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Coronavirus Aid Relief and Economic Security (CARES) Act Explained

CARES Act ExplainedA giant stimulus package has been signed into law by the President. The Coronavirus Aid Relief and Economic Security (CARES) Act brings a $2 Trillion dollar shot in the arm to the American economy, reeling from the devastating impact of the COVID-19 (coronavirus) pandemic sweeping the globe.   

The CARES Act contains various broad-reaching provisions, including direct payments to Americans, expansion of the unemployment insurance program and various other provisions to provide much-needed liquidity to our economy. While GJM will be providing future information on many aspects of this act, we feel it’s important to share some key elements of the legislation as it existed once it passed in the U.S. Senate.

SBA Loan Program

Under this Act and as part of Keeping American Workers Paid and Employed Division A, the Small Business Administration (SBA) will administer a modified SBA 7(a) forgivable loan program to fund loans to Companies to keep their employees in lieu of massive layoffs and other working capital needs. This program is called the Paycheck Protection Program. In the Senate Bill any qualified SBA 7(a) lender may elect to participate in this program. Our basic understanding of the bill that was passed by the Senate is as follows:

  • A borrower can get an SBA 7(a) forgivable loan or a direct SBA disaster loan, but not both.
  • Increased eligibility for certain small businesses that employ less than 500 employees per physical location of the business.
  • Loans can be no more than $10,000,000 calculated on a formula of the average monthly payroll costs times 2.5.
  • The loans will have a maximum maturity of 10 years.
  • Allowable uses of the loan are to fund a Company’s payroll costs, group health insurance, interest on mortgage payments, rent, utilities and interest on other debt obligations incurred before the covered period.
  • Good faith certification from the eligible recipient that the uncertainty of the economic conditions make the loan request necessary to support the ongoing operations of the recipient, acknowledge that the funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments and utility payments.
  • SBA will waive the guarantee fee required for a 7A loan.
  • SBA will eliminate the requirement that a small business concern is unable to obtain credit elsewhere.
  • Provide a process to allow borrowers to be eligible for loan forgiveness in amount equal to their payroll costs, health benefits, retirement benefits, interest portion of mortgage payments, rent and utility costs for the eight-week period immediately following when the loan proceeds are received. The amount of the debt forgiveness will be reduced proportionally by the number of employees laid off during this time.
  • Any amount forgiven that would normally be included in gross income shall be excluded from gross income.

It’s important to remember that the final legislation isn’t in place. The law may change upon Congress’s process of passing the final law, but many financial intuitions are preparing themselves to accept your applications.  It is our understanding that the application process will be streamlined and that the intentions are to fund these loans as quickly as possible.

Here are some other key provisions in the CARES Act:

Employee Retention Credit:

The CARES Act establishes an employee retention credit for businesses that have been forced to shutdown by the COVID-19 pandemic.  

  • Eligible employers closed or partially closed during the coronavirus pandemic can take a credit against payroll taxes equal to 50% of qualified wages up to $10,000 in wages and health benefits for each employee
  • Credit allowed against employer FICA taxes
  • Employers with greater than 100 employees
    • Qualifying wage amounts between March 12, 2020 and before December 31, 2020 when not able to provide services due to closed or partially closed business
  • Employers with less than 100 employees
    • All wages paid between March 12, 2020 and before December 31, 2020 qualify for credit
  • If taking loans under SBA 7(a) program, retention credit is not allowable

Retirement Plans impact:

The act provides taxpayers a break on penalties for early distributions from retirement plans related to the pandemic.  

  • Take up to $100,000 in distributions from plans for pandemic-related distributions without 10% penalty for early distribution
  • Bill allows distribution income to be taxed over three years or repaid back to the plan over three years with no taxation
  • Suspends RMD (required minimum distributions) for 2020

Payroll Tax Delay:

  • Delays payment of 2020 employer payroll taxes (the 6.2% portion) with 50% due December 31, 2021 and the remainder due December 31, 2022
  • Same delayed payment schedule for self-employment taxes
  • If taking loans under SBA 7(a) program, payroll tax delay is not allowable

Net Operating Losses (NOLs):

  •  2018, 2019 and 2020 net operating losses can elect a five-year carryback

Interest Limitation

  • Sec. 163(j) changes to adjusted taxable income percentage from 30% to 50%.  Eligible for 2019 and 2020 taxes.

Corporate Alternative Minimum Tax (AMT):

  •  The bill allows for refundable credit for 2018 tax year.

 Qualified Improvement Property

  • Technical corrections for previous tax reform bill that now allows for depreciation to be taken over 15 years for qualified improvement property instead of 39 years.

Individual Rebates

  • Individuals will receive a tax credit of $1,200 ($2,400 for joint filers) plus $500 for each qualifying child.
  • The credit is phased out for taxpayers with adjusted gross income (AGI) above $150,000 (for joint filers), $112,500 (for heads of household), and $75,000 for other individuals.

We are here…

Gilmore Jasion Mahler professionals are reviewing the law and having discussions with clients about the impact. If you have yet to connect with your GJM team, now is the time to do so and ensure you’re protecting your business and your employees as much as possible from the financial fallout associated with the pandemic. We have also created a GJM COVID-19 Resource Center where you can find updates and links as your business navigates the pandemic.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.

GJM COVID-19 Update & Resources

GJM COVID-19 Update and ResourcesAs our country faces the COVID-19 crisis we want to take a moment to bring you up to date on some of the steps Gilmore Jasion Mahler is taking as a result. We would also like to share some information on some resources for businesses, should you need them.

Ohio Governor Mike DeWine has announced a loan program to provide economic assistance to companies due to the slowing down of business in Ohio. It may be available to help your business provide funding for payroll, past due accounts payable and other working capital needs. Typically, such a loan program will have a very low interest rate and up to 30 years repayment schedule. Also, in the unfortunate event that furloughs or layoffs are necessary during these challenging times, impacted employees should qualify for immediate unemployment compensation relief.

Here are some helpful links for businesses seeking information in both Ohio and Michigan.

http://jfs.ohio.gov/ouio/CoronavirusAndUI.stm

https://www.sba.gov/page/guidance-businesses-employers-plan-respond-coronavirus-disease-2019-covid-19

https://www.michigan.gov/coronavirus/0,9753,7-406-98178_98179---,00.html

While there has been talk of the IRS possibly moving back the April 15 tax deadline, as of now there is no official word on if that may happen so GJM is currently working under the assumption there is no delay in the tax deadline. We expect to receive further guidance from the US Department of the Treasury this week and will promptly let everyone know.

As we are writing this, our offices remain open, though we have encouraged our staff to work from home if possible for the next three weeks. Should you need to drop off tax documents, GJM offices will be open during our normal business hours for you to do so.

We will continue to monitor COVID-19 developments here in Northwest Ohio and around the nation and share further information with our clients and partners as needed. Please feel free to reach out to your GJM team with any questions or concerns.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting services and provides comprehensive services including assurance, business advisory, tax, risk advisory and healthcare management. The firm's professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.

Understanding Lean Six Sigma

Six Sigma Lean GJMAny business owner will tell you that quality assurance is critical to success. Mistakes or defects in the design or production processes can be costly in terms of recalls or customer dissatisfaction and can also leave your business vulnerable to liability concerns. Small mistakes can mar reputations – and the internet is an elephant that never forgets. In this business age, quality assurance is more crucial than ever.

It’s essential to have ingrained processes regarding quality assurance and measurement in order to avoid error. One of the most effective and data-driven of these measurement processes is Lean Six Sigma, a tool that can be used across industries and companies. In fact, our own firm has embraced Six Sigma as we constantly look to improve and streamline our processes at Gilmore Jasion Mahler (GJM).

In the first of a three-part series on Lean Six Sigma, we’ll explore a definition of the methodology as well as its main tenets. You’ll also come away with a good handle on what Six Sigma is all about and how it may fit in with your business.

What Is Lean Six Sigma?

At its core, Lean Six Sigma is a management practice that allows companies to leverage data to virtually eliminate defects within business processes. To be Six Sigma qualified, a company’s defect rate must be less than 3.4 per million produced.

Six Sigma has the potential for application in virtually any capacity and in any business, from honing a business strategy and creating benchmarks to goal setting and statistical measurement.

A Quick History

The Six Sigma certification was developed by Mikel Harry and Bill Smith of Motorola, a company that was among the first to receive the prestigious Malcolm Baldrige Award. As the concept has evolved, it has become a multi-dimensional approach that helps drive businesses to:

  • Improve processes
  • Decrease defects
  • Reduce variability within processes
  • Lower costs
  • Increase customer satisfaction
  • Increase profits

The Stages of Six Sigma

The phases of Six Sigma can be explained in the acronym DMAIC: Define, Measure, Analyze, Improve, and Control. This acronym is applicable to both operational and organizational issues, and businesses of all types and sizes.

  • First, a business defines a problem that needs to be resolved, as well as how it has affected the organization.
  • Second, a business uses various processes to measure the problem through mapping, data gathering, and the validation of the data measures.
  • Next, an analysis of the data is considered the heart of the Six Sigma philosophy, as it helps determine the root cause of the problem, which will guide the steps ahead.
  • After a complete analysis, a business takes steps to improve their processes, using several suggested strategies.
  • Finally, control focuses on continuous quality improvement through monitoring and reporting.

The Lean Six Sigma methodology has helped businesses of all types, including GJM, to identify and eliminate errors in business processes. Next in the series, we will learn more about its benefits and applications. We’ll also share some specifics on how GJM has applied Six Sigma principles and seen results.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.

Hannah Mankowski Joins GJM

Hannah Mankowski GJMHannah Mankowski recently came on board with GJM as an Audit Associate. Here's a chance to get to know her a bit as she settles into her new role. Welcome, Hannah!

When did you join GJM? November 2019

What do you like best about accounting? I like that everything fits together and can be figured out. Working through a problem and being able to deliver what you said you were going to deliver and add value is very satisfying.  

Are you from the Toledo area originally? If not, where are you from? I am originally from Plainwell, Michigan (near Kalamazoo). Went to BGSU for college and decided to stay in the area.

What do you like about living in Northwest Ohio? I like living close to BG and Cedar Point

Anything you’d like to share about your past professional experience? I spent two years with one of the big four accounting firms and I got to learn and experience a lot in that time with them.

Do you have any pets, hobbies, family? I am from a family with 6 other siblings, so that has taught me to deal with and thrive under chaos. My current family includes my husband, Reid (who also works at GJM), my two dogs (Bogey and Ace) and myself. I played golf through high school and then in college at BGSU so I enjoy golfing and I am lucky that Reid does as well. I also love to spend time with our families.

Favorite book or movie? One of my favorite books is Pride and Prejudice, but I also have read the Harry Potter series multiple times.

What is something people may be surprised to find out about you? I loved running in college and ran two half marathons. I do not run as much anymore. Ha, Ha.

Interested in pursuing a career with Gilmore Jasion Mahler? Please visit our careers page to get a feel for life at GJM.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The firm's professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.

4 Steps Contractors Should Take to Prepare for 2020

Contractors 2020 GJMConstruction companies must continually monitor the industry outlook to prepare for the year ahead. Since the construction industry is so closely married to the economy, including consumer spending habits, a close inspection of the current climate is required when planning for the next year.

Below, we break down the steps that every contractor should take when planning projects for the coming year.

Understand Your Niche Market

Overall, conditions for industrial construction in 2020 look good. Consumer spending was up 2.5% in 2019. Compared to the previous year, the economy grew 1.8% in 2019 and is expected to grow an additional 1.5% in 2020. Employment is strong; wage gains have been modest across the board. This kind of boost in the economy is good for industries across the board.

It is still important to understand the exact conditions within your niche market, however. When there’s more growth in commercial businesses, industrial businesses organically expand, creating more opportunities for commercial contractors. Understanding the exact factors that affect your niche market can help your 2020 plans.

Plan for New Technology

Those who can leverage new technology will stay ahead of the game, and the same goes for the construction industry. Automation, for example, can eliminate or at least reduce redundancies in your work operations.

Plan for Your Workforce

The industry outlook for construction is generally positive, but the voluntary quit rate is the highest it has been in over a decade. Unemployment is low, which means there are more available jobs than there are people to fill them. As such, it is important for employers to assure workplace satisfaction and promote engagement within their workforce. Offering attractive benefits, such as a competitive retirement package, can help promote employee retention.

“Prequalification of subcontractors is also a crucial step that can help ensure contractors have the workforce necessary to complete all aspects of any project they are taking on,” says Bob Bobek, CPA, who leads GJM’s Construction Specialist Team and works closely with many contractors.

Finally, leveraging technology to find quality employees will be an essential aspect of recruitment in 2020 and beyond.  

Consider, too, holding your profit margins steady with controlled growth. With all the available work and a limited workforce, you want to grow at a pace you can staff. Rapid growth resulting in large receivables and retainage at lower profits can starve a company of its cash.

Stay On Top of Industry News

Contractors will be continually subject to evolving federal regulations, both with regard to employment, construction of projects, and purchase of raw materials. It is essential to stay abreast of industry news and legislation that may affect practice. A commitment to technology, employee retention, and understanding external factors that affect business will help drive your company forward in the New Year.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.