How COVID-19 Has Changed the Future of Money

COVID-19 has spread across the world and closed down businesses everywhere. There have been changes to the world in ways that we never could have imagined. It will have a major impact on the way businesses and individuals handle money.

credit card changes the future of money due to covid-19

Consumer Spending

Spending is low in most industries because of lockdowns and limited locations being open. Some particularly low industries are travel and transportation, apparel, and services. Consumers are expecting lower household incomes for the upcoming months, so money spending is focused on necessities. The uncertainty causes irregular buying behaviors. These behaviors have businesses scaling back on production. 

Industries that have been thriving include grocery stores, house supplies, and at-home entertainment. This is caused by the increased amount of time people are spending indoors. Consumer spending drives economic growth. Although it is positive that these industries are still doing business, it is vital to the economy that other industries pick back up again. 

It is unknown if buying behaviors will go back to normal or not. Gyms may not completely recover because of the increase in at-home workout equipment and virtual fitness subscriptions. Restaurants have lost tons of money from canceled trips and lack of orders. Without a steady income, many of these businesses have had to permanently close their doors. 

Retirement Plans

The CARES Act made three changes to certain retirement accounts. These changes have increased the number of early withdrawals to people’s retirement plans.

  1. It doubled the amount a person can take out as a 401(k) loan. 
  2. It allowed people to take early hardship withdrawals of up to $100,000 from 401(k)s and IRAs in 2020 without paying a 10% penalty before the owner turns 59 1/2.
  3. It allowed retirees and those who have inherited IRAs to skip taking a required minimum distribution (RMD).

This may cause people to feel more comfortable taking out extra money when the CARES Act is not in place. There are rules and restrictions on that you can find here. 

Cash Payments

Many stores started to only take plastic cards and virtual payments like Apple and Samsung Pay. This is one way to reduce the spread of germs. There might be a shift in some of these places to only accept these payments over cash permanently. Some people have opted out on using cash on their own for the same reasons- to flatten the curve.

Other businesses have completely reduced contact with payments. Their solution to this is mobile payment applications. Venmo and Cash App are two increasingly popular examples of this. These apps are easy to download. After the pandemic, people will be more likely to use this form of payment after they feel more comfortable and trust that it works. 

Future of Money

Businesses need to adapt to the changing world. Changes in spending habits, retirement plans, and cash payments are some ways COVID-19 has affected money. We can help you navigate the future of your business’s money. Serving the Baltimore area for several years, we are dedicated to providing customized services to fit each one of our client’s unique needs. 

Please contact us at (410)-764-3731 or at https://www.plcfo.com/contact/ for questions or to book an appointment.

How to Take Action in Uncertain Times

 

Show customers that you are resilient during uncertain times. Keep your business thriving instead of shying away from running your business altogether. Although it may seem challenging, there is always an opportunity waiting to happen. Follow these steps to get your business on the right track during this unprecedented time. 

Host Virtual Workshops

 

While most people are staying home, they are looking for virtual events to attend. These events can be free or paid. Host a workshop that teaches something that resonates with them and the current situation that we are in. 

 

Provide a call-to-action at the end of the workshop. An idea for this could be to link a landing page on your website that provides them with further information on the topic. You could also give out a coupon code for those that attended the workshop as an incentive to purchase from your business. This can land you new customers and keep your current customers satisfied.

 

Reach Out to Customers 

 

Call, email, text, or send a letter to current and past customers. See how your customers are doing and offer them support. It is okay to continue to sell your product or service, as long as you are not pushy with those that are not ready to buy. You may need to tailor your messaging to fit with what is happening right now. Be sure to share it promptly so that it fits with their current mindset.

 

Build Your Relationship With Vendors

 

Build relationships with vendors in your industry. Keep in mind that relationships take time to establish. Introduce your business, ask how they are doing, and let them know you are here for them if they need anything. These connections can lead to future partnerships or collaborations. Collaborations can be on products, virtual workshops, or campaigns to give back to the community. 

 

Focus On the Positive

 

Instead of looking at what your business does not have, find what it does have. Use your available resources to create an innovative campaign, socially safe service, or useful product. Show your community that you are a leader by controlling the situation to the best of your ability.

 

Create New Opportunities

 

Utilize these uncertain times to create opportunities for your business. Take an inventory of what your business currently offers. This can be tangible or intangible. Does this offering benefit your business and its customers? You may need to add, change, or remove parts of your inventory to increase your business’s value. Try incorporating customer engagement in these new opportunities. This increases the business to consumer interactions.

 

Take Action

 

PL Consulting has taken action in these uncertain times. We can help you navigate the future of your business. Serving the Baltimore area for several years, we are dedicated to providing customized services to fit each one of our client’s unique needs. 

Please contact us at (410)-764-3731 or at https://www.plcfo.com/contact/ for questions or to book an appointment.

 

Employers Can Defer Employment Tax Deposits Until Payment Protection Program Loan is Forgiven

 

April 2020 – The IRS has issued frequently asked questions (FAQs) on the payroll tax deferral opportunity provided by the Coronavirus, Aid, Relief, and Economic Security (CARES) Act (Public Law 116-136). Under that provision, employers of all sizes (including tax exempt/non-profit employers) can defer the deposit and payment of the employer’s share of Social Security taxes. Self-employed individuals can also defer payment of some self-employment taxes.


Background

 

To help employers conserve cash while retaining their workforce, Section 2302 of the CARES Act allows all employers to defer depositing the employer’s share of Social Security taxes for payments due from March 27 (CARES Act enactment date) through December 31, 2020. Generally, employers are required to deposit timely 6.2% of employee wages up to $137,700 (which is the 2020 Social Security wage base), along with 1.45% of Medicare (or “hospital insurance”) taxes (with no wage base cap). But Section 2302 of the CARES act allows employers to defer depositing the 6.2% of wages, interest-free and penalty-free. Payment of half of the amount deferred is due on December 31, 2021, and the remainder is due on December 31, 2022.

Insight

 

  • Employers’ 1.45% Medicare tax cannot be deferred under the CARES Act and must be deposited unless it is being used to offset payroll tax credits allowed under the CARES Act or the Family First Coronavirus Response Act.
  •  There is no application form or approval procedure to use the payroll tax deposit deferral. Rather, employers simply do not remit the amount that would otherwise be due. IRS will update the Form 941 for the second quarter of 2020 to track the deferred deposits.
  • While not addressed by the IRS in the recent FAQs, it appears that an employer who paid their social security tax liabilities due on or after March 27 could take advantage of the full deferral amount allowed by recovering the previously paid, but not required, amounts from other 2020 federal tax deposits. Employers using third party payroll-providers should discuss system capabilities and procedures for taking advantage of the allowed deferral and the possibility of recovering any previously paid amounts that were eligible for deferral.

Coordination With PPP Loan Forgiveness

 

There was some confusion over whether employers who obtain a Paycheck Protection Program (PPP) Small Business Administration (SBA) loan could use the payroll tax deferral, since Section 2302 of the CARES Act states that employers who obtain forgiveness of a PPP loan may not defer deposit of payroll taxes. The FAQs clarify that employers who obtain PPP loans may defer deposit of payroll taxes until such time that the employer receives a decision from its lender that all or any portion of their PPP loan is forgiven.

 

Once loan forgiveness has occurred, the employer must resume timely payroll tax deposits. The FAQs confirm that the amount that was deferred through the date that the loan was forgiven will continue to be deferred. Accordingly, half of the deferred amount will be due on December 31, 2021, and the other half will be due on December 31, 2022.

 

Insight

 

To maximize the payroll tax deferral opportunity, employers with PPP loans may wish to consider delaying their request for PPP loan forgiveness until December 31, 2020. PPP loans are for two years, at 1% interest and do not require any payments during the first six months. Employers can request PPP loan forgiveness for qualified payroll costs and certain other expenses incurred during an eight-week period beginning on the date they receive the loan proceeds (lenders must disburse proceeds within 10 days after the loan is approved). Lenders generally have up to 60 days to consider the loan forgiveness.  There does not appear to be any time limit for when an employer could submit its request for loan forgiveness, and many will wait until after June 30, 2020, to take advantage of provisions that maximize loan forgiveness.

 

For example, if an employer submits a request for loan forgiveness on July 15, 2020, the lender could forgive the loan anytime through September 15, 2020. Assume the loan is forgiven on August 15, the employer could no longer defer payroll taxes from August 15 through December 31, 2020. But if the employer does not request loan forgiveness until December 15 (and assuming the lender does not forgive the loan until early 2021), the employer could continue deferring payroll taxes through December 31, 2020.