charitable foundations are encouraged to donate to the Arts for Illinois Relief Fund by visiting www.artsforillinois.org.
Arts for Illinois also launched an online platform that features talented artists – performers, singers, poets, painters, writers and other creatives from across Illinois – who have generously made their works available for the public’s enjoyment while at home during these challenging times. Visit www.artsforillinois.org to explore a wide-range of art experiences, as well as learn more about the Arts for Illinois Relief Fund. Share your art using #ArtsforIllinois.
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I originally intended this post to be about the City of Chicago Small Business Resiliency Fund loan application process. And, well mostly, it is. But I learned a couple pretty important things over the past week of researching funding options for small businesses — something more general, and in a sense more important:
Find a good lender immediately. As in, today.
Get your financials ready. As in, today.
In the fast-paced world of obtaining small business resources during the COVID-19 crisis, preparedness is the word.
For example, in a webinar this morning, I found out that the City of Chicago’s program application will go live later today. And guess what: the funds are distributed first-come, first-served. I am not kidding. This means that businesses that already have a relationship with a banker or community fund will be able to navigate this maze more quickly than others — the same for businesses who are large enough to have an internal staff member or even an accountant to prepare the application, or the capital to hire a specialist.
With that said:
1) Finding a lender you trust seems to be the #1 most important thing you can do right now. A good lender is qualified to help you walk through the myriad funding options available, and may be able to predict what items will be needed to apply for specific programs, even before those programs have released guidance. (As an accountant, I am doing my best to get up-to-speed, but it’s simply not my area of expertise. I’m very good at helping pull together financial information for applications, however!)
2) The City Of Chicago Small Business Resiliency Fund presenter today encouraged everyone to apply, because it will connect you with a lender who can help you navigate the full landscape of options, not just this fund.
3) However, not all lenders are created equal. For example, lenders outside of Chicago will not know much about city-specific programs. And let’s face it, we’ve worked with a lot of banks and community funds, and some folks just have no idea what they’re doing (on a good day, not during a crisis, and without an overwhelming amount of information to evaluate). And I’ve heard from some clients that their usual lender isn’t even participating in the PPP program.
So, find a lender, now. Ask around to other small businesses to find out who they use. Ask your bank. If you already have an SBA or other loan, reach out to your loan officer (presuming you’ve had a good experience with them). Sometimes a big bank will be the better choice, sometimes the smaller community bank in your neighborhood, sometimes a community lending organization. Cross-reference by checking the SBA website “find a lender” tool. I don’t know a single decent one so far, so if you find somebody you like, please introduce me!
UPDATE 4/1 — A few clients have responded with recommendations: Chase, Wintrust, Radius Bank, Huntington Bank, Bank of America… all of them do 7(a) loans quite consistently so they are used to the documentation requirements, and can quickly pivot to offer PPP loans. These SBA “preferred lenders” (rather than just “certified lenders”) seem to be ready to take documentation Friday and issue loans ASAP thereafter.
And as for getting your financials together, here’s a list to get you started for any loan or grant:
Bank statements for the past year
Most recent business tax return (sole prop, partnership, S-Corp, C-Corp, Co-op, Not-For-Profit)
QuickBooks Profit & Loss and Balance Sheet comparative reports for the past 3 years (you can run one report for 1/1/17-2/29/20 and change the columns to “Years”; make sure to run these on cash- or accrual-basis to match your tax return)
W-2s for 2019 and payroll reports for 2019 and the first quarter of 2020
Rather than include my specific notes on the City of Chicago Small Business Resiliency Fund application process below, as originally intended, I’m going to link to them here as soon as I can (done!), so that I can get this info out ASAP to all small businesses that may need this guidance, not just those in Chicago.
Get on it!
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
IMPORTANT: This blog post is now out-of-date due to new guidance released on April 6th — see new post here.
The new CARES Act has introduced the “Paycheck Protection Program” (PPP) — $350 billion in loans to be administered by the SBA. The loans may be used to cover a borrower’s payroll and payroll taxes, mortgage interest, rent and utilities for eight weeks from the date of the loan.
But this is the key: if an eligible borrower uses the loan for qualifying expenses “while maintaining its workforce”… the loan may be forgiven. This makes the PPP way more valuable than most other federal, state and city aid (with the exception of flat-out grants, and possibly some credits).
The loans aren’t available yet — hopefully we’ll begin seeing these within the next two weeks. This legislation is hot off the press, and lenders do not yet have guidelines or checklists in place to know how to process applicants. I know this sounds awful to ask of you at a time like this, but: please be patient. Use the time to get your books and documentation in order, select and reach out to your favorite lender, and get everything ready to apply the moment they open the gates.
Qualification and Terms
To qualify for the loan program, a borrower:
(1) must have been in operation on February 15, 2020;
(2) have no more than 500 employees; and,
(3) must certify that the uncertainty of current economic conditions makes necessary the loan request to support its ongoing operations.
The amount of a loan cannot exceed 250% of the borrower’s average total monthly “payroll costs” during the one-year period leading up to loan origination. “Payroll costs” include salaries, wages, commissions, tips, paid time off, health insurance, retirement benefits, and state and local taxes not to exceed $100,000 per employee.
Loans are subject to a maximum of $10 million.
Amounts not forgiven (explained below) will have a maximum maturity date of 10 years from the date the borrower applied for loan forgiveness.
Interest on the loans shall not exceed 4% until June 30, 2020, but may be subject to change afterwards. All loan payments (principal, interest and fees) are deferred for at least six months, and up to one year.
Loans are “non-recourse” (which means company owners are not responsible for payments if the company defaults), except to the extent the loan proceeds are used for a purpose other than borrower’s payroll, mortgage interest, rent and/or utilities expenses.
Borrowers/owners will not need to provide any collateral or personal guarantee during the “covered period” (February 15-June 30, 2020). (It’s unclear whether lenders will require collateral and/or a personal guarantee to spring into effect upon the loan continuing to remain outstanding — or not completely forgiven — after June 30, 2020.)
Loan Forgiveness
The total of all payroll costs, mortgage interest payments, rent and utility payments incurred and made by a small business PPP borrower during the eight weeks following the loan — capped at the total loan principal amount — is potentially eligible for forgiveness. Unlike other forms of forgiveness of indebtedness, the amount of forgiveness received by a borrower will not be taxed as income. So this is kind of a big deal.
However, the maximum forgiveness amount will be reduced if the company reduces its number of Full-Time Equivalent Employees (FTEs) and/or reduces wage or salary compensation in excess of 25%. The reduction of forgiveness is reduced in proportion to the decrease in the number of FTEs during the eight-week period following the loan origination date, and the borrower’s monthly average FTEs from either (1) February 15, 2019 – June 30, 2019 or (2) January 1, 2020 – February 15, 2020.
In addition, the maximum forgiveness amount will be reduced dollar-for-dollar for any wage or salary reduction of an employee (who is paid less than $100,000 year) in excess of 25% (measured against the wage and salary for that employee during the most recent full quarter prior to the loan origination date).
If the small business previously reduced its workforce or the salary/wages it pays its employees, they can still qualify for loan forgiveness if FTEs are re-hired and/or wages are restored by June 30, 2020.
After an application is submitted for loan forgiveness, the lender will have 60 days to make a determination as to whether the loan will be forgiven. Lenders will then work with the SBA to be reimbursed for the forgiven amount; this won’t be something the small business owner has to do.
Information on Lenders
The Paycheck Protection Program will be administered by the existing network of approved SBA lenders, but the SBA and Treasury Department have said they are adding qualified lenders to disburse and service loans made with the guarantee of the SBA. Supposedly it’s not that hard to qualify as a lender, so if you have a good business relationship with a bank or other lending organization, encourage them to apply to become a qualified lender ASAP.
Lenders can make borrower eligibility determinations without SBA approval, using only the program eligibility rules. A borrower does not need to show it is unable to obtain credit elsewhere (a customary SBA loan requirement). This is also kind of a big deal.
Loans under the program are fully guaranteed by the federal government, which is an increase to the existing guarantee percentages under the current SBA loan program. (Ditto on the big deal.)
The SBA and the Department of Treasury are in the process of developing the guidelines lenders will use to administer the Payroll Protection Program loans. They must issue regulations within 15 days of enactment of the CARES Act, which means it’s possible that lenders could begin taking loan applications in two weeks. Just to be clear here: this is light-speed for a newly-enacted government program.
Recommendations for Potential Borrowers
I’m hearing from clients and colleagues that none of the lenders have received guidance yet for these PPP loans. However, if you have your books in order and gather all the appropriate documentation that you expect they’ll ask for, then you’ll be ready when the time comes.
In addition to getting the books in order for 2018, 2019 and up-to-date through 3/31/20 (if they’re not already), I’m recommending to clients who may be interested in the program, as potential borrowers, start working on documentation to verify the following: 1) the number of full-time equivalent employees on payroll and pay rates for the applicable periods: including payroll tax filings, state income, payroll, and unemployment insurance filings (basically, payroll from a comparable period one year ago); and, 2) payments on mortgage obligations, lease obligations and utilities: including payment receipts, transcripts of accounts, or other documents (to prove you had a lease or mortgage and utilities in service before February 15th of this year). 3) You’ll need some type of certification by an “authorized individual” (presumably an owner, partner or officer) as to the business having been negatively impacted by COVID-19; 4) And of course you’ll need some relationship with an SBA-approved Sec 7a lender, which means start calling around now.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
UPDATE 6/11/20 — an excellent, straightforward article by Accounting Web was released entitled, “How to Help Clients Conduct Layoffs and Furloughs While Mitigating Their Risk“. It explores the differences between various strategies: furloughs, paycuts, and layoffs — and how to navigate which to choose and what pitfalls each entails.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
UPDATE 4/9/2020: Per Crain’s Chicago — More than 12,000 applied for the grants, and 700 were drawn at random from a pool of applications. The winning 450 bars and restaurants each will get an average of $14,000, which can be used for payroll and general corporate purposes. The 250 small hotels get an average of $30,000. Officials said they are looking for other sources of funds to offer more grants in the future.
To help hospitality businesses make ends meet in the midst of the COVID-19 pandemic, the State of Illinois launched the Hospitality Emergency Grant Program. Grant funds are available to support working capital like payroll and rent, as well as job training, retraining, and technology to support shifts in operations, like increased pick-up and delivery. Eligible businesses include:
Bars and restaurants with a valid license to serve food or liquor and who generated revenues of less than $1 million in 2019.
Hotels with a valid license (hotels, motels other lodging establishments) and who generated revenues of less than $8 million in 2019.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
I’m getting a lot of client questions about unemployment these days — understandably… one person referred to it as the “IDES of March” — and thought a short Q & A + random notes and tips might be helpful. Some of these are notes from clients and friends based on their own experiences and research.
None of this should be taken as legal advice. Please see the State of Illinois’ unemployment website or give them a call (I’m hearing wait-time is about 45 minutes, so get a book or magazine out) with specific questions. For Employers: (800) 247-4984 For Employees: (800) 244-5631 I’ve also heard that some of the branch offices have shorter wait times, such as Arlington Heights (847-981-7400) and Skokie (847-745-3242).
IMPORTANT NOTE: For some reason, IDES benefits cannot be applied for with a smart phone — YOU MUST APPLY USING A COMPUTER. I know, this is ridiculous. Don’t shoot the messenger. Here’s the information you’ll need to apply.
Q: What if I’m temporarily laid off because the place where I work is temporarily closed because of the COVID-19 virus? A: An individual temporarily laid off in this situation could qualify for benefits as long as he or she is able and available for and actively seeking work. Under emergency rules IDES recently adopted, the individual would not have to register with the employment service [office of IDES]. He or she would be considered to be actively seeking work as long as the individual was prepared to return to his or her job as soon the employer reopened.
Q: What if I quit my job because I am generally concerned over the COVID-19 virus? An individual who leaves work voluntarily without a good reason attributable to the employer is generally disqualified from receiving UI. The eligibility of an individual in this situation will depend on whether the facts of his or her case demonstrate the individual had a good reason for quitting and that the reason was attributable to the employer. An individual generally has a duty to make a reasonable effort to work with his or her employer to resolve whatever issues have caused the individual to consider quitting.
Q: How are unemployment benefits calculated? A: Here’s the place where IDES shows how they calculate the amount: https://www2.illinois.gov/ides/IDES%20Forms%20and%20Publications/CLI105L.pdf — see page 16 starting with “how your benefits are determined”. Basically, they take the prior three 3-month periods (quarters) and average your wages during that time. So contrary to popular belief, it’s not based on the most recent week or pay-period. (In fact, the most recent quarter is not even included in calculations.) Then they pay 47% of that amount.
And for more information on how unemployment benefits vary so widely from state-to-state, check out this great article. The number of complicating factors involved makes apples-to-apples comparisons almost impossible.
Q: I heard that the federal government is paying an additional $600 per week as well. Do you have to apply separately to get the federal government amount? A: To the best of my knowledge at this time, there is no separate Federal application form. The state is supposed to be handling that aspect, and be reimbursed for the Federal amount, as well as their “extra” expense to process everyone. Heads-up that the one week “waiting period” will not apply for the $600 weekly amount — just for the state benefit amount. Once the Federal portion kicks in, the $600 will continue for up to four months, with the state paying for normally 29 weeks, plus another 13 weeks per Congress’ bill.
Q: I use Gusto as my payroll service. What are my options for making sure my employees are eligible for unemployment until I’m able to get everyone back to work again? A: You have two main options: 1) Dismiss all your furloughed employees in Gusto so they can apply for unemployment — Gusto will save all their data, and they will still be in the system the moment you are able to rehire. To rehire: Go to People –> Show dismissed people (right column) –> Select employee –> on the right, under actions, click “rehire employee”. – If you dismiss an employee in Gusto, then you will no longer be charged the monthly fee to keep them in the payroll system. – Keep in mind that when you dismiss an employee, you must then report to your benefits coordinator or health insurance company that the employee has been dismissed. This makes them eligible for COBRA for 18 months. COBRA allows them to remain on the group plan and reimburse the company for the cost (plus an admin fee). However, many employees cannot afford to do this, given that they’ve just lost their jobs. (Desperately trying to refrain from dwelling how immensely stupid this is, and wishing we had a single-payer tax-supported universal healthcare system.) Luckily, all the arrangements for COBRA payments happen outside both the payroll and health insurance systems. You can negotiate any arrangement you want with employees, as long as they are all treated fairly. So if the company is able to and wants to foot the bill for health insurance while the employees are furloughed, they can. If they want the employee to continue to pay only their employee percentage, and not the whole cost, they can. Or if they want to offer to fully or partially foot the bill, but defer the employee’s payment until the company reopens and they can return to work, that is also a choice you can make. Just be sure to track the liability, and document the agreement in writing. 2) The other option is to keep them on payroll at a zero or very reduced pay rate. Some employers are keeping the pay just exactly high enough for the employee to be able to have their portion of health insurance benefits withheld from their paycheck. However, it is not as easy to apply for unemployment, and they may only qualify for partial benefits. But they should be able to show the reduced or zero wages, explain that they are furloughed due to business slowdown from COVID-19 sequestering orders, and be treated accordingly as unemployed or partially-unemployed per IDES regulations. – One benefit of this approach is that they do not use up any of their 18 months of COBRA, and it allows you to easily have them pick up a shift or an odd job here or there. – This allows the employee to potentially qualify for up to 2 weeks of paid sick leave (or partially-paid leave to take care of a sick family member or a child that must be home-schooled due to school closings), and another 10 weeks of partially-paid family medical leave — to be reimbursed to the employer by the federal government in the form of refundable payroll credits. – Gusto is also providing options for deferring or waiving monthly payroll processing charges for those who need it.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
UPDATE: On April 9, the IRS issued Notice 2020-23, which expands the deadline extension to many more tax returns and payments. The most important is that second-quarter estimated tax payments are also due July 15th now, rather than the original date of June 15th. More here.
Obviously things have been changing daily in the surreal and crazy world we’re all living in right now. As of March 28, 2020, here are the new deadlines for 2019 income tax returns and 1st & 2nd-Quarter Estimated Tax Payments — for both the IRS and Illinois Department of Revenue.
Both Federal and Illinois income tax returns and payments that were due on April 15 are now due July 15. (This includes both calendar and fiscal-year filers, as well as fiscal-year extended due dates that land on April 15th.)
However, keep in mind that the new stimulus checks will be based on 2018 tax returns if the 2019 return is not filed soon — more on that in this excellent article by Tony Nitti. And of course, if you are due a refund, it is best to get that filed sooner rather than later.
An extension can be filed before July 15 to extend the filing date (but not payment date) until October 15, the usual extension date.
Federal 1Q estimated tax payments are also now due July 15 — BUT Illinois 1Q payments are still due April 15.
New automatic, systemic liens and levies are suspended for now. New delinquent accounts will not be forwarded to debt collection for now.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
Gusto is my favorite company to work with for so many reasons… but it just got better as I have been watching how much effort they’ve put into researching cash flow options for their small business clientele.
I’ll be circling back to this list soon to explore these in an order that I think makes most sense for my client base; I’ve also emailed them about some City of Chicago and Cook County resources that should be added to the list.
But in the meantime, please check out their downloadable list of Federal, State, and Private resources for relief, loans and grants available to small businesses.
As they mention in the post:
This spreadsheet will regularly be updated with financial resources for small businesses. Check back for the most up-to-date information, and share it with a business owner who may benefit from the support.
We’ll also be creating similar resources for unemployment benefits and sick leave. Visit the Talk Shop homepage for our latest publications, and see our COVID-19 employer guide for more helpful info.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
I’m getting a lot of questions on this one from clients and figured it would be good info for many out there.
If you own a small business and have had to lay off or furlough staff during this difficult time, you may wish to offer those who would like to assist an opportunity to contribute to a so-called “virtual tip jar”.
The issue is that tips are taxable income that should be run through payroll… whereas most of what we’re talking about right now are rightly termed as “gifts” — which are non-taxable to the recipient. Only if the gift exceeds $15k to any one recipient does the gifter (not recipient) have to file a gift tax return. The IRS requires that to qualify as a gift, the property (usually cash in this case) must be given without expecting to receive something of at least equal value in return.
It is reasonable to argue that these gifts are not lost wages or wage replacement — nor are they income to the company and then payroll to the staff. These are people who have simply lost their jobs through no fault of their own or the business owner’s, and we’ve become friends with these folks through the years and want to help. These are the people who’ve poured us that soothing cup of herbal tea during rough times, or a shot of tequila during rougher ones. They’ve taught us to mold clay, or taught our children music. We’ve gotten to know and love them and we want to help. That’s a gift. So here are a few “tips” for making sure your tips don’t inadvertently become taxable income to your business or your staff.
1) Make sure these are in fact gifts. No fair disguising actual sales of product or services, or trades. Don’t mess this up for everyone else.
2) Use GoFundMe, rather than an existing business method of collecting payments — not Paypal, Square, Stripe or anything else. The reason is that these businesses are required by law to send a 1099-K to you and the IRS, because the government is correct to assume that in general, those funds should be considered income. Whereas, the money in this case isn’t “income” to the business, so we need to make that clear by using GoFundMe, which is set up for arms-length gifting.
3) Secondly, use your personal name and your personal bank account for this — do not run it through the business and do not use the business EIN/ Tax ID. Again, we’re trying to make it clear that this money is just a gift to the employees out of the goodness of everyone’s heart, and not a replacement of wages that would be taxable via payroll.
4) Which brings me to another important point: do not run this through payroll. Think about it: all that is happening is that a disinterested but kind third party (a plain old nice human such as myself) decides to gift money to your staff because I feel bad that they are out of work. So I give you some money, since you’re a trustworthy person who has everyone’s contact info and can fairly distribute it. And you, personally, then take the funds and hand them out. No business account, no payroll, just an altruistic gift that you are passing along as the middle man.
There are certainly situations out there and arguments to be made that in some circumstances, these funds would qualify as income to the business, and then the payments would need to be made to employees via payroll. This is not a comprehensive post designed to address all of those alternative contexts — and should not be relied on as tax advice. Please consult with your CPA or attorney for specific questions about your own business.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
