Small Businesses of New York State: Review of Getting Up To $5,100.00 / Person in Federal Funds

Coronavirus outbreak brought a chaos to a modern world of specialized division of labor and production.  Disruption in the supply chain in one part of the world today will affect businesses in the other locations.  Modern travel (or its sudden disruption) only contributed to the climate of uncertainty.  Uncertainty, in turn created anxiety, as evidenced by empty shelves and aggressive attitudes of folks visiting stores in this world’s richest countries, including the United States.  On top of all else, most people are strongly encouraged, and in some places required to remain within four walls of their homes most of the time.  Resources are getting scarcer, anxiety is reaching new heights!  What to do?

One suggestion is to focus on exploring the resources that are available, especially those that come as a result of coronavirus outbreak.  If you are part of the business having less than 500 employees, or a self-employed individual in New York State (or other area subject to quarantine, such as California), then exploring a resource made available by the U.S. Government can be useful.

The resource that is the focus point of this article is the tax credit of up to $5,100.00/person made available by the federal government to small businesses and self-employed individuals through Families First Coronavirus Response Act last Wednesday (March 18, 2020).  Specifically, qualified businesses can apply for up to $5,100.00/person (as early as June 2020) in credit that was paid to stay home (sick leave) as a result of coronavirus emergency.  § 7001-7002 of the Act.  Of course, the money comes with strings attached, require a degree of planning, and call for a complex analytical journey, as opposed to getting straight up stimulus check (which may or may not come).  Let us explore some of those strings.

As a part of legislation, Congress created Emergency Paid Sick Leave Act.  The Act requires that “employer shall provide to each employee employed by the employer paid sick time to the extent that the employee is unable to work (or telework) due to a need for leave because: * * *  The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID–19.”  § 5102(a)(1) of the Act.  This brings the following elements for review:

1. Who is employer?
2. Who is employee?
3. Can the employee telework?
4. Is there quarantine or isolation order?

Depending on the review of applicability of above elements, this can mean tax credit of up to $5,100.00/person.

Employer

Employer includes business with fewer than 500 employees (it also includes many other organizations, such as public agencies, which are not a focus of this article).  §§ 5110(2)(A)(i)(I), 5110(2)(B)(i)(I)(aa) of the Act.

Employee

Basically, if W-2 is involved, or in the case of small business, it is run by owners-officers with the capacity to bind the company, there will be employee falling under the law.  § 5110(1)(A)(i) of the Act; 29 U.S.C. § 203(e)(1) (individual employed by an employer); see also 26 U.S.C. § 3121(d)(1) (legal authority to bind the act or acts of the Company, as “officers of a corporation”).

Telework

Understandably we live in the digital environment of the 21st Century, where a lot of jobs involve computers.  But, some functions just cannot be outsourced to the digital environment.  For example, barber shops and bars.

Quarantine / Isolation Order Related to COVID-19

For New York, such order came in the form of Gov. Cuomo’s Executive Order 202.8:

Effective on March 22 at 8 p.m.: All businesses and not-for-profit entities in the state shall utilize, to the maximum extent possible, any telecommuting or work from home procedures that they can safely utilize. Each employer shall reduce the in-person workforce at any work locations by 100% no later than March 22 at 8 p.m. Any essential business or entity providing essential services or functions shall not be subject to the in-person restrictions. An entity providing essential services or functions whether to an essential business or a non-essential business shall not be subjected to the in-person work restriction, but may operate at the level necessary to provide such service or function. Any business violating the above order shall be subject to enforcement as if this were a violation of an order pursuant to section 12 of the Public Health Law.

So from March 22, 2020 through April 19, 2020 a 100% in-person reduction is in place.  Of course there are multiple exceptions for “essential” business.  But, if “essential” business rubric does not apply, then it likely fits § 5102(a)(1) of the Act.

Timing

Emergency Paid Sick Leave Act takes effect on April 2, 2020.  § 5108 of the Act.  Cuomo’s Executive Order 202.8 is good through April 19, 2020, creating the following overlap:

Since the limit is 10 days, then credit would be only available for $5,110.00 of the amount, which would be claimed as a part of second quarter IRS Form 940 filing in June 2020.

Those folks that find this article interesting/useful should further go check the following pages for guidance:

• IRS’ Coronavirus Tax Relief
• DOL’s Guidance Dedicated Webpage

Wishing everyone good health and luck!