Financial

COVID-19 Tax and Financial Updates 04-03-2020

Here are the latest updates and some may have already changed after this was written:

Tax Updates

  • Tax deadlines: both New Jersey and New York have finally extended the tax deadline from April 15th to July 15th.
  • CARES Act economic impact payments: payments will begin in the next three weeks and will be distributed automatically. Who is eligible?
    • Tax filers with adjusted gross income up to $75,000 for individuals and up to $150,000 for married couples filing joint returns will receive the full payment. For filers with income above those amounts, the payment amount is reduced by $5 for each $100 above the $75,000/$150,000 thresholds. Single filers with income exceeding $99,000 and $198,000 for joint filers with no children are not eligible. Social Security recipients and railroad retirees who are otherwise not required to file a tax return are also eligible and will not be required to file a return.
    • Eligible taxpayers who filed tax returns for either 2019 or 2018 will automatically receive an economic impact payment of up to $1,200 for individuals or $2,400 for married couples and up to $500 for each qualifying child.

Paycheck Protection Program for Small Businesses

Here is a summary of the program and you can start applying for this as of today, April 3rd. You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Remember, guidance is changing on an almost daily basis so this information can change and probably already has.

  • Overview: This program, also known as PPP provides funds to pay for payroll costs, interest on mortgages, rent, and utilities. The amount of the loan is generally calculated by multiplying 2.5 by your average monthly payroll costs.
  • Eligibility: Small businesses with 500 or fewer employees—including nonprofits, veterans organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors – are eligible. Businesses with more than 500 employees are eligible in certain industries
  • Forgiveness: Loan funds may be fully forgiven if used to pay for payroll costs, interest on mortgages, rent, and utilities within 8 weeks beginning on the date of the loan. 75% of the funds must be used for payroll to be forgiven.
  • Headcount: You must maintain or quickly rehire your employees and also maintain salary levels. Forgiveness will be reduced if headcount declines or if salaries and wages decrease.
  • Maturity: The loan has a maturity of 2 years and an interest rate of 1%.
  • The loan does not have a personal guarantee.
  • An application form is attached to see more details of what is required.

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COVID-19 Tax and Financial Updates 03-27-2020

There have been a lot of tax and financial announcements due to the COVID-19 pandemic. Here are some highlights of updates as of this writing:

Tax Updates

  • Tax deadlines: The Treasury Secretary announce that the tax deadline for all businesses and individuals is delayed from April 15th to July 15th. Additionally, they will be able to make payments without interest or penalties. This also applies to the first quarter 2020 estimated income tax payment that is due on 4/15/20, however it does not postpone the second quarter estimated tax payment due on 6/15/20. Yes, that is strange, but we are living in unique times. IRA contributions for the year 2019 can be made until 7/15/20. So far, there isn’t any news from the State of NJ.
  • Existing Installment Agreements: For taxpayers under an existing IRS installment agreement, payments due between April 1 and July 15, 2020 are suspended. Taxpayers who are currently unable to comply with the terms of an Installment Payment Agreement, including a Direct Deposit Installment Agreement, may suspend payments during this period if they prefer. Furthermore, the IRS will not default any Installment Agreements during this period. By law, interest will continue to accrue on any unpaid balances.

Families First Coronavirus Response Act: Employee Paid Leave Rights

Generally, the Act provides that employees of covered employers are eligible for:

  • Two weeks (up to 80 hours) of paid sick leave at the employee’s regular rate of pay where the employee is unable to work because the employee is quarantined (pursuant to Federal, State, or local government order or advice of a health care provider), and/or experiencing COVID-19 symptoms and seeking a medical diagnosis; or
  • Two weeks (up to 80 hours) of paid sick leave at two-thirds the employee’s regular rate of pay because the employee is unable to work because of a bona fide need to care for an individual subject to quarantine (pursuant to Federal, State, or local government order or advice of a health care provider), or to care for a child (under 18 years of age) whose school or child care provider is closed or unavailable for reasons related to COVID-19, and/or the employee is experiencing a substantially similar condition as specified by the Secretary of Health and Human Services, in consultation with the Secretaries of the Treasury and Labor; and
  • Up to an additional 10 weeks of paid expanded family and medical leave at two thirds the employee’s regular rate of pay where an employee, who has been employed for at least 30 calendar days, is unable to work due to a bona fide need for leave to care for a child whose school or child care provider is closed or unavailable for reasons related to COVID-19.

Covered Employers: The paid sick leave and expanded family and medical leave provisions of the FFCRA apply to certain public employers, and private employers with fewer than 500 employees.

Eligible Employees: All employees of covered employers are eligible for two weeks of paid sick time for specified reasons related to COVID-19. Employees employed for at least 30 days are eligible for up to an additional 10 weeks of paid family leave to care for a child under certain circumstances related to COVID-19.

Qualifying Reasons for Leave: Under the FFCRA, an employee qualifies for paid sick time if the employee is unable to work (or unable to telework) due to a need for leave because the employee:

  1. is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
  2. has been advised by a health care provider to self-quarantine related to COVID-19;
  3. is experiencing COVID-19 symptoms and is seeking a medical diagnosis;
  4. is caring for an individual subject to an order described in (1) or self-quarantine as described in (2);
  5. is caring for a child whose school or place of care is closed (or child care provider is unavailable) for reasons related to COVID-19; or
  6. is experiencing any other substantially-similar condition specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and

Important points for employers:

  • The effective date of the Families First Coronavirus Response Act is April 1, 2020 through December 31, 2020.
  • The law is intended to be neutral for employers. Employer pays benefits and recovers the cost of such leave through a refundable, dollar-for-dollar payroll tax credit (up to certain dollar limits)
  • Employer receives 100% reimbursement for paid leave and certain health insurance costs, but
  • the amount is includible in income
  • Paid leave itself is exempt from employment taxes, and if the employer continues the employee’s health insurance coverage while he/she is out on leave, then the credit is grossed up to cover this additional expense

SBA Loans

The SBA is offering low-interest loans of up to $2 million with a low interest rate of 3.75% and long repayment terms. The SBA is waiving the “credit elsewhere” clause. The process should take 2 to 3 weeks and the website to go to is:

https://disasterloan.sba.gov/ela

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Tax and Financial Updates

There have been a lot of tax and financial announcements due to the COVID-19 pandemic. Here are some tax, unemployment and loan updates.

Tax Filing and Payment Due Dates Extended

The Treasury Secretary announce that the tax deadline for all businesses and individuals is delayed from April 15th to July 15th. Additionally, they will be able to make payments without interest or penalties. Initially, the extension was only for paying your taxes, but now it is for both filing and paying. So far, there isn’t any news from the State of NJ

Unemployment

If you were laid off, then do not hesitate to collect unemployment through your state’s Department of Labor website, even if it is temporary. Be aware that some of the websites have crashed due to the high volume of claimants. Also, for business owners, such as officers who own 5% or more of a corporation, you generally cannot collect unemployment.

SBA Loans

The SBA will offer low-interest loans of up to $2 million with low interest rates and long repayment terms. To qualify, you must show: a lack of working capital and loss of revenue related to COVID-19, financing is not available elsewhere (i.e., a rejection from your bank that you are currently using), your state’s governor will need to request that the Disaster Assistance Loans be open to their state, and meet the lending requirements.

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I Took the Day Off and You Should Too

Technology is absolutely wonderful at times. This is one of those times because I took the day off today, but still didn’t miss my goal of writing one post per week. Everyone needs a day off, a week off, or even a month off and here are 5 reasons why:

Rest and Recuperate

After working intensely or longer than normal hours everyone needs to take a break. The day after tax season is always a day off for myself and my staff, and I like to take at least a few additional days off after that. It’s hard to take a family vacation at this time with the kids being in school, but I get to see them more though.

Spend Time with Family

It’s good to be able to spend some additional time with your family and not being at work all day. You don’t have to fight the commute, come home tired, or still have stress resting on your shoulders when you come home. Most likely you are just a little more relaxed.

Complete a Small Project

Maybe there is a project that needs to be tackled that you haven’t been able to get to. For me, the list seems endless, but it feels good once a project is finished. Be careful if the project is too large, otherwise it will take away from resting and recuperating.

Reflect and Think

When I am able to relax, it makes it easier to reflect on different aspects of my life and the direction of how things are going. Also, ideas seem to flow more smoothly when not under pressure.

Be Thankful and Grateful

Be thankful that you get to have a day off and grateful for all that you have. A little gratitude can help to put things into perspective.

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Wanna Be More Comfortable Financially?

Isn’t this what everyone says, that they want to be more comfortable financially? There are two ironies that are common with this thought, but you can do something about it.

Scenario #1

In this scenario you are making a good living, saving plenty, built up a good portfolio of assets, and have little to no debts. You should feel secure and comfortable, but yet you do not. Due to the fact that finances are very, very emotions based would be the reason for this, but I’ll let the psychologists figure out the exact reason. Whatever the reason may be, there may be two solutions to help change your perspective in this case: be thankful for your strong finances and be more generous with your giving. Remember, you can’t take it with you at the end, and there are others that can use some help right now.

Scenario #2

This is probably a more common scenario, but also relates to everything else in life. You need to make more money, save more, pay off your debts, and make your finances more secure and comfortable. Ironically, every action you take is in direct contradiction to obtaining healthier finances, from impulsive spending, failing to save, purchasing on credit, and a lack of serious actions to make more money. Maybe the reason is because you’re getting by, although not in a financially healthy manner, or maybe you feel like you are being restricted if you save a purchase for another day. Either way, it’s not working out well and you need to make changes. Even if the changes are very, very small changes, such as saving just 1% of your income, you will be surprised by how effective this can be to get the momentum going.

Last Thought

I’m not sure which scenario is better or which one is easier to fix. Would you rather think you are not financially comfortable, but really are, or not be comfortable, but prevent yourself from getting there?

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Why is Sales Such a Bad Word?

Everyone is trying to sell something, whether we realize it or not. Even employees are trying to sell themselves to get a job and keep moving up the ladder. Although selling has a bad reputation, it is more about intent, which makes it either good or bad.

The Bad Side of Sales

Selling a service or product that is unnecessary, unhelpful, damaging, or just not needed are the worst forms of selling. The “not needed “ product can be very subjective though, because no one really needs a Dodge Challenger Hellcat, but on the other hand, maybe it is exactly what is needed! On a serious note, a common example of selling something that is unnecessary can be a professional telling you that you need to replace your entire heating system, when it can easily be fully repaired for a fraction of the cost. Another example can be a warranty that is completely useless. The list goes on and every business that sells or provides a service should try to avoid selling in this manner.

The Good Side of Sales

If you are selling something that is in the best interest of your client, customer, or patient, then you are selling correctly. Put their interests before your wallet and you have nothing to worry about. This is the simplest test to alleviate your fears of being a sales person.

Don’t Over Think It

Don’t think about it too much. Everyone is selling something to some degree, whether we recognize it or not.

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Are You Keeping Track of the Right Metrics?

Financial information tends to bore most people except for accountants, accountants, and accountants. Even though the thought of looking through and analyzing numbers may scare you, there are some metrics that drive your financial results and should be measured carefully. They are usually more exciting to keep track of because they can also help predict your results. Here are some examples:

Customer Metrics

Volume: Examples of customer metrics can include: the number of patients, clients, or customers seen/visits per day, week, or month. An increase in this number will increase your sales, however, there may be a delay in actual cash received.

Sales per customer: Are your customers purchasing more or less from you? An easy way to increase sales is to increase the amount of sales to each customer.

Multiple Location Metrics

Same store sales or sales by location: If you have multiple locations, you must keep track of your sales by location. Ideally, you want to keep financials by location, but sales per location is a good starting point. You should compare the sales versus the same period last year and also with other locations.

Net profit by location: It’s great if your sales are doing well in one location, but if the profitability is poor, then you need to know this to make improvements or to shut down that location. Time and resources need to be spent at locations that will achieve the highest return.

Sales or Billings per Employee or by Employee

Sales results: Which employees are performing well, and which are not? What if you operate a real estate office and do not know which agents are your top performers and which are not performing?

Billings: For non-sales positions, especially professional services firms, a crucial number is billings per employee. A low amount may mean that you are over staffed or have inefficient operations. It is also critical to know billings per individual employee.

Leads & Sales Generation

# of leads: Are you receiving more inquiries or less inquiries compared to last month or last year at this time? An increase in leads should result in an increase of sales, but this is just the starting point.

Appointments scheduled: What is the percentage of inquiries that set appointments? You need to make sure that you are able to schedule appointments from your leads.

Appointments closed: A high closing ratio is the ultimate goal and a sign of sales productivity.

Customer acquisition cost: Ideally, you want to obtain customers at the lowest cost possible with the least amount of effort. The longer you retain a customer then the more you can spend trying to acquire them, but if you spend too much money on obtaining one-time customers then your profitability will suffer greatly.

The Metrics are Endless

There is an endless amount of metrics, and each industry has their own set of metrics that are measured, but sometimes metrics can be borrowed from outside your industry to make your own business more profitable. Review your situation to see which metrics will have the most impact to keep your success moving forward.

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Should Married Couples Keep Their Money in Separate Accounts?

It’s not uncommon for married couples to keep their money in separate accounts, specifically checking accounts. With retirement accounts, each spouse must have their money in a separate account, including IRA’s and 401k’s, but is it ideal for a married couple to have separate checking accounts vs. a joint account, and why is this important?

Exceptions

There are some situations where funds must be kept separate, such as the case of a spouse with some sort of addiction (spending, gambling, substance) or mental issue, but this must be done to protect the family. I’m not referring to this situation.

Business Analogy

Can you imagine starting a business with a partner and then telling them that there needs to be separate accounts for the business that they bring in vs. the business that you bring in? In some cases, you may be able to know this information, but it can start to get grey very quickly. If everything was separate, then how are you partners? Who pays which bills and when? Should each partner know what the other is doing financially? I have never heard of a business that has done this and if they have, then I would like to know how it worked out. On a practical level, it is no longer a partnership. If a husband and wife have separate accounts then how can they behave like partners, financially speaking?

Unity

Having a joint checking account forces both spouses to work together and communicate about finances. Finances permeate through all aspects of a family from simple matters to more complex matters. A joint checking account keeps both spouses on the same page, and helps to keep them accountable to each other. It also helps to minimize selfishness and sets a focus on the family. With separate accounts, you can easily spend money on your own needs instead of putting the needs of your spouse and family first.

Asset protection

Do you want to know how to protect your assets in a marriage? Protect the health of the marriage so you do not have to worry about divorce. Practically speaking, what are you really protecting if you have separate checking accounts? The point of a checking account is not to save money, but it is used to pay for the operating expenses of the family.

Interdependence vs. Independence

It’s great to be independent, but interdependence is a more mature, evolved, and higher level of thinking. Independence states that “I” am important while interdependence shows that “we” are important. Which would you rather be?

Give it a Test Drive

If you are currently keeping your checking accounts separate, then why not give a joint checking account a chance? Try it out for 3 – 6 months and see if it changes the nature of your relationship. If they get better then let me know, but if things get worse, then don’t tell your spouse that you got the idea from this article.

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Do You Make a Good Living and are Actually Poor? You Probably Need to Stop Doing These 3 Things.

We spend so much of our time working, working, and then working some more to make a good living, but do you have anything to show for it? I don’t mean showing off, but rather having a strong financial foundation with minimal debts, savings, investments, and other valuable assets. If not, then keep reading . . .

#1: Stop Justifying Every Expense

Expenses can always be justified and rationalized even when they aren’t. It’s okay to spend money, but it should be in line with your economic situation. The funny thing is that as your income increases, your spending almost always increases in tandem, and sometimes even more than the increase of income. Relax, and spend a little slower while saving more. Remember, the goal of savings is to support yourself and your family for emergencies, large expenses such as college, and when you eventually stop working and retire.

Step #2: Caring What Others Think

Guess what? No one cares about your material possessions except on a superficial level. Sometimes people will briefly talk about you because you drive an older car (even though it may be a luxury car that is fully paid for), live in an older house, have crabgrass growing on your lawn (unfortunately it dies in the winter, otherwise it is nice and thick in my opinion), take non-Disney vacations (aren’t you exhausted afterwards anyway?), and don’t wear Uggs or brand names on your shirts and jeans (I like that only those rare individuals with fine taste in men’s shoes appreciate the awfully expensive shoes I wear though). The bottom line is not to stretch yourself to seek status or to impress others, but to spend according to your state in life.

Step #3: Saving Last

This is one of those times that math doesn’t make sense. You need to save first otherwise there will be no savings left over. You would think that the order doesn’t matter, but is does matter in the real world. Also, save up on a percentage basis, so that when your income grows, your savings grow also.

Summing it Up

These bad habits are prevalent among those that earn $50k, $500k, or more. Bad habits will follow you through your life regardless of where you are economically. Once you recognize this, hopefully you will be able to change course instead of feeling like you are always running and getting nowhere.

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How to Destroy Your Business Success in 6 Steps

Sometimes to be successful means to avoid doing the things that will destroy your success. It’s easy to go down the wrong path and it’s important to be aware of this.

Step #1: Saddling Your Business with Debt

Conventional wisdom states that there is smart debt vs. dumb debt or a similar description of two kinds of debt. Although there is some truth to this, the bottom line is that large amounts of debt will cause a huge handicap to your business, especially a start-up. Even if you are doing well it will not feel like it when you have massive debt payments each month or sometimes on a daily or weekly basis if you took out a predatory lender loan. When you have easy access to large amounts of debt it numbs your sense of being financially cautious, prudence, and allows you to spend your money on things that can easily be justified but are not necessary.

Step #2: Poor People Management

See what happens if you constantly treat your employees, vendors, and customers disrespectfully. The end result will be high turnover, sabotage, lack of a sense of shared purpose, losing customers, and everything else negative. It is amazing to see how little attention is paid to the management of people in a poor performing business.

Step #3: Over Working Yourself

There are times when you need to work more or work more rigorously, but if done for too long, then your productivity will decline, decision making becomes worse, and you may find yourself in the hospital for stress induced health reasons.

Step #4: Not Listening to the Right Advisors

Unemployed Uncle Jimmy with a string of failed businesses will not provide you with the advice you need, and if he does provide you with advice, then do the opposite. Or, which is also very commonplace, is to seek the advice of the wrong professional. Make sure the professional that you confide in is an expert with the advice you are looking for.

Step #5: Personal Issues

This is somewhat related to step #2, but more on a personal level. If you are going through difficult times on a personal level, then this will ultimately translate into poor business performance.  A common example is taking care of a sick family member that needs you. If you need to focus more fully on your family situation, then delay starting a business, or for an existing business try to delegate more of your business responsibilities to trusted employees.

Step #6: Ignore Marketing and Sales

Many years ago, I met with a brand new business owner to discuss his business and try to help him out. During our discussion, I asked what he was doing for marketing, and he said that he did very little because he didn’t want to spend money on marketing because marketing costs money. I’m not sure of my exact reply, but he was no longer in business within a few months’ time.

Summing it Up

Some of these steps may seem obvious, but they are common due to the fact that it is hard to take a step back, access a situation, swallow your pride, and say to yourself, “Hey, I need some help because I am not always right.” We should probably all say that more often.

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