Businesses that have survived the initial economic shockwave caused by the COVID-19 pandemic have a lot to be proud of.
However, with the unpredictability of the fall season looming, it’s important to understand how the decisions you make today will impact your business tomorrow.
We previously communicated to our clients and friends the provisions of The CARES Act which was passed back in March in response to the COVID-19 pandemic. The CARES Act allowed sponsors of retirement plans to amend their plans to permit coronavirus-related distributions (CRD) for participants directly impacted financially. This included plan withdrawals, changes in loan limits, waiver of RMD requirements, and elimination of the 10% excise tax for distributions made to participants prior to age 59 ½. Please remember that plan documents, company policies and handbooks may need to be revised if you adopted these changes.
At this time we want to highlight the provisions within the Internal Revenue Code relating to partial termination which can be triggered by COVID-19 related location closures or employee terminations. If you have, or plan to lay off employees, you need to be acutely aware of the qualified retirement plan partial termination rules. Before you make a major business decision that could have a ripple effect, our team at RBT suggests that you reach out to your team of financial experts to get advice. Remember, it’s always better to be proactive than reactive.
A retirement plan can suffer a partial termination if a substantial portion (usually 20% or more) of plan participants are terminated, or if a defined benefit plan stops or reduces future benefit accruals. If a partial termination occurs, participants must be immediately 100% vested in all accrued benefits. This means that employer contributions, including matching contributions and profit sharing contributions must become fully vested regardless of the vesting schedule in the plan document. There may be other ramifications for defined benefit plans and in particular if you participate in a multi-employer defined benefit plan.
The IRS has prescribed a “turnover rate” formula to determine whether the reduction is significant. When calculating turnover to determine if a partial plan termination has been triggered, make sure you are using the proper calculation because the IRS is referring to participant turnover, not employee turnover.
Here’s an example to determine if a partial plan termination has been triggered:
Plan A has 300 participants at the beginning of the plan year. Due to layoffs, 80 participants are terminated from employment during the year. An additional 20 employees become eligible to participate during the plan year. The turnover rate is 80 ÷ 320 or 25%.
In contrast, if we were to calculate simple employee turnover, you would use this formula:
Turnover rate = # of separations ÷ average # of employees.
The number of participants in a retirement plan is not always the same as the number of employees, so the turnover rates will not necessarily be the same.
RBT recommends that you to contact your third party administrator for guidance. If your plan is chosen for audit, and it is determined that you did not comply with the regulations, the plan may lose its qualified status which could result in the loss of the tax deduction that was taken resulting in significant tax consequences, penalties, and fines. RBT is here to assist our clients at all times, but in particular during uncertain times, in a thoughtful, professional, and prompt manner.
As towns, villages, cities, and counties in New York deal with the economic fallout of COVID-19 in their own finances and on those of their taxpayers, it is a good time to consider an independent budget review to ensure that elected officials are doing all they can do to manage governmental funds properly.
Counties generally have budget departments, and often use independent reviews as a matter of course. In smaller municipalities, a municipal accountant or budget officer will generally ask department heads to submit budget requests, and then review those requests with them. The budget officer and the municipality’s chief fiscal officer must work together to create a realistic budget for the municipality’s governing board. This is intensive work in good times, and the pandemic has tightened finances across the board, creating new stresses and concerns.
New York State has projected an overall decline in sale tax revenues of 15 percent for April 2020 through March 2021, according to the State Comptroller’s Office. Some local municipalities will be hit even harder, especially with falling revenue from gasoline taxes due to lower prices at the pump. The New York Association of Counties has estimated that New York’s counties will see 22 percent drop in sales tax collections for the full year, a shortfall of $1.09 billion.
The Government Finance Officers Association notes that, particularly in difficult financial times, bringing in someone with technical expertise to review the municipality’s finances can provide reassurance to taxpayers that officials are acting responsibly.
An outside accountant can analyze the municipality’s operating results year-to-date, provide a clear-eyed perspective, and mediate the sorts of disagreements that inevitably arise among officials during budget negotiations.
At the same time, the reviewer can report any, identified deficiencies and inaccuracies in the municipality’s processes noted during his or her analysis and suggest solutions.
The independent accountant can review the budgeting practices of each department, and the assumptions on which planning is based. From there, the accountant can look at their projections of estimated revenues and appropriations and determine if they are reasonable.
For instance, town highway superintendents, who draw up their own budgets that require town board approval, may have disagreements with the town supervisor, and a neutral arbiter can help resolve the tension between what is needed to maintain roads and what the town taxpayers will bear overall.
In examining the overall budget process, the reviewer can look at the capital plan, and what expenditures are planned for the coming year or so; and the reviewer can look at debt projections. He or she can assess the fund balance plan and provide advice to officials on what they should use from those reserves
During the budget review process, the independent reviewer will meet with the members of the governing body to present comments, recommendations and findings and answer the officials’ questions. At the end of the process, the municipality receives a formal report.
An independent budget review can provide local government officials with assurances that they have done everything properly and responsibly for the taxpayers. The independent review also provides value and confidence for taxpayers, as they know someone with expertise in government accounting has provided input, and that there is a reasonable basis upon which their property taxes are determined.
Municipal governments in New York looking for ways to generate revenue can consider improvement districts, such as business improvement districts, to fund needed services in high-demand areas without imposing an undue burden on other taxpayers.
New York State enacted legislation allowing for the creation of business improvement districts (“BIDs”) in 1981. In general, improvement districts are created to provide services to a specified area, while having the property owners within that area who would benefit from those services pay for them.
BIDs are formed and governed by municipal officials and community members and funded through an added tax on commercial property owners within the borders. In exchange for those taxes, these BIDs offer services including street and sidewalk clean-up and maintenance, with the aid of volunteers; marketing of the district, and special events that draw in potential customers and contribute to the life of the district and surrounding community.
BIDs may also drive revitalization efforts with the municipality, bringing to fruition improvements to sidewalks, roadways, lighting, and other downtown design elements.
In practice, business improvement districts can be narrowly tailored for a specific service, or a broader entity that oversees security, sanitation, land- and streetscaping and marketing for business.
Examples of expansive business improvement districts are found in the City of Middletown, where the Downtown Middletown Business Improvement District encompasses the heart of the commercial district near City Hall; and in the Town of Poughkeepsie, where the Arlington Business Improvement District centers on Raymond Avenue and borders on Vassar College.
An example of a more focused BID is one created by the Town of Woodbury for the Woodbury Common Premium Outlets, the 250-plus-store shopping center that draws 13 million visitors annually from around the globe. The Woodbury BID was created specifically to fund police services required by the outlets.
The Town of Woodbury, with an estimated 2019 population of 11,370, employs 21 full-time and two part-time police officers, and four full-time civilian dispatchers. Although the town has little other crime of any significance, according to statistics from the town and from the state Division of Criminal Justice Services, the department handles hundreds of larceny cases and more than 1,500 motor vehicle accidents annually.
Creating a business improvement district requires a public hearing. The district must be clearly defined, and its enhanced services will be funded via a special assessment on each property within its boundaries. Because the districts have higher demands for the services, the tax is essentially a premium
Although the BID will be incorporated as a non-profit, the assessment will be levied by the municipality along with property taxes, and the taxing district remains under the control of the local government. According to the Government Finance Officers Association, this has the added benefit of maintaining accountability to the public for the improvement district’s spending.
Some BIDs, including Middletown and Arlington were formed in part to revive urban downtowns that suffered in previous decades when malls and chain stores drew customers out of traditional shopping districts.
In areas where there may be separate special districts for water, sewer, lighting etc., a BID can also consolidate these other entities and simplify the structure of government. In cases of municipal mergers, BIDs can also play a role. For example, when towns and villages discuss mergers, concerns by village residents about reductions in services often present a stumbling block. In such a case, the solution could be a business improvement district that follows the village outline. That would allow a special assessment for dedicated police coverage for the former village, and the town could take over water and sewer as special districts.
Local governments need revenues to provide enhanced services to support the economic health and stability of commercial areas. Business improvement districts present a way to do that by charging a special assessment to the commercial properties that will directly benefit from those services, without unfairly burdening other taxpayers.
The COVID-19 pandemic and the accompanying shutdown have brought financial challenges to municipal governments throughout New York State.
Sales tax revenues declined steeply across the state in April and May compared to 2019, and state aid will be cut or delayed. Unemployment rates may affect residents’ ability to pay property taxes, creating further worries about revenue as we head toward the fall budget season.
There are strategies that county, city, town and village governments can undertake to mitigate the effects of the crisis: finding alternate ways to generate revenue and to cut costs to address short-term needs in the next 12 to 18 months; and making the budgeting process and financial practices more resilient to address long-term goals for the next three to five years.
The starting point can be a two-part analysis: First, a short-term analysis of cash flow to ensure the municipality can keep running in the next few months. Then a long-term forecast can determine if an economic upturn will resolve issues, or if there are deeper problems that need repair.
The COVID-19 pandemic has caused immediate fiscal pain around the state.
A survey by the Association of Towns of the State of New York (AOT) found that in the month of March, towns in New York lost roughly $215 million in revenue between drops in sales tax, mortgage recording taxes, license and permit fees and justice court fines. AOT noted in its survey findings that businesses in the state were operating as normal for the first half of March. Sales tax made up the largest portion of the loss, according AOT.
The New York State Comptroller’s Office has reported that April sales tax revenues in New York’s counties and cities dropped by 24.4 percent compared to April 2019. May’s sales tax collections fell 32.2 percent compared to May 2019.
State tax receipts for May fell by 19.7 percent compared to May 2019, a drop of $766.9 million, the Comptroller reported. Personal income tax withholding revenues dropped 9 percent in May compared to May 2019.
In bad times, the Government Finance Officers Association recommends taking a financial diagnostic review of operations and the budgeting process to provide officials of a financially distressed municipality with an in-depth look at their budgeting and fiscal practices. This helps to assess financial health and to identify areas for strategic cost savings and alternative sources of revenues.
In such a climate, it is crucial that local governments find a way to create what the GFOA calls “culture of frugality,” and find responsible, cost-effective solutions
Short-term measures, meant to affect 12 to 18 months out, are cost-cutting and alternate-revenue strategies, such as dipping into reserves to bridge a budget gap. With each measure, a government must consider whether the move will be a sound long-term strategy, or if a cut today could lead to increased costs down the line.
A number of school districts in the mid Hudson region used a variety of these tactics to get through the 2020-2021 school budget season, avoiding deeper cuts to teaching staff or academic programs by leaving jobs unfilled after employee retirements, and using fund balance to offset tax levy increases to spare taxpayers and keep the budget under the statutory tax cap.
Longer-term planning for recovery after crisis requires a data-based approach that addresses root causes of financial stress. This means requires studying the economic and social environment of a municipality, analyzing budgeting processes and reforms, and creating an operational plan.
Now is the time for government leaders to look for ways to mitigate the crisis, to build resilience through 2020 and beyond.
Over the next several articles, we will discuss these approaches in more depth, with recommendations for concrete steps that local governments can take.
After hearing concerns from small business owners across the country about the restrictions of the PPP, lawmakers passed a bipartisan bill called the Paycheck Protection Program Flexibility Act of 2020 to make the PPP easier to use and get forgiven. Still, a lot of confusion remains surrounding the terms of PPP loans. We will focus on SBA question 49 of SBA’s FAQ list to get to the root of what to do:
Question: What is the maturity date of a PPP loan?
New PPP loans approved on or after June 5th automatically have a loan length of five years. The PPP loan program is widely recognized for its forgivable nature if used for payroll, rent and utilities. Still, for a significant portion of borrowers, not all of the loan will be forgiven. The unforgiven portion will be converted to an SBA loan at a rate of 1%.
If a PPP loan received an SBA loan number before June 5, 2020, the loan has a two-year maturity. Existing loans can have their length extended from two years to five years, if the borrower and lender mutually agree to it. But what exactly does that mean for business owners who fall in this category, and how does one go about extending their existing loan?
The answer as it turns out, is not quite as clear-cut as you would hope. Lenders nationwide from longtime trusted local credit unions, to big bank chains are currently waiting on government rulings to learn how to proceed. There have been talks of complete blanket loan forgiveness roll-outs for any business owner who received up to $150,000 in PPP loans, but no concrete decisions have been made just yet. Lenders, like the majority of financial heavyweights, are taking a wait-and-see approach for upcoming changes to PPP terms as well as the forgiveness applications that are starting to roll in.
Even before the Covid-19 crisis, small business owners have long known the challenge of getting access to cheap capital. Extending two-year loans to five-year loans could be a helpful business strategy for businesses facing continued COVID-19 induced problems as we approach the tail end of 2020 and head into 2021.
To illustrate the appeal of extending a PPP loan, consider the following scenario. A small business applied for and received a $200,000 PPP loan. By using the loan primarily for payroll, utilities and rent, the business owner was able to have 75% of the loan forgiven, leaving $50,000 to be paid back to the SBA.
At 1%, a two-year loan of $50,000 results in a monthly payment to the SBA of $2,105. The same loan over a five-year period is $855 a month.
For many small businesses, $1,250 a month can make a big savings difference. This crisis has shed light on how many small businesses operate on a small margin, so choosing the longer loan period can create better options for a sustainable business structure.
As lenders wait for further clarification from the SBA, many recommend business owners to be in regular communication with their lenders for important policy changes or updates. Depending on the bank you are working with, the likely scenario is that once you give them a call, the representative will refer you to your bank’s Business Banking Team to review your unique circumstance with a Loan Specialist. If your PPP loan falls in the two-year loan length category, the team may help you to complete reauthorization forms so your lender can approve the loan extension. Currently, there truly is no one-size-fits-all answer that can cover businesses across industries, which is what makes this issue all the more complex.
While some questions remain unanswered, it is important to do everything in your power to protect your business against future vulnerabilities and to stay vigilant to the challenges that lie ahead. The entire professional staff at RBT remains committed to helping our clients navigate these challenging times. If you have any questions, or would just like to talk about the financial future of your business, we are here for you. Please do not hesitate to reach out and connect to one of our team members.
Developing and implementing sound municipal fund balance policy is crucial to any local government’s ability to plan for the ebb and flow of expenditures and revenue and to deal with unexpected events or expenses, even in the best of times.
A policy that sets out the amount of funds a municipality keeps in reserve, how those funds may be used, and how they will be replenished is a planning tool, helping to guide daily operations as well as longer-term strategies.
There are five categories of fund balance. In order of most restricted to least restricted in terms of use, they are non-spendable, restricted, committed, assigned and unassigned fund balance. The latter three categories comprise what is known as unrestricted fund balance according to Office of the State Comptroller guidance. Under New York State law, counties, villages, towns and fire districts may carry over “a reasonable amount” of unappropriated, unreserved fund balance from one budget year to the next. A municipality must follow proper procedures and legal requirements to transfer funds between these classifications.
Municipal revenues ebb and flow as a matter of course. In Orange and Dutchess counties, for example, most municipalities collect their property taxes, the main source of revenue, early in the calendar year. Sales tax and state aid supplement are other major sources of funds. However, the government body must have enough cash on hand to cover payroll and bills throughout the year, even in the months when revenues are not coming in. That requires a cash flow plan for the entire upcoming year.
Since property taxes are not received at the very beginning of the year, the cash flow plan should contain a provision to cover this temporary shortfall. The standard, according to the New York State Governmental Finance Officers Association, is to maintain enough unrestricted fund balance in the general fund to cover at least two to three months of regular general fund operating revenues or regular general fund operating expenditures.
In addition, government officials should assess their municipality’s unique circumstances and risks to determine what level is appropriate for a sound fund balance policy. If a town or village is vulnerable to natural disaster such as flooding which could generate unexpected expenses, or to an unpredictable revenue source such as state aid that could be cut, officials may need to keep higher levels of unrestricted fund balance in reserve.
A sound fund balance policy provides a framework to guide current budgetary decisions as well as those for the long-term. For example, a municipality’s capital plan should inform officials and taxpayers what needs to be done over the next five years, and how it will be funded. Planning major expenditures in advance allows a government to save funds, minimizing the need to borrow.
Fire districts often set up equipment or building reserves and budget transfers to those reserves each year, to allow them to save for capital purchases such as fire trucks, which can cost from $600,000 for a new engine to $1.2 million for a new aerial ladder truck.
There are consequences to insufficient fund balance. When a municipality with limited reserves finds itself in the throes of an emergency, officials may have to make painful budget cuts that deprive residents of needed services, or they may have to raise property taxes. A municipality may have to undertake short-term borrowings, which can raise costs and hurt its bond rating.
If a municipality carries too much fund balance, it runs the risk of angering taxpayers, who will perceive this as paying extra taxes now to benefit the future.
So what makes good fund balance policy?
According to the New York State Comptroller’s Office, an effective policy is written, formally adopted by the governing body with input from relevant officials, such as the municipality’s financial officer. The policy should be used to develop long-term plans, and should address how surplus balances should be used, as well as how and when to replenish fund balance that has been spent.
A sound fund balance policy provides a cushion against unexpected expenditures and revenue shortfalls, and ensures that government operations can continue even in difficult times.
Contact RBT CPAs, LLP with any questions you may have.
Municipal retirement incentives can be a solid strategy for a local government that seeks to generate revenues and cut expenses, but using this option requires research and planning to determine if it is right solution for financial circumstances.
Municipal retirement and separation incentives are making the news as county executives across the Mid Hudson region seek to trim budgets. In the wake of sales tax losses and delayed state aid during the COVID-19 crisis and shutdown, every dollar counts.
As an example, in late June, Dutchess County announced retirement incentives for employees who meet state pension system requirements, offering a bump to the county share of retiree health insurance premiums and either 10 years of fully covered vision and dental or a $10,000 incentive payment. Dutchess is also offering the option of a $20,000 lump-sum incentive to employees who retire, as well as to employees who opt for voluntary separation.
Dutchess expects the incentives to save the county between $8 million and $12 million.
The first step in determining whether a retirement incentive is right for a local municipality is to perform an analysis of your employee demographics. Once officials determine who is reaching or is at retirement age, they must consider the job and duties of the employees who might take an incentive. Is this a job where the employer will need to fill the vacancy, or it is a position that can be eliminated?
Whether a job’s duties are essential or non-essential factors into the decision. Police officers who retire, for example, may need to be replaced to maintain public safety. For other positions, departments may be able to combine duties to accommodate trimmed staffing, or find ways to automate services, such as online bill paying.
The analysis must be realistic and consider which retirees’ or open positions must be filled to continue providing needed services to taxpayers.
Local governments looking to offer incentives must also examine labor contracts and work out details with unions if bargaining-unit positions are affected.
Although retirement incentives are thought of as a near-term money-saving measure, their effects make them a longer-term measure.
Once officials have analyzed the workforce and weighed all of the information, they can then extrapolate potential savings versus the cost of incentives that will entice a sufficient number of employees to accept the offer.
Savings depends on the employee’s salary and when he or she accepts the incentive. For example, if workers retire effective July 1, the municipality will still have half of their annual salaries and benefits in the budget, helping to offset the cost of the incentives. Offering an incentive earlier in the year maximizes savings.
Officials must be sure that the savings created by the retirements or separations exceed the funds paid out to secure them.
The most obvious incentive is a cash payout. Orange County, for example, offered voluntary separation incentives of $10,000 for employees with 10-20 years of service, $12,500 for those with 20-30 years of service, and $15,000 for workers with more than 30 years. Orange coupled its separation incentives with a two-month voluntary layoff program that allows workers to collect unemployment.
Municipalities can also offer perks such as bonus payouts of unused sick or leave time, continuation of benefits, or reduced contributions towards benefits.
To offer incentives, the municipality must spend money. Optimally, a municipality will have cash savings from unexpended salaries and/or sufficient fund balance to pay out incentives. Otherwise, officials must take a hard look at the current budget, to look for efficiencies.
In determining the best course for using municipal employee retirement incentives, local officials must take a larger view of personnel and government functions. That assessment will determine how a government can most economically and efficiently provide the services constituents need and expect.
The coronavirus (COVID-19) pandemic has forced American businesses to adapt quickly to a radically new economic and operating landscape. If your company sells, manufactures, delivers, distributes or otherwise facilitates goods considered “essential” you may need to operate at full (or overtime) capacity. On the other hand, manufacturers whose goods aren’t deemed essential may be forced to idle their machines and close their doors indefinitely. (In many cases, state guidelines specify which businesses are essential and which ones aren’t.)
Both situations are challenging. But if you’re up and operating, here are four considerations to help you do so safely and productively:
1. Keep Workers Safe
The health and safety of workers has always been a priority for manufacturers. Now you must contend with the threat of COVID-19. If some of your employees can work from home, enable them to do so successfully by ensuring they have the technology and other resources they need. Even as states “open for business” again, consider keeping remote workers at home, if possible, until COVID-19 treatments or a vaccine are available.
For workers who must be on-site, consider scheduling skeleton crews in shifts and try to keep the same workers on individual crews to limit potential exposure. Also limit the number of managers working at any one time in production areas. Even if you normally operate nine to five, the transition to 24-hour operations may be easier than you think. Exercising flexibility helps lower the risk that the virus might spread. And if an employee does become sick, fewer coworkers will be required to self-quarantine.
Positive cases of COVID-19 exposure should be treated seriously. In addition to quarantining workers, you must thoroughly clean all production and office areas before allowing operations to resume.
2. Embrace Innovation
Doing things the way you always have may not be the best course right now. Instead, be ready to adapt and innovate whenever the situation calls for a different approach. For example, most manufacturing workers don’t work from home. But 3D printers may make it possible for some employees to produce goods while social distancing.
Or consider how your company might repurpose goods to meet new demands. As has been well-publicized, some companies are redeploying resources to produce ventilators and other needed medical equipment. In many cases, manufacturers may find it relatively easy to pivot to new production modes and goals. For instance, some distilleries are converting alcoholic beverages into disinfectants. Paper producers might ramp up production to meet increased demand for shipping boxes. And manufacturers already producing cardboard could redesign templates to make more “to-go” boxes for restaurants that have been forced to close dining areas.
Be sure you heed federal and state government mandates. Some companies may be asked to modify their operations so they can produce in-demand medical or cleaning products. Even if you aren’t required to change your operations, look for opportunities to address the current situation. Slight alterations could mean the difference between your products being deemed essential vs. non-essential. If you’re a link in an important supply chain, you may be able to make the case for continuing operations.
3. Plan for Financial Challenges
Your factory may be busy now, but there’s no guarantee that will be true in a few months. The financial ramifications of COVID-19 could be long-lived — and dire — for many businesses. Plan so that work slow-downs don’t sneak up on you.
Federal and state authorities have introduced various tax breaks, particularly for companies that keep workers on the payroll. The Families First Coronavirus Response Act made certain employers eligible for tax credits so long as they provide paid sick leave to COVID-19-positive employees or workers who have to stay home to care for sick family members.
The subsequent Coronavirus Aid, Relief, and Economic Security (CARES) Act authorized several provisions, including:
Delays for payroll tax obligations,
An employee retention credit,
Favorable tax provisions for businesses incurring losses, and
Expanded unemployment benefits for workers.
The CARES Act also launched the massive Paycheck Protection Program (PPP) that offers qualified businesses forgivable loans and other forms of relief for keeping employees on the payroll. After the available money ran out, Congress approved a second round of funding for the PPP in late April.
State and local support levels vary depending on the municipality. For example, your state may have removed some restrictions for businesses producing essential products.
4. Get Professional Advice
Your manufacturing management team doesn’t have to tackle the many challenges of the COVID-19 crisis alone. We have up-to-date information on federal and state benefits available to manufacturers. And we can help you navigate the lending landscape. For example, we can help identify appropriate lenders and prepare the calculations and statements required to apply for PPP loans. Don’t hesitate to contact us.
Crisis brings out the best — and worst — in people. Some dishonest people have already turned the coronavirus (COVID-19) pandemic to their advantage by preying on unsuspecting victims and exploiting their fears.
FTC Reports Rise in COVID-19 Scams
In the first quarter of 2020, the Federal Trade Commission (FTC) received more than 7,800 consumer complaints related to the coronavirus (COVID-19) crisis. That number is expected to surge, as the rate of complaints roughly doubled during the last week of March.
Top categories of COVID-19-related fraud complaints include:
Reports regarding cancellations and refunds for travel and vacation plans,
Problems with online shopping,
Mobile texting scams, and
Government and business imposter scams.
So far, the FTC reports that consumers have lost a total of $4.77 million from COVID-19-related frauds. The median loss is $598. If you encounter fraud related to the ongoing COVID-19 crisis, report it to the FTC.
“History has shown that criminals take every opportunity to perpetrate a fraud on unsuspecting victims, especially when a group of people is vulnerable or in a state of need,” said IRS Criminal Investigation Chief Don Fort.
Here’s an overview of six COVID-19-related scams and practical advice on how to avoid them.
1. Fake Charities
When a catastrophe like COVID-19 strikes, philanthropists flock to donate cash and other assets to help relieve the suffering. But, before making a donation, be aware that opportunistic scammers may set up fake charities to benefit from your generosity.
Fake charities often use names that are similar to legitimate charitable organizations. So, be sure to do your homework before making a contribution. Donors aren’t the only victims to these scams — those in need also lose out.
2. Stolen CARES Act Payments
The new Coronavirus Aid, Relief, and Economic Security (CARES) Act provides one-time direct “economic impact” payments to individuals and families. If you’re eligible, these payments are up to $1,200 for single people and $2,400 for joint filers, plus $500 per qualifying child under 17. They’re considered advances for a new federal income tax credit that’s subject to phaseout thresholds based on adjusted gross income (AGI).
People who are strapped for cash may be impatient to receive the money — and cyber-crooks know it. Scammers may, for instance, call or email you, pretending to be from a government agency like the IRS. Then they’ll ask for your Social Security number (SSN) in order to receive your check. Or they’ll say you must make a payment to qualify for the check.
The IRS warns that scammers may:
Use the words “Stimulus Check” or “Stimulus Payment.” (The official IRS term is economic impact payment.)
Ask the taxpayer to sign over their payment check to them.
Ask by phone, email, text or social media for verification of personal and/or banking information saying that the information is needed to receive or speed up their payment.
Suggest that they can get a tax refund or payment faster by working on a taxpayer’s behalf. This scam could be conducted by social media or even in person.
Mail the taxpayer a bogus check, perhaps in an odd amount, then tell the taxpayer to call a number or verify information online in order to cash it.
Don’t fall for these ploys! If you previously signed up to have your federal income tax refunds deposited into a bank account, your advance credit payment will come to you that way. If not, you may be entitled to receive a paper check through the mail. Either way, the U.S. Treasury won’t contact you over the phone or email you with a request for payment or sensitive personal data (such as a bank account or SSN).
3. Public Health Phishing
In a “phishing” scheme, victims are enticed to respond to a false email or other online communication. In COVID-19-related phishing scams, the perpetrator may impersonate a representative from a health care agency, such as the World Health Organization (WHO) or the Centers for Disease Control and Prevention (CDC). They may ask for personal information, such as your SSN or bank account, or instruct you to click on a link to a survey or an email.
If you receive a suspicious email, don’t respond or click on any links. The scammer might use ill-gotten data to gain access to your financial accounts or open new accounts in your name. In some cases, clicking a link might download malware to your computer. For updates on the COVID-19 crisis, go directly to the official websites of the WHO or CDC.
The IRS reports that its Criminal Investigation Division has seen a wave of new and evolving phishing schemes against taxpayers, and among the targets are retirees.
4. Retail Scams
In some parts of the United States, there’s little or no supply of certain consumable goods, such as toilet paper, hand sanitizer, antibacterial wipes, masks and paper goods. Scammers are exploiting these shortages by posing as retailers in order to obtain your personal information.
Con artists may, for example, claim to have the goods that you need and ask for your credit card number to complete a purchase transaction. Then they use the card number to run up charges while you never receive anything in return.
How can you avoid retail scams? Deal with outfits only if you know they’re legitimate. If a supplier offers a deal out of the blue that seems to be too good to be true, it probably is.
In other cases, online sellers are price gouging on limited items. If an item is selling online for many times more than the usual price, you probably want to avoid buying it.
5. Robo-Calls
Robo-calls may be increasing during the COVID-19 crisis. This scam has been tailored to fit the pandemic. For instance, callers may offer masks, testing kits and other COVID-19-related items at reduced rates. Then they’ll ask for your credit card number to “secure” your purchase.
A reputable company wouldn’t try to contact you this way. If you receive an unsolicited call from a phone number that’s blocked or that you don’t recognize, hang up or ignore it.
In addition, don’t buy into special offers for such items as COVID-19 treatments, vaccinations or home test kits. You’ll likely end up paying for something that doesn’t exist. There currently is no vaccine for COVID-19.
6. Bogus Business Emails
Businesses aren’t immune to COVID-19 frauds. Frequently, scams originate from emails instructing employees to remit goods, authorize transactions or provide proprietary data.
For example, an employee might receive an email that appears to be from the company’s president that directs the employee to transfer funds, wire money or take some other financial action. But the email is actually from a fraudster, hoping to steal money or gain access to the company’s computer system.
Under normal conditions, this type of phishing email might have raised some eyebrows. But COVID-19 has disrupted normal business operations and caused businesses to take extreme measures to protect assets and preserve cash flow. Companies may be especially vulnerable to these scams while employees work from home and don’t have the same access to management as they do during normal conditions.
Another type of phony business email appears to come from the company’s IT department. These messages might ask the recipient to provide his or her password — or to download software that turns out to be malware that infects the entire system. Employees who are stressed, overworked or sleep-deprived due to COVID-19 are easy targets for this scam — especially if an employee’s wireless home network is less secure than the company’s in-office network.
Education is the key to avoiding COVID-19-related frauds in the workplace. Remind employees about network security protocols and phishing scams during the pandemic. And provide tools that allow them to verify any communications that seem out of the ordinary and to report hoaxes as soon as possible.
Ongoing Team Effort
You’re not in this alone. The Federal Trade Commission (FTC) has ramped up efforts to protect consumers on matters relating to COVID-19. Visit the FTC’s website for more information about these types of scams and how to avoid them — or contact your financial advisors for additional guidance.
Businesses across America that have been shut down due to the novel coronavirus (COVID-19) pandemic may now (or soon) have the option to reopen.
Since no two businesses are alike — even those in the same industry and location — what makes sense for one company could be a disaster for another. But many questions that business owners are asking could be applicable to all organizations. Here are 10 questions to keep in mind as you decide whether and how to open up.
How will customers respond if you open your doors now? You can only make an educated guess, but this is perhaps the most crucial question of all. Let’s say you go to a lot of trouble and expense opening up, while assuming financial and health-related risks. If nobody seems to notice, that’s a big problem.
Can you modify your business model to improve your chances of success when you reopen? As we all know, many restaurants have been able to reopen (or remain open) by going into the carryout business. How might you change your business to accommodate customers whose needs or behaviors are different today? For example, would adding a delivery service be productive? Could you bolster your web presence to increase merchandise sales?
Should you offer new products and services? The pandemic is sure to change certain customer preferences and increase demand for products or services you could offer. What might they be?
Will your supply chain be ready to accommodate your needs? If you’re in a retail or manufacturing industry, there’s little point in reopening if you won’t have enough inventory to meet demand.
Will you need to do special promotions to lure customers back? Holding a “going back into business sale” might work for some enterprises. It may take an ambitious marketing effort to let former and prospective customers know you’re ready to serve them. How can you get through to your former customers?
What physical changes will you need to make in your business to keep employees and customers safe? Clear Plexiglas barriers are sprouting up in businesses everywhere to impede the spread of COVID-19. So, too, are measures to enforce social distancing, as well as enhanced cleaning services. Are you able to make such workplace adaptations?
Will your employees feel safe returning to your workplace? Already, some employees who have been asked to return to their former jobsites are balking due to fears of becoming infected. Some, including older workers and those with health conditions that put them at extra risk, may have legitimate concerns. Some of those employees may be forfeiting their jobs in taking that stance if they’re collecting unemployment benefits. And some employees may have legally protected rights to keep their jobs if you can make a “reasonable accommodation” (under the Americans with Disabilities Act) that makes them comfortable to return to work. If you are facing these issues, consult with your employment attorney.
Are you prepared to accept the risk that employees may contract COVID-19 at work? In terms of legal liability, you might be protected by heeding the advice of the Centers for Disease Control and Prevention and implementing their recommended safety measures, plus your own common sense. Be sure to document your efforts. If after returning to work, someone becomes seriously ill and it appears to be due to an exposure at your workplace, you may need to provide this documentation. Of course, even if you don’t face legal challenges, the predominant concern is the health and safety of your employees.
What are other businesses, including competitors, doing in your area? If you’re on the fence about whether to reopen, but your competitors are doing just that, you need to consider the risk of a long-term or permanent loss of market share. This assumes that customers are ready to return to the marketplace for your products or services.
What’s the cost of delay? If you have a lot of ongoing fixed expenses, such as rent, insurance, taxes and borrowing costs, every day you take in zero revenue puts you deeper in the hole. If instead your fixed costs are minimal, the current prospects of a rapid return to your pre-pandemic pace of business are slim, and competitors aren’t nipping at your heels, the cost of holding off on reopening may be small.
Final Thoughts
In the end, the choice you face may not be an all-or-nothing proposition. That is, you can begin to open the doors to your business a crack and wait to see what happens, before ramping up to your pre-pandemic operating capacity. That would certainly be a more prudent approach than staying closed or fully reopening.
