Hurricane Sally Business Casualty Losses

Business Casualty Losses

For partial business losses, the deductible amount of the loss is the value of the destroyed portion or the adjusted basis of the property, whichever is less, reduced by insurance or other compensation received.

For business property that is completely destroyed, the deductible amount of the loss is the adjusted basis of the property minus any salvage value and any insurance or other compensation received or recoverable.  This is the case whether or not the fair market value (FMV) of the business property immediately preceding the total casualty is less than the adjusted basis of the property.

Two methods may be used to determine the decline in FMV of property damaged in a casualty:

  • Appraised value immediately before and immediately after the casualty to determine the amount of deductible loss.
  • Cost of repairing the damaged property to set the amount of the loss.

The IRS has announced relief related to Hurricane Sally. In summary, the filing and payment due dates for various individual and business tax returns due on or after September 14, 2020 have been extended to January 15, 2021. Please note this does not include an extension to pay your 2019 tax liability, it only extends the time to timely file the tax return. The IRS is offering this relief to any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual assistance. Currently this includes Baldwin, Escambia and Mobile counties in Alabama, but taxpayers in localities qualifying for individual assistance added later to the disaster area, elsewhere in the state and in neighboring states, will automatically receive the same filing and payment relief. The current list of eligible localities is always available on the disaster relief page on IRS.gov. The Alabama Department of Revenue is also offering similar relief. For more information, please go to the Alabama Department of Revenue Website.

If you have any questions, please call your accountant at CSB or our main office at 251-343-1012.

Hurricane Sally Personal Casualty Losses

Personal Casualty Losses

Hurricane Sally is a federally declared disaster and therefore personal casualty losses can be taken by taxpayers who itemize deductions.  The casualty loss deduction is subject to

  • $100 floor per casualty AND
  • 10% of adjusted gross income (AGI) limitation
  • The loss must exceed the $100 floor and 10% of AGI before it “counts” as a deduction.

Casualty losses can be taken for damaged property as well as property that is totally destroyed.  The amount of the loss is the lesser of

  • The adjusted basis of the property OR
  • The reduction in the property’s fair market value caused by the casualty
  • The loss must be reduced by the amount of any salvage value and insurance or other reimbursement received.

The IRS has provided safe harbors for calculating residential real property losses.

  • Estimated Repair Cost Safe Harbor Method – This method is available for losses of $20,000 or less. A taxpayer may use the lesser of two repair estimates prepared by two separate and independent contractors licensed in accordance with state or local regulations.
  • Insurance Safe Harbor Method – A taxpayer may determine the decrease in fair market value by using the estimated loss determined in reports prepared by the taxpayer’s insurance company.
  • Contractor Safe Harbor Method – A taxpayer may use the contract price for repairs as set out in an itemized contract prepared by a licensed contractor. The contract must be binding and signed by the taxpayer and the contractor.

The IRS has also established safe harbors for personal belonging losses based on replacement cost adjusted 10% for every year the item is owned.

Additionally, the IRS has announced relief related to Hurricane Sally. In summary, the filing and payment due dates for various individual and business tax returns due on or after September 14, 2020 have been extended to January 15, 2021. Please note this does not include an extension to pay your 2019 tax liability, it only extends the time to timely file the tax return. The IRS is offering this relief to any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual assistance. Currently this includes Baldwin, Escambia and Mobile counties in Alabama, but taxpayers in localities qualifying for individual assistance added later to the disaster area, elsewhere in the state and in neighboring states, will automatically receive the same filing and payment relief. The current list of eligible localities is always available on the disaster relief page on IRS.gov. The Alabama Department of Revenue is also offering similar relief. For more information, please go to the Alabama Department of Revenue Website.

If you have any questions, please call your accountant at CSB or our main office at 251-343-1012.

Crow Shields Bailey Promotes Andrew Bailey, CPA, ABV To Manager

We are very excited to announce that Andrew Bailey, CPA, ABV, has been promoted to Manager. His contributions to our firm have been invaluable. Andrew’s hard work, leadership skills, and his knack for innovation speak for themselves. A graduate of Birmingham-Southern College, he has been with CSB since 2016 and has contributed to many different areas of growth for the firm. Andrew primarily works in tax return preparation and tax planning for businesses, individuals, estates, and trusts; and in business valuation for estate and gift tax, litigation, and merger and acquisition, among other areas.

Andrew is also a very active member in the community. He is the President of the Eastern Shore Chamber of Commerce Young Professionals, Board Member/Treasurer of the Estate Planning Council of Mobile, AICPA NextGen Ambassador for Forensic and Valuation Services, a graduate of the ASCPA Leadership Academy Class VII, and a Junior Achievement Classroom Volunteer at Fairhope High School.

Andrew is a Huntsville native married to Jenny Speir of Fairhope. Andrew and Jenny reside in Fairhope with their son Win and their dog Jack. In his spare time, Andrew enjoys weekends at the hunting camp or on the water, cooking on his Big Green Egg, and spending time with family and friends. He and Jenny also enjoy trying new restaurants around Fairhope, now that they are residents there.

 

Breaking Down The SBA Loan For Small Businesses: What You Need To Know

Are you a small business that has heard about Small Business Association (SBA) loan, but doesn’t know where to start? Or if you’re even eligible? With all the misinformation circulating about the SBA loan, we have broken down the facts so small businesses can be best prepared during this time, including who is eligible, how to calculate the amount you might receive, how the loan can be used, terms of the loan, the loan forgiveness program, and application.

SBA loans will be expanded according to recent legislation allocating $349 billion to this program. The eligibility requirements are being relaxed to extend credit to small businesses to help maintain payroll and pay bills (ex. rent, mortgage interest, other interest, utilities) during the ‘covered period.’ Regulations (expected to be final by the first of April) are expected to allow almost any FDIC insured entity to process loans and disburse funds on the same day.

ELIGIBILITY OVERVIEW

When is the ‘covered period’? The ‘covered period’ includes loans made between February 15, 2020 and June 30, 2020. Loans issued during this time are ‘covered loans.’

How do I know if I’m an eligible recipient of a covered loan? Small businesses (fewer than 500 employees or under the SBA NAICS industry guideline, whichever is greater) that have been in operations since February 15, 2020 are eligible for the loan. You must have employees that are paid salaries and payroll taxes and/or pay independent contractors (1099-MISC). Note, if you are a sole proprietor or independent contractor, you are also eligible to receive a ‘covered loan’ providing certain documentation. 

CALCULATION OF LOAN AMOUNT

What is the maximum loan I can apply for? The maximum amount you can apply for is the lesser amount of the following options:

  • Either $10 million, OR a sum of:
    1. Your average total monthly payments for payroll costs incurred for the year prior to the date on which the loan is made (12-week period if you are a seasonal employer), multiplied by 2.5
    2. Outstanding amount of existing SBA loans between January 1, 2020 and ending when your new ‘covered loan’ is made available. This will be refinanced under the ‘covered loan.’

(Avg. monthly payroll cost X 2.5) + (Outstanding SBA loans after January 1, 2020)

What do payroll costs include? The sum of payments for any employee compensation; examples include:

  • Salary, wage, commission
  • Payment of cash tips or equivalent
  • Payment of vacation, parental, family, medical, or sick leave
  • Allowance for dismissal or separation
  • Payment required for group health benefits (insurance premiums)
  • Retirement benefits
  • State or local tax assessed on compensation

If I’m a sole proprietor or independent contractor, how can I calculate payroll costs? In this situation, payments of compensation cannot exceed $100,000 in one year, and are pro-rated for the ‘covered period.’

What do payroll costs NOT include? The following items are not considered payroll costs:

  • Compensation in excess of a $100,00 annual salary, pro-rated for the ‘covered period.’
  • Taxes imposed on IRC chapters 21, 22, or 24 during the ‘covered period’
  • ANY compensation of non-U.S. resident employees
  • Qualified sick leave for which a credit is allowed under section 7001, or qualified family leave wages for which a credit is allowed under section 7003 of Families First Coronavirus Response Act

USE OF LOAN PROCEEDS 

What can I use the loan for? The SBA loan can be used to cover the following:

  • Payroll cost
  • Employee salaries, commissions, or similar compensations
  • Costs related to continuation of health care benefits during periods of sick, medical or family leave, as well as insurance premiums
  • Payments of interest on any mortgage obligations (not including prepayment of or payment of principle on a mortgage obligation)
  • Rent and utilities
  • Interest on any other debt obligations that were incurred before the ‘covered period’

TERMS OF LOAN AND THE PROCESS OF SECURING THE LOAN 

Who has the authority to delegate a loan? Approved SBA lenders are able to make and approve ‘covered loans.’

What are the borrower requirements? The borrower requirements include a “good faith certification” stating that uncertain economic conditions make the loan necessary to support ongoing operations. These funds will be used to retain workers and maintain payroll, rent payments, mortgage interest payments, and utility payments. It also is in good faith that the applicant DOES NOT have an application pending for a loan under a 7a loan for the same purpose and duplicative amounts, and no other amounts have been received under section 7a loans between February 15, 2020 and December 31, 2020.

Will I be able to obtain credit elsewhere? The requirement that small businesses are unable to obtain credit elsewhere DOES NOT APPLY to ‘covered loans’ during the ‘covered period.’

What about 7(b)(2) loans? 7(b)(2) loans made after January 31, 2020 can be refinanced as part of the ‘covered loan.’

Will there be nonrecourse? Or collateral needed for this loan? SBA has no recourse (or will demand compensation or payment) against individuals, shareholders, members, or partners of an eligible recipient unless the ‘covered loan’ proceeds are used for unauthorized purposes (see above). There are no personal guarantee requirements and no collateral requirements for ‘covered loans.’

What about the interest rate? Interests rates for the SBA loan are not to exceed 4%.

Is there a deferred payment arrangement? Lenders must provide complete payment deferral for a period of not less than six months, including payment of principle, interest, and fees. Deferrals are not to exceed one year.

LOAN FORGIVENESS PROGRAM

Is there a forgiveness amount? Any possible forgiveness amount may not exceed the loan amount, and is calculated as the following amount of costs and payments made during the eight-week period beginning on the date of origination of the ‘covered loan’ (‘covered period’):

  • Payroll costs
  • Payments on interest of any mortgage incurred prior to February 15, 2020
  • Rent obligations on leases in force between February 15, 2020
  • Utility payments for which service began before February 15, 2020 – electricity, gas, water, transportation, telephone, or internet access

What is the forgiveness amount limited by? The forgiveness amount is limited by the following:

  • Multiplying possible forgiveness amount (as calculated above) by dividing average full-time equivalent (FTE) during ‘covered period’ by either of the following:
    • Average FTEs between February 15, 2020 and June 30, 2019
    • Average FTEs between January 1, 2020 and February 20, 2020
    • Note, average FTEs are calculated as the average number FTEs for each pay period
  • Amount of any reduction in total salary or wages of ANY employee during the ‘covered period’ that is in excess of 25% of the total salary or wages of the employee during the most recent full quarter during which the employee was employed before the ‘covered period’
    • Note, this does NOT include any employee receiving compensation in excess of $100K

LOAN FORGIVENESS APPLICATION

What should my application include? The application should include documentation verifying the number of FTEs and pay rates during the ‘covered period’ including:

  • Payroll tax filings reported to IRS
  • State income, payroll, and unemployment insurance filings
  • Documentation of expenses such as rent and utilities

The application should also include certification stating:

  • Documentation is true and correct
  • Amount for which forgiveness is requested was used for authorized purposes
  • Any other documentation SBA determines necessary

Crow Shields Bailey is proudly serving as a resource for small businesses to protect for their future during this time. If you have further questions about how the SBA loan can benefit your business, feel free to contact our office 251.343.1012, or visit our Coronavirus Resource Center to stay up-to-date on changes made daily.

Crow Shields Bailey PC – SBA Loan & Loan Forgiveness Information

Our team has been researching around the clock to keep you up to date on the latest details regarding the COVID-19 crisis. What we currently know is that the CARES Act that includes the Paycheck Protection Program (SBA Loans) has been signed by the President, but the banks are still waiting guidance from the SBA. We have spoken with numerous bankers, and although they do not know the specifics of what will be required for the loan application, they have suggested to us that you start gathering the following information. It is imperative that you have this to us as soon as possible. $350 billion has been set aside for this program, but those funds will move quickly because everyone in the country will be applying. As far as we know, loans will be processed on a first come, first serve basis. There may be additional items they will require or the items below may change, but as of today, this is what they think will be required. Please call us at 251-343-1012 with any questions you have so we can have you at the front of the line with your bank.

  • Personal and Business Financial
  • Business Financial Info
  • Business Ownership (Articles of Inc., Operating Agreement, etc.)
  • Business Overview/History
  • Copies of Business Leases
  • Description of how COVID-19 has impacted your business
    • Outline income shortfalls
    • Have you experienced any supply chain or other business interruptions?
    • Have you experienced a delay in receipt of accounts receivable?
    • What steps have you taken to anticipate or mitigate risk related to the Coronavirus (i.e. contingency plan, travel ban, work from home, quarantine, business closure etc.)?
    • Employees retained during impacted period
    • Utility Costs
    • All scheduled debt and lease payments made during impact.
    • Number of employees, payroll cost and frequency
  • Monthly payroll costs for the past twelve months
    • Payroll costs include the sum of the following:
      • Salaries, wages, or commissions
      • Payment of cash tip or equivalent
      • Payment for vacation, parental, family, medical, or sick leave
      • Allowance for dismissal or separation
      • Payment required for the provisions of group health insurance premiums
      • Payment of any retirement benefit
      • Payment of State or local tax assessed on the compensation of employees

A summary of the loan program is below. Let us know how we can best serve you.

Maximum Loan Amount During the covered period, with respect to a covered loan, the maximum loan amount shall be the lesser of  the average monthly payroll costs incurred during the 1-year period before the date on which the loan is made  times 2.5 or $10,000,000, whichever is less.

Loan Maturity Maximum of 10 years from the date on which the borrower applies for loan forgiveness under that section. Covered Loans will be required to be deferred for 6 months to a maximum 12 months

Fees: All SBA Guaranty Fees normally applicable to the 7a loan will be waived

Certification As a condition of receiving a loan under this section, a borrower shall certify under terms acceptable to the Secretary that the borrower— (1) does not have an application pending for a loan under section 7(a) of the Small Business Act (15 U.S.C. 636(a)) for the same purpose; and (2) has not received such a loan during the period beginning on February 15, 2020 and ending on December 31, 2020.

Loan Forgiveness Borrowers are eligible for loan forgiveness equal to the amount spent by the borrower during an eight-week period after the origination date of the loan on the following items: payroll costs; interest payment on any mortgage note incurred prior to February 15, 2020; payment of rent on any lease in force prior to February 15, 2020; and payment on any utility for which service began before February 15, 2020.

  • Amounts forgiven may not exceed the principal amount of the loan. Eligible payroll costs do not include compensation to any employee above $100,000 in wages.
  • Amounts forgiven will be reduced proportionally by any reduction in employees retained during the eight-week period after the date of the loan as compared to either (i) the period from February 15, 2019 to June 30, 2019 or (ii) the period from January 1, 2020 to February 29, 2020. The borrower can elect the period of time used for the analysis.
  • Amounts forgiven will also be reduced by the reduction in pay of any employee beyond twenty-five percent (25%) of their compensation for the most recent full quarter during which the employee was employed.
  • Borrowers that re-hire workers previously laid off will not be penalized for having a reduced payroll at the beginning of the period.
  • The remaining loan balance of any portion of a loan that is not forgiven will have a maturity of not more than ten (10) years

Crow Shields Bailey PC – SBA Disaster Assistance Loans

SBA to Provide Disaster Assistance Loans for Small Businesses Impacted by Coronavirus (COVID-19)

  • Who is eligible?
    • These loans are for small businesses, agricultural cooperatives, aquaculture enterprises, and nonprofits affected by disaster to help meet working capital needs or normal business operating expenses through the recovery period. They are available to for profit and non-profit companies.
    • Small businesses, for purposes of these loans, have 500 or fewer employees.
  • What can these loans be used for?
    • Loans may be used to pay fixed debts, payroll, accounts payable, and other operational bills that can’t be paid because of the disaster’s impact. They cannot be used to expand or refinance existing debt or cover lost profits.
  • What is the maximum loan offered?
    • $2 million
  • What is the interest rate on these loans?
    • The interest rate is 3.75% for small businesses without credit available elsewhere; businesses with credit available elsewhere are not eligible. The interest rate for non-profits is 2.75%.
  • What is the term of these loans?
    • SBA offers loans with long-term repayments up to a maximum of 30 years. Loans are determined on a case-by-case basis, based on each borrower’s capacity for making monthly loan repayments.
  • When do repayments begin?
    • The first payment isn’t due until a year after the official date of the loan. However, interest starts accruing on the loan the moment the funds are disbursed.
    • On a case by case basis, loans offered under this program may have a forgiveness clause as a feature.
  • What do I need in order to apply?
    • Your business needs to operate in a current declared disaster area.
      • States or territories are required to certify that at least five small businesses within the state/territory have suffered substantial economic injury, regardless of where in the state those businesses are located as a result of a disaster. Once an economic injury declaration has been made for a state, loans will be available statewide. This will apply to current and future disaster assistance declarations related to Coronavirus (COVID-19).
      • Certain counties in Alabama, Florida, Georgia, Mississippi, and Tennessee have been declared disaster areas relating to Coronavirus (COVID-19).
      • Current declared disaster areas can be searched at https://disasterloan.sba.gov/ela/Declarations.
    • You need to register with the Federal Emergency Management Agency by calling FEMA at 1-800-621-3362 (TTY: 1-800-462-7585) or visit DisasterAssistance.gov.
    • You need documentation justifying amounts you will need to cover each category of cash outflow. Be as thorough as possible!
  • How do I apply?

Crow Shields Bailey PC COVID-19 Update #1

As we navigate through these unprecedented times, we must work together to ensure the safety of our clients, team members, and families. To comply with the CDC and WHO’s recommendations of social distancing to help slow the spread of COVID-19, we recommend that our clients send in all necessary tax documentation electronically. If you have this capability, please e-mail to your tax preparer for a link to upload your information securely. You can find your tax preparer’s e-mail address on the Meet Our Teams section of our website. If you do not know who your tax preparer is, you can send an e-mail to Emilee Shuler at [email protected] requesting a link for secure upload.

If you do not have the capability to send information electronically, we have drop boxes located in each office and protocols set up to ensure everyone’s safety. You can also send via mail. Additionally, we are holding meetings by phone for now. We are all working either in the office or remotely and available by phone and email for any questions you may have.

If you have any questions or concerns, please do not hesitate to contact us at 251-343-1012. We hope that you and your families stay healthy and safe.

Crow Shields Bailey PC COVID-19 Response

As we all find ourselves in uncharted territory, we want to share with you how CSB is responding to Coronavirus (COVID-19).

CSB is concerned with the health of our clients, team members, vendors and the communities we serve.

We have a plan in place to ensure continuity of services to our clients.  Our team has the ability to work remotely and can access client information in a safe and secure manner. Whether we are working in our offices or remotely, the lines of communication will remain open.

What you should know:

  • CSB will have drop off boxes in the lobbies of each of our three locations to limit hand-to-hand contact.
  • We will also need to do more phone meetings rather than meeting face-to-face.
  • We will rely on the use of our secure file transfer services such as SafeSend (to electronically receive and sign tax returns) or Sharefile (to send and receive documents which do not require signatures).

Our plan is to have personnel in each of our offices. However, we will follow local regulations and guidance regarding whether an office should be closed.

We value our relationship with you and will continue to provide updates as needed as we navigate these unprecedented times.

Please feel free to reach out with any questions or concerns. We hope you and your loved ones are safe and healthy.

 

Gina McKellar

Managing Shareholder

Crow Shields Bailey 2020 Promotions

Congratulations to all of our team members that received promotions this year. We are extremely grateful for all of their hard work, and we are proud of them for earning their well-deserved promotions.

Teresa Ernest, CPA was promoted to Principal

Kenny Crow, III, CPA was promoted to Manager

Abby Roveda, CPA was promoted to Supervisor

Jay Crowley, CPA was promoted to Senior Accountant

Allie Parker, CPA was promoted to Senior Accountant

Madison Quigley was promoted to Senior Accountant

Frank Schottgen was promoted to Senior Accountant