The Dreaded Coronavirus & How It May Affect Your Business
Coronavirus is a major concern across the globe right now. Not only does the virus put yourself, friends and family members health at risk, but it also has the potential to cause your business lose money. Cancellation of events, avoidance of public places by many and getting sick with the virus yourself are all very real concerns that will cause your business to lose money over the Coronavirus.
The CDC has recommended that events with large gatherings of people should be postponed or canceled in order to help stop the spread of the virus. Parades have been canceled, sporting leagues have ended their seasons early and many people are being encouraged to work from home. For our party rental customers, this may mean you have received deposits for events such as carnivals or birthday parties that are now canceled due to the virus.
Event Cancellation Insurance
If you purchased an Event Cancellation policy prior to the outbreak event cancellation, you should be covered as long as there is no exclusion for infectious diseases listed on your policy. Unfortunately, for those wanting to purchase event cancellation insurance now that the outbreak has already started, the policy will not offer any protection from the Coronavirus. However, you can now see why event cancellation insurance can be so important and it may be a good idea to look into for the future.
Worker’s Compensation Insurance
If the employee was exposed to the virus at the workplace and contracts the illness, they may be eligible for coverage under your Worker’s Compensation insurance. If you don’t have Worker’s Compensation insurance and you have employees, this coverage is a must. In fact, it is required by law in most states.
Communicate with your accountant / CPA
Your accountant/CPA can let you know if your business is operating on the cash basis or accrual basis of accounting. Then they can determine if they have picked up the payments in revenue. If so, and they have to send the money back , they should be able to expense and/or offset revenue. Its important they distinguish between deposits and refunds of money etc.
Deducting income loss with the IRS
If they haven’t picked up the cash they received in income, there is no deduction because no income was picked up in the first place. Also, IRS does not allow for a deduction for economic loss. For example, if a business shuts down in a month they typically earn $100, they don’t get to deduct the lost potential.
Bouncing Back from Income Loss
Review End of the Year Transactions
Businesses should look at transactions around year end. Depending on their accounting procedures and policies, its possible that they took in cash or recognized revenue that they won’t realize. Again, they should consult with their accountant to see if they should be picking up all the income etc based on the facts and circumstances.
Tax Relief & Other Assistance from the Government
Congress is proposing many changes related to payroll taxes, possible tax filing/payment extensions due to the pandemic. President Trump is also looking into to some kind of financial relief for businesses affected by the Coronavirus outbreak. Hopefully one of these changes will be able to lessen any financial hardships you may be facing due to the Coronavirus.
Property Casualty 360. “Insurance may cover these coronavirus-related scenarios”. https://www.propertycasualty360.com/2020/03/10/policies-may-offer-limited-coverage-for-these-coronavirus-related-scenarios-414-173660/?cmp_share=share_facebook&fbclid=IwAR2z8pkALvZNMwoK0Et8n6RvBirZM6LGztRGe6ohG7IX2n91t52le201tjs . March 10, 2020