What farmers should know about COVID-19 federal aid

There’s assistance for most ag-related businesses, but don’t rush in without careful evaluation

We’re all navigating the world differently these days as the coronavirus works its way into nearly every aspect of our lives and economy.

Even though I can’t predict when or where this crisis will end, I can share some details about the federal stimulus packages designed to provide COVID-19 impact relief. Farmers, ranchers and other ag businesses should take a careful look at the aid provisions to see how you can benefit.

The assistance for taxpayers and small businesses—those with 500 or fewer employees—is rolling out in phases. Key among them are:

• The Families First Coronavirus Response Act , which includes provisions for emergency family and medical leave expansion, emergency unemployment insurance stabilization, emergency paid sick leave, and tax credits for paid sick, and family and medical leave.

• The Coronavirus Aid, Relief, and Economic Security Act, signed into law March 27. This $2 trillion legislation was designed to alleviate COVID-19’s economic impact.

Here are some details related to the COVID-19 economic aid:

1. The new federal tax deadline is July 15. The Treasury Department and IRS have extended the federal income-tax filing due date from April 15 to July 15. Taxpayers can also defer federal income tax payments, including the first quarterly estimated tax payment, until July 15. You don’t have to file any additional forms or contact the IRS to qualify for the extension. Be sure to check your own state’s tax-filing deadline status, since not all have extended to July 15.

2. Under CARES, most Americans will receive economic impact payments, or “stimulus checks.” 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 17 and younger. 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. If you draw Social Security, you’re also eligible for a stimulus check. The payments will be distributed starting in late April.

Important: If your 2019 income was higher than 2018’s, consider delaying your 2019 tax filing if that will help your stimulus-check eligibility.

3. FFCRA delivers mandates as well as benefits for small business owners. They include:

• Emergency Paid Sick Leave—Employers with fewer than 500 employees must provide up to 80 hours of EPSL for coronavirus-related absences in addition to any current paid time off offered. EPSL includes Tier 1 for employees directed impacted by the virus and Tier 2 for employees who are caregivers.

• Paid Public Health Emergency Leave—Employers with fewer than 500 employees must offer up to 12 weeks of paid Public Health Emergency Leave to employees who have been employed at least 30 calendar days.

• Payroll tax credits—Employers can receive a refundable credit for up to 100% of wages paid to employees receiving EPSL. The maximum credit is $511 per day per employee under Tier 1 and $200 per day per employee under Tier 2.

• Self-employment tax credits—Self-employed individuals also are eligible for a refundable self-employment tax credit as an “employee” of their own business. This is calculated as the lesser of the Tier 1 or Tier 2 amounts noted above or 67% of the individual’s per-day self-employed income (your 2020 self-employed income divided by 260).

4. The Paycheck Protection Program is one of CARES’ biggest provisions. It’s aimed at helping small businesses survive the economic downturn and keep their workers on the payroll. PPP is a loan program for businesses with fewer than 500 employees, regardless of revenue. It operates through the Small Business Administration.

This new program is a huge source of funding with a long list of eligible businesses. A PPP loan allows a small business to get 2.5 times its total monthly payroll, with a maximum of $10 million. SBA says a PPP loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent and utilities.

Loan applications will be accepted until June 30. 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’s participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. Consult with your local lender to see if it’s participating in the PPP.

Before you apply, I urge you to evaluate your own unique circumstances. Keep these points in mind:

• Don’t take the easy way with payroll calculations. At K-Coe Isom, we strongly discourage any business from taking this route. Calculating payroll according to the simplified formula on the SBA application may not properly capture your total loan eligibility, leaving money on the table.

• Balance urgency with accuracy. Rushing to apply for PPP, and utilizing that money, will make businesses ineligible for other stimulus programs, such as Employee Retention Credits, that could be more advantageous. It pays to look at the entire picture and evaluate everything that’s available to help your business specifically. A careful look, on a case-by-case basis, will benefit you in the long term.

• Copying what another business is doing won’t deliver optimal benefits. If you have multiple entities and affiliated businesses, there may be other opportunities or limitations that should be addressed when applying. Much of the impact will need to be determined on a case-by-case basis, and programs should be picked according to eligibility, applicability and impact.

Editor’s note: Maxson Irsik, a certified public accountant, advises owners of professionally managed agribusinesses and family-owned ranches on ways to achieve their goals. Whether an owner’s goal is to expand and grow the business, discover and leverage core competencies, or protect the current owners’ legacy through careful structuring and estate planning, Max applies his experience working on and running his own family’s farm to find innovative ways to make it a reality. Contact him at [email protected].