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The COVID-19 pandemic has changed this country’s economic marketplace in ways we can’t yet imagine. If you own a small business, are a contractor or gig worker or are self-employed, you may be riding this unexpected wave, not quite knowing where your business is going to land.
Despite all the uncertainty swirling around out there right now, you can take hold of the situation and make sure your business keeps its head above water. Here are some smart steps to make now that will also pay off after this crisis has passed.
Small businesses can live and die by their budgets in the best of times, but when the going gets tough, a solid financial plan is vital. Here are some tactics for cutting costs and getting the benefits you deserve.
The U.S. Small Business Administration offers Economic Injury Disaster Loans (EIDL) to small businesses facing a number of hardships, including COVID 19.
The Small Business Administration has comprehensive information about this loan program.
The low-interest COVID assistance loans are available to small businesses, nonprofits, and agricultural businesses with fewer than 500 employees. They’re designed to help with working capital as well as normal operating costs, such as rent, utilities, and continuing health care benefits.
State and communities across the United States are offering additional assistance programs for small businesses affected by the pandemic, so it’s worth checking to see what may be available.
Do you have an emergency budget on the books? If not, now’s a great time to create it. Even if you’re self-employed or a gig worker, you need to stick to a budget, and it’s a smart move to prepare for weathering emergencies like a worldwide pandemic or more common scenarios like floods, tornadoes, earthquakes, or other natural disasters that could shut down your business temporarily.
It means paring down your expenses to the bare minimum. Travel, big expenses like new equipment and, likely, hiring are frozen for the time being. The holiday party you had planned for your staff is probably canceled, too.
Look a little deeper, though, and you’ll find many other, less obvious ways to cut costs. Here are a few ideas:
When’s the last time you dusted off that policy? If you can’t remember, now’s the time to take a look.
You may have coverage for some of the losses you’re experiencing because of a business downturn or a complete shutdown due to COVID-19. Emphasis is on the word “may,” here.
Policies vary widely, but it’s worth a quick call to your agent to talk over your policy, its exclusions, and whether you’ll be covered for any losses you’ve incurred.
If you have a retirement account, great! If not, now is the time. Open a retirement account or evaluate whether you’re getting all the tax benefits you’re entitled to under your current plan. Let’s look into this in more detail.
[Related resource: The Tax Preparation Checklist]
Retirement accounts like SEP and SIMPLE IRAs, Solo 401(k)s, and others can offer potentially larger contributions and tax benefits each year, but what about Roth or traditional IRAs? The fact is, getting the most out of your tax benefits can be complicated.
With SEP and SIMPLE IRAs, Solo 401(k)s, and traditional IRAs, your out-of-pocket contributions are pre-tax, and may provide a tax deduction in the year of contribution. You’ll see tax-deferred growth until you start withdrawing during retirement, when the funds will be taxed as ordinary income.
The whole idea of Roth IRAs is switching that tax liability up to the front end, rather than the back. With a Roth, you make your out-of-pocket contributions after-tax, so you don’t get any tax deduction upfront. Your qualified distributions and withdrawals are tax-free.
Uncertain times don’t have to mean uncertain finances. At Equity Trust, we’re here to help. Find out more comprehensive information in our “Guide to Self-Directed Accounts & Taxes.”
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