CARES act and CRD eligibility

Submitted by Doug Stecklein on Mon, 2020-05-04 18:23

I own a house painting company and am unsure whether I qualify for coronavirus related distributions.
We are only 1 month into our painting season but we have already had 5-6 jobs(2-3 weeks of work) postpone or cancel.
We typically have a 3-4 month backlog of customers so I could potentially lose 3-4 months of jobs without reducing hours.
My fear is that with customers continuing to cancel we will lose our backlog of customers that we have worked for so many years to amass and be more susceptible to financial hardships in the future.
Am I correct In thinking we will still not qualify for CRDs under the current eligibility wording?
Thank you,
Doug



Submitted by William Tuttle on Mon, 2020-05-04 20:39

The wording seems very clear. Only the “closing or reducing hours of a business owned or operated by the individual”, would qualify for a CRD. Any reduction in a backlog would not matter. Congress or the IRS could issue guidance expanding on the definition of “adverse financial consequences. However, I think it is unlikely that would include a backlog.

Submitted by Alan - IRA critic on Mon, 2020-05-04 21:07

As a small business owner, you have a lower bar to qualify since no particular person must be diagnosed with Covid. You should be able to document a few of the cancelled orders as due to Covid or fear of Covid. A somewhat larger stretch is fear of spending the money due to the expected financial damages they expect from Covid. Or you could wait to see how the IRS might expand the reasons to clearly qualify, and it is widely expected that they will.

Submitted by William Tuttle on Mon, 2020-05-04 21:27

I see nothing in the list of adverse financial consequnces that would have anything to do with cancelled orders. Only if that resulted in the business having to close or actual current reduction of  business work hours would apply. Any reduction in back log would not qualifiy.

Submitted by Alan - IRA critic on Mon, 2020-05-04 23:44

  • Yes, I overlooked the implications of “in the future”.  There are still gray areas, but if the hours are eventually reduced due to lack of business from cancellations THIS SEASON there will be adverse financial consequences. On the other hand, if gross receipts are in the range of prior years, there is no current adverse consequence to justify a CRD. I would ignore backlogs for this purpose, as they are just a form of insurance you don’t need until your gross receipts drop from lack of work. At that point your hours and income are reduced and you become analagous to the furloughed employee. 
  • Another judgement area is the term “due to Covid” and how directly that should be applied. If the business was a restaurant and a “stay at home” order was in force, the restaurant would have to close or cut hours as a result. For house painting, are these jobs interior or exterior?  In most areas, interior painting jobs would be gutted by the virus, while exterior would not unless you were in a state that did not treat such painting as an “essential business”. Therefore, this entire definition needs IRS guidance or there will be a wide range of gray area interpretations. 
  • In prior disaster declarations, you did not even need to suffer physical damage. You just had to be in the listed counties. With Covid, everyone except perhaps grocery stores and a Covid related medical staff suffer adverse financial consequences to varying degrees. 
  • For the OP, unless your annual gross receipts fall quite short of your prior years average, you wouldn’t qualify. If they do fall short due to continued cancellations, you will know in time to request a CRD, as that deadline is 12/30/2020.

Submitted by Alan - IRA critic on Tue, 2020-05-05 19:42

The CARES Act does not indicate any specific number or length of reduced hours to qualify for employees or business owners. The IRS released some info yesterday that indicated they were seeking public comment regarding qualification guidelines and they know the issue is time sensitive. But the public comment time will delay these regulations somewhat. I would just keep documenting the loss of hours and connection to the virus while you wait for specific IRS guidance, hopefully specific to your situation. Unless they broaden CRDs to just about everyone, there are still going to be gray areas in which people will have to decide on the risks of aggressive interpretations.

Submitted by Doug Stecklein on Tue, 2020-05-05 19:46

 We had 2 customers postpone and 1 cancel in the span of a week, all due to Coronavirus, and we were unable to work for 2 days during that week because we didn’t have anyone available to move forward to fill in the hole it left in our schedule.  Is that enough in reduced hours to qualify?If not, I may just wait to see if the IRS expands on their reasons for eligibility. EDITED:Sorry, just refreshed and saw your last reply Alan.It sounds like you think they will determine our eligibility based on reduced hours or closing by comparing this years revenue to last years revenue.If that is the case I will most likely not qualify.  We had a horribly rainy year last year that resulted in our lowest revenues since 2008.  

Add new comment

Log in or register to post comments