Thursday, April 30, 2020

Corporate Expenses Covered by Officers or Shareholders.



If you play a major role in a closely-held corporation and take on corporate expenses personally, you may wonder if such expenses paid on behalf of the corporation will be deductible.  These costs may wind up nondeductible both by the officer and the corporation unless proper steps are taken.
In general, you can't deduct an expense you incur on behalf of your corporation, even if it is a legitimate "trade or business" expense and even where the corporation is financially troubled. This is because a taxpayer can only deduct expenses that are his own. And since your corporation's legal existence as a separate entity must be respected, the corporation's costs aren't yours and thus can't be deducted even if you in fact pay them. What's more, the corporation won't be able to deduct them either because it didn't pay them itself. Therefore, it shouldn't be a practice of a corporation's officers or major shareholders to cover corporate costs.
On the other hand, if a corporate executive incurs costs which relate to an essential part of his duties as an executive they may be deductible as ordinary and necessary expenses related to his "trade or business" of being an executive. If you wish to set up an arrangement providing for payments to you and safeguarding their deductibility, a provision should be included in your employment contract with the corporation stating the types of expenses which are part of your duties and authorizing you to incur them. For example, you may be authorized to attend out of town business conferences on the corporation's behalf at your personal expense.
Alternatively, to avoid the complete loss of any deductions by both yourself and the corporation, an arrangement should be in place under which the corporation reimburses you for the expenses you incur. This will at least allow the corporation to deduct the amount of the reimbursement.
Please contact us if you would like assistance regarding any of the above or if you wish to discuss any of these matters further.

Monday, April 6, 2020

Part 3 of 3 - Federal and State Emergency Small Business Programs


The chart below compares grant and loan programs available at the state level for Illinois and Indiana businesses.  Please contact us with any questions.  This information is current as of 4/4/2020.
 
 Small Business Programs3.xlsx

Program/ Benefit

Illinois Small Business Emergency Loan Fund

Downstate Small Business Stabilization Program

Indiana Rapid Response Loan Fund

Type

Loan

Grant

Loan

Purpose

Inexpensive financing opportunity for business affected by Coronavirus

Quick relief for businesses affected by Coronavirus

Inexpensive financing opportunity for business affected by Coronavirus

Amount

Up to $50,000

Up to $25,000

Up to $25,000

Eligibility/ Eligible Expenses

Working Capital; 50% of loan must be used for payroll

Working Capital; costs incurred after date of grant award

Wages, insurance premiums, other expenses

Applicable Dates

4/1/2020

Until funds are exhausted

Restrictions

Proof of Urgent Need required

Other Info

Low interest loan of up to

$50,000 with 5 year repayment period, 6 month payment deferral, 3% interest rate

Grant of up to $25,000 per business based on 60 days of working capital

Loan up to $25,000 at 3.75% rate

Eligible

Business outside City of

Under 50 employees, not

Not agricultural enterprises,

Businesses

Chicago, Under 50 employees

located in an ineligible

religious or charitable

and $3 M in revenue; Must

community or county; must

organizations or businesses with

experience at least 25% decrease

demonstrate urgent need in

1/3 or more of revenue from

in revenues; Not available for

relation to the COVID-19

gambling activities

non-profits or farms

emergency and commit to

retaining jobs

Employee limits

50

50

Self Employed?

Yes, but must employ at least one person other than the owner

How to Apply

https://app.smartsheet.com/b/fo

In conjunction with local

https://www.response.indycham

rm/c75a9b0557564704a73a0afc

government (city, village,

ber.com/loans

1eba81b2

county)

https://www2.illinois.gov/dceo/

CommunityServices/Community

Infrastructure/Pages/DownstateS

mBizStabilizaition.aspx

Part 2 of 3 - Federal and State Emergency Small Business Programs


The chart below compares payroll tax credits and deferral options available at the federal level.  Please contact us with any questions.  This information is current as of 4/4/2020.
 
Small Business Programs3.xlsx

Program/ Benefit

Payroll Retention Credit

Payroll Delayed Deposit

Sick Pay

Emergency FMLA

Type

Payroll Tax Credit

Deferred payment

Payroll Tax Credit

Payroll Tax Credit

Purpose

Employer relief for keeping employees on payroll when business if fully or partially suspended

Employer relief for keeping employees on payroll

Mandatory pay protection for potentially ill employees (ill, quarantined, or seeking diagnosis) and caregivers (of ill, quarantined, or seeking diagnosis, or child(ren) whose school/place of care is unavailable)

Mandatory pay protection for employees who are caregivers of child(ren) whose school/place of care is unavailable due to COVID-19

Amount

50% of wages (including allocable health plan expenses) per employee,

$5,000 max credit per employee

Employer's share of Social Security, no dollar limits

80 hours @ full pay, Max $511 daily wage ($5,110 total max), or 80 hours @ 2/3 pay, max $200 daily wage ($2,000 total max) if reason is for caregiving; also allocable health plan costs

10 weeks @ 2/3 pay, Max $200 daily wage ($10,000 total max) (first 2 weeks of 12 weeks unpaid under this program); also allocable health plan costs

Eligibility/ Eligible Expenses

Wages & health plan expenses

Pay 50% each by 12/31/2021 and

12/31/2022

Wages & health plan costs

Wages & health plan costs; must have been employed for 30 days

Applicable Dates

3/13/2020 - 12/31/2020

3/27/2020 - 12/31/2020

4/1/2020 - 12/31/2020

4/1/2020 - 12/31/2020

Restrictions

PPP Loans disqualify credit

PPP Loans disqualify benefit

Other Info

No duplication of Sick Pay or FMLA pay used for those credits; No credit available for any period for which employer is allowed a Work Opportunity Credit for the employee

Employer SS tax exempt (not Employee SS tax exempt), Medicare tax applies but employer portion is refundable under credit,

Mandatory benefit Employer must post notice of availability

Employer SS tax exempt (not Employee SS tax exempt), Medicare tax applies but employer portion is refundable under credit,

Mandatory benefit (12 weeks allowed with last 10 being paid), Employer must post notice of availability

Eligible Businesses

Operations partially or fully suspended as a result of government order limiting commerce, travel or group meetings, or 50% reduction in quarterly receipts from prior year

All businesses

Required for all business with 500 employees or less

Required for all business with 500 employees or less; potential exemption for businesses with 50 or fewer employees

Employee limits

100 or less no rules,

>100 limits apply

None

500

500

Self Employed?

No

Yes

Yes

Yes

How to Apply

On payroll return or IRS Form 7200

On payroll return or IRS Form 7200

On payroll return or IRS Form 7200

Comments

Payroll tax credit is considered income to the employer

Payroll tax credit is considered income to the employer

Part 1 of 3 - Federal and State Emergency Small Business Programs


The chart below compares grant and loan programs available at the federal level.  Please contact us with any questions.  This information is current as of 4/4/2020.
Small Business Programs3.xlsx
Program/ Benefit
SBA Grant
SBA EIDL
Loan
SBA PPP
Loan
Type
Grant
Loan
Forgivable Loan
Purpose
Quick relief for businesses affected by Coronavirus
Inexpensive financing opportunity for business affected by Coronavirus
Employer relief for keeping employees on payroll
Amount
$10,000
Up to $2 million
2.5 times average monthly payroll costs, up to $10 million
($100,000 wage limit)
Eligibility/ Eligible Expenses
Payroll, COGS, Rent, Mortgage
Same as SBA Grants and more
Payroll, rent, utilities, mortgage interest
Applicable Dates
1/31/2020 - 12/31/2020
1/31/2020 - 12/31/2020
2/15/2020 - 6/30/2020
Restrictions
Reduces any EIDL or PPP loan forgiveness
Cannot use for the same purpose as the PPP loan (same expenses)
Cannot claim payroll expenses that received credit under other programs
Other Info
Emergency advance, funded within 3 days and need not be repaid (see restrictions).
12 month payment deferral, up to 30 year term at 3.75% rate (2.75% for NFP). No personal guarantee for loans under
$200,000; May refinance to PPP loan; approval based on credit score
6 month payment deferral, up to 2 year term at 1% rate. Non- taxable forgiveness if used for specified purposes. 75% or more must be used for payroll costs. Forgiveness reduction if certain employee counts are not maintained.
Eligible Businesses
All businesses including rentals and private NFPs; Must have been in operation on 1/31/2020
All businesses including rentals and private NFPs; Must have been in operation on 1/31/2020
All small businesses, including 501(c)(3) NFPs; Must have been in operation on 2/15/2020
Employee limits
500
500
500
Self Employed?
Yes
Yes
Yes
How to Apply
https://covid19relief.sba.gov/#/
https://covid19relief.sba.gov/#/
SBA Lender
Comments
Apply in conjunction with Loan application. MUST check box on loan application indicating interest in grant.
Quick, easy to complete application. Not required to accept loan even if offered.