A few days ago, I noticed some unusual charges on one of my credit cards, including a $60 charge for Chipotle, which, while delicious, is not an establishment I have been frequenting during the quarantine. (Although I really could go for a carnitas bowl right about now.) It only took me a few minutes to realize that my card had been compromised, and the thief was using it without my authorization. 

Credit card theft is frustrating in ordinary circumstances, but even more annoying during a global pandemic that has left my husband, also an attorney, and I working from home full-time while taking care of our two young children.  Fighting fraud is the last thing I want to be doing. 

A few days later, I received an email from a company that provides continuing legal education, informing me that someone had hacked their system. The company told me that someone had gotten access to their customers’ credit card information, including mine. It made me realize that everyone, including lawyers (who often think they are savvier than the common or even technologically sophisticated criminal), is susceptible to fraud and scams.  

Now, in the time of COVID-19, we are even more vulnerable to data privacy scammers and cyber attackers who are taking advantage of those who are already facing financial, emotional, and personal difficulties brought on by the global health crisis.   

Many federal agencies have created websites to help consumers identify fraud and scams so that they can avoid them or seek help if they fall prey to the schemes, including the 

What types of scams and fraud should I be looking for?

Since COVID-19 began, several kinds of fraud and scams have surfaced, including:

  • offers for fake cures, vaccines, and unproven treatments
  • fake shops and websites offering to sell high demand medical supplies like masks and hand sanitizer;
  • fake testing kits
  • charity scams
  • phishing scams where scammers to trick you into clicking on or downloading a link that allows them access to your computer and any personal and financial information you have stored
  • phone calls and emails asking for personal and financial information in exchange for help applying for things like grants, stimulus checks, loans, or unemployment compensation, etc.
  • fraudulent offers for medical advice or COVID-19 testing in exchange for Medicare beneficiary information that the scammer then uses to file bogus claims, and
  • investment scams asking you to invest money in publicly traded companies that the scammer falsely suggests will be able to prevent, cure or detect COVID-19

Unfortunately, this list is not exhaustive of all of the types of scams and fraudulent schemes that are out there. As fast as criminal scammers can develop their schemes is as fast as consumers face the threat of falling prey to their tactics.  

How can I protect myself from falling for a scam or fraudulent scheme?

The various federal governmental agencies listed above have also provided guidance on how to avoid falling for COVID-19-related scams. Their advice includes taking some or all the following steps:

  • Independently verify the identity of any company, charity, or individual that contacts you regarding COVID-19. Do not rely on the person contacting you to verify their identity. Independently search for the organization or individual and call them to verify the information.  
  • Check the websites you are directed to. For instance, the CDC’s website is cdc.gov. A scammer may try to entice you to visit a fraudulent website, like cdc.org, that is similar but not the real website.
  • Question any unsolicited offers for supplies, treatment, or other assistance, especially if they ask you for any personal or financial information.
  • Do not click on links or open email attachments from unverified or unknown sources.  
  • Ignore offers for COVID-19 treatment, tests, or cures that do not come directly from your trusted health care providers.
  • Be wary of any organization that asks you to provide payment or donations in cash, wire transfer, gift card, or through the mail.  
  • Hang up on illegal robocalls.

Who can I trust?

If you are concerned that something sounds like a scam, it probably is. Stick to obtaining information from trusted sources, including:

As always, be cautious of anything that seems suspicious or too good to be true. It is important to remain vigilant — both now and after the COVID-19 crisis is over — to make sure that you are taking all of the steps necessary to protect yourself and your finances. The last thing you need amid dealing with this global health crisis is to put your personal information or finances at even greater risk.

Laura McGarry is an attorney at Russell, Krafft and Gruber, LLP in Lancaster, Pennsylvania. She received her law degree from Penn State Law and provides legal counsel to individuals and businesses in Lancaster and surrounding communities.

The federal government has taken significant steps over the past weeks to provide relief to individuals and businesses struggling to manage their finances during the COVID-19 crisis. The first of these, the Families First Coronavirus Response Act (FFCRA), went into effect on April 1.  

Most notable of the provisions in FFCRA were the requirements for employers with fewer than 500 employees to provide paid sick leave and expanded FMLA leave for employees who missed work for COVID-19-related reasons. 

Closely behind that came the Coronavirus Aid, Relief, and Economic Security (CARES) Act. CARES rolled out payments to individuals, tax credits to businesses, and loans through the Paycheck Protection Program (PPP) to encourage employers to retain or bring back their employees.  

While the relief provided by these Acts is significant and will help countless businesses handle the uncertainties that lay ahead, they also present potential challenges for employers as they try to navigate these various programs and determine which ones are right for their business. These two Acts also interplay and overlap on employee wages in complicated ways. Businesses should review both carefully to make informed decisions about which programs or credits to participate in and understand whether that disqualifies them from other forms of relief.

The Department of Labor and the IRS have been releasing further guidance, seemingly by the day, to clarify the relationship between the FFCRA and the CARES Act. The most helpful of these thus far are:

Notably, participation in one program can disqualify or limit your relief in another.  

Here’s how:

The FFCRA Employee Retention Credit Overlaps with its own Paid Sick Leave Provisions

The FFCRA provides for an Employee Retention Credit in the form of a refundable tax credit against payroll taxes for qualified wages paid to employees. 

Similarly, the Paid Sick Leave provisions of the FFCRA also provide for a refundable tax credit for employers who pay sick leave to employees who miss work for COVID-19-related reasons.

IRS guidance is clear, however, that employers cannot use the same wages to qualify for both credits.

The FFCRA Employee Retention Credit Overlaps with the CARES Act’s PPP Loan and Small Business Interruption Loan

An employer who receives a CARES Act PPP Loan or a Small Business Interruption Loan may not also 

  • receive the FFCRA Employee Retention Credit or 
  • use those funds to pay sick leave to an employee and also take a credit against payroll taxes.

In other words, a business that receives a PPP Loan can still take a tax credit for qualified paid sick leave wages. However, they cannot then use those wages for the sick leave credit and count that toward the loan forgiveness offered under the PPP loan. 

The FFCRA also contained a provision that allows employers to defer certain portions of their payroll taxes on wages paid between March 27, 2020 and December 31, 2020. An employer can then pay the payroll taxes they chose to defer over the following two years.  

It is not yet clear whether employers who receive the Employee Retention Credit against payroll taxes or those that receive a PPP Loan can also defer their payroll taxes. The IRS needs to supply further guidance on that question.

These are just some of the many entanglements between the relief packages stemming from the COVID-19 pandemic. While many businesses are looking for relief wherever they can find it, you must educate yourself and make informed decisions about the types of relief that will work best for your business and your situation.  The attorneys at Russell, Krafft, & Gruber, LLP are here to assist you in sorting out what is best for you and your business.

Aaron Zeamer is an attorney at Russell, Krafft & Gruber, LLP, in Lancaster, Pennsylvania. He practices in a variety of areas, including Business Law and Liquor License matters. Aaron works frequently with commercial real estate agents, brokers, restaurant and bar owners, breweries, distilleries, and wineries to facilitate the sale and transfer of PA liquor licenses.

If you’ve been watching the news or checking social media at all over the past few weeks, you already know that Americans will be receiving a stimulus payment (economic relief payment) to help ease the financial burden caused by COVID-19. How you filed your last tax return will determine both the payment amount and the way you receive it.  To learn how much you can expect to receive and how to receive your payment as quickly as possible, check out my colleague’s post about the tax stimulus payments

But what will happen to your economic relief payment if you are going through a divorce or separation? 

The scenarios will look different depending on your situation. However, in each scenario discussed below, one issue remains the same: how the courts will disburse the payment between separated or recently divorced spouses. 

In many divorce matters, the courts split tax returns between the parties as part of the divorce settlement. This stimulus payment would be no different. You just need to determine how that split will look. It may be an equal split where each of you gets half. Or, it may look a little different. 

If you and your spouse can resolve the matter between yourselves amicably, that is the best path to take.

If you are working with an attorney, they can help you choose what to do. Although we have closed our physical office, the attorneys at Russell, Krafft & Gruber, LLP are ready to help.  

Let’s dive deeper into what can happen in five different scenarios.

Scenario 1: My spouse and I have separated since filing our last tax return

Assuming you filed a joint return for 2019, the IRS will use both your incomes to determine your payment amount and will direct deposit your payment into the account listed on your last return as long as it remains open. Presumably, that is a joint account. If you have closed that account, the IRS’s Economic Impact Payments site will allow you to provide updated account information.  

If you have not yet filed your 2019 tax return, you may be able to file it now as single or separate and have your status changed before the IRS issues the payment, although this is not guaranteed. Even if you have not filed your 2019 taxes yet, the IRS may still base your payment on your 2018 filing status and income.

Scenario 2: My spouse and I have filed for divorce since filing our last tax return

This scenario isn’t much different than the one above. If you previously filed a joint return, the IRS will use both incomes in calculating the amount and will deposit your money into whatever account you listed at the time.  

Make sure you verify what account that is because there is a good chance that the payment will go into a jointly owned bank account or an account you have closed. If so, you should also update your banking information on the IRS’s Economic Impact Payments site.

Scenario 3: My divorce was recently finalized

For the recently divorced, how your stimulus payment will be calculated depends on the filing status of your last return. If your most recent tax return was filed individually, it should be smooth sailing for you as you and your ex-spouse should both get your separate payments.  

If you filed your last tax return as married filing jointly, there is a good chance that the payment will either go into an account that has been closed or is now owned by either you or your ex-spouse individually. We recommend talking to your ex-spouse about how you are going to handle it. If that’s not an option or you can’t agree, reach out to an attorney for help.

Scenario 4: My spouse is behind on support payments through the Office of Domestic Relations

If your spouse or ex-spouse is behind on support payments, their stimulus payment may be reduced or they may not get one at all.

In this case, the Department of Treasury should deduct the stimulus payment of the spouse who owes support and redirect that payment to the spouse to whom the support is owed. If you think that you are entitled to this type of payment and have not received it, you may want to reach out to an attorney to discuss it in greater detail.

Scenario 5: Our last return listed an account that’s no longer correct

If you haven’t yet filed your 2019 return, do it now and update your account information as soon as possible! The IRS is working on an application that will be called Get My Payment. It is expected to become available by mid-April, so hopefully any day now! You should be able to access it also on the Economic Impact Payments page once available, so keep checking back!

If you’ve already received your stimulus payment and your spouse or ex-spouse is refusing to share it, you are not necessarily out of luck. Reach out to an attorney because there are things that can be done to ensure you get your fair share.  

How do we divide the stimulus payments for our children?

The government will also be distributing stimulus payments of $500 for each qualifying dependent child. The child stimulus payments may create additional questions: How will this be distributed between the parties? What impact may this have on child support?  

Unfortunately, we don’t have all these answers now, but we are keeping our eyes on all new developments. I will discuss how divorced couples can split the child stimulus payments in a future blog, so keep checking back!

………………………………………….

We are learning additional information on these topics and more on a daily basis. All of the attorneys at Russell, Krafft & Gruber, LLP are busy blogging to keep our community informed. To stay up to date on the latest, please follow Lancaster Law Blog.

If you are facing an emergency that requires court intervention, whether it be a family law emergency, contract dispute, landlord/tenant matter or something else, contact Russell, Krafft & Gruber, LLP to discuss your options with one of our attorneys. Although we have closed our physical office, our virtual office is open for business.

Kathleen Krafft Miller is an attorney at Russell, Krafft & Gruber, LLP, in Lancaster, Pennsylvania. She received her law degree from Widener University and practices in a variety of areas.

Nichole M. Baer profile pictureThe attorneys of Russell, Krafft & Gruber, LLP are pleased to welcome Nichole M. Baer to their legal practice. Nichole is a graduate of Pennsylvania State University and Stetson University, College of Law.  While in law school, Nichole interned with the Honorable Amy Williams, an appellate judge for the Sixth Judicial Circuit of Florida and was Treasurer of the Intellectual Property Club.

Nichole concentrates her practice in Business Law, Trademark, Estate Planning and Administration, and Real Estate, providing clients with targeted and effective legal representation.  Nichole’s experience in several practice areas enables her to use a holistic approach to assist clients, recognizing that each client’s needs and wants differ. Each of Nichole’s clients is provided a personalized legal plan, regardless if that plan is an Operating Agreement, a Trademark, resolving issues with the Department of Revenue, a real estate settlement, or drafting estate planning documents. In each case, clients receive personal attention and results that are tailored to their unique situation.

Nichole is currently the Co-Coordinator for Lancaster County’s Wills for Heroes Program.  She also serves as a Community Service Committee Member for Lancaster Young Professionals and a Resource Development Committee Member for the Community Action Partnership of Lancaster County.  She is a current member of Lancaster Young Professionals, Lancaster Bar Association, and Referral Partners Plus.  She is the past Real Estate chair for Lancaster County Bar Association and a former Co-Coordinator for Lancaster County’s division of the High School Mock Trials.

On April 10, 2020, the IRS further extended filing deadlines and payment obligation due dates for federal tax returns. They have extended this change to any person who has a tax obligation due on or after April 1, 2020 and before July 15, 2020.  

How can I receive the extension for federal tax returns?

Conveniently, the extension is automatic so there is no need to call the IRS, file extension forms, or send documentation to receive the extension. This extension applies to all obligations due during that time period originally or pursuant to a valid extension.  

However, if a person believes they will need additional time beyond July 15, 2020, the appropriate extension form should be filed before July 15, 2020. 

Any extension granted beyond July 15, 2020 will not go past the original statutory or regulatory extension deadline. So if a person would not otherwise be allowed an extension past July 15, 2020, they cannot file for an extension past that date.

What about other time-sensitive deadlines?

Assuming the action was not due before April 1, 2020, the IRS has also extended the deadline for all time-sensitive actions until July 15, 2020. 

This includes:

  • filing all petitions with the Tax Court
  • the review of a decision rendered by the Tax Court
  • filing a claim for credit or refund, or 
  • bringing suit for the credit of a claim

If the deadline to file for a credit was March 30, 2020, this extension does not cover that credit.  

So what filings does this extension cover?

  • Individual income tax returns and payments
  • Calendar year or fiscal year corporate tax returns and payments
  • Calendar year or fiscal year partnership tax returns and payments
  • Estate and trust income tax returns and payments
  • Estate and generation-skipping transfer tax returns and payments
  • Gift and generation-skipping transfer tax returns and payments
  • Estate tax payments of principal or interest due as a result of certain elections
  • Exempt organizations’ business income tax returns and payments
  • Excise tax payments on investment income
  • Quarterly estimated income tax payments

What else should I know?

The IRS is encouraging those who can to file electronically as soon as possible, especially if a refund is due. The IRS is still processing refunds and working on getting them out as soon as possible. 

Most, if not all, physical IRS locations are closed, which has impacted their receipt of physical returns sent via private delivery services. However, if you mail an item according to the proper rules, the IRS will consider it timely filed based on the mailing date regardless of the date it is actually received.

In the meantime, individuals can look forward to their Tax Stimulus Checks established by the federal CARES Act. 

For more information or updates, check out the IRS Coronavirus Tax Relief page. These extensions and deadlines are subject to change as the coronavirus’s impact continues to spread.

Lindsay Schoeneberger is an attorney at Russell, Krafft and Gruber, LLP in Lancaster, Pennsylvania. She received her law degree from Widener University School of Law and practices in a variety of areas, including Estate Planning and Estate Administration.

On April 10, 2020, the GIANT Company and Team Pennsylvania, announced a $250,000 emergency grant program for companies in the food supply chain. The program will support farms, processors, and other small food businesses that are impacted by COVID-19.

If you are interested, the deadline is short, so you must complete the application quickly. 

They are accepting applications online only through April 24, 2020.  

The GIANT Company and Team Pennsylvania developed this grant program in consultation with

  • the Pennsylvania Department of Economic and Community Development
  • the Pennsylvania Department of Agriculture, the Pennsylvania Chamber, and
  • the Pennsylvania Food Merchants Association

Those eligible include any Pennsylvania small business of 250 employees or less that operate in the Pennsylvania food supply chain, including businesses that grow, make, or process food. The maximum grant is $15,000 per company. They will announce and distribute these grants to small businesses in early May 2020.  

To apply for this grant, a business owner will need to supply the business’s

You can submit any questions to Team Pennsylvania at Agriculture@TeamPA.com.  

If you need additional funds, take a look at the SBA’s Economic Injury Disaster Loan or Payment Protection Program.

Nichole Baer is an attorney at Russell, Krafft & Gruber, LLP, in Lancaster, Pennsylvania. She received her law degree from Stetson University, College of Law and practices in several areas including BusinessCommercial Real EstateEstate Planning, and Estate Administration.

The U.S. Congress, as part of the CARES Act, has created the Paycheck Protection Program (“PPP”) to provide loan funds to small businesses to increase employee payroll retention during the COVID-19 pandemic. The program even offers forgiveness for the loan under certain conditions. 

Small businesses under 500 employees (including sole proprietorships, independent contractors, and self-employed persons), private non-profit organizations, or 501(c)(19) veterans’ organizations, and tribal businesses are eligible under this program if they meet certain program requirements.  

The SBA is also waiving affiliation standards for small businesses in the hotel and food industries or franchises in the SBA’s franchise directory. What this means is small businesses in the hospitality and food industry, along with franchises approved by the SBA that have more than one location, will be eligible at the store/location level if that location employs less than 500 workers.  

Where To Use

Applicants can use a PPP loan for 

  • payroll costs, including benefits
  • interest on non-federal mortgage obligations incurred before February 15, 2020
  • rent under a lease agreement in force prior to February 15, 2020, and 
  • utilities, with service that began before February 15, 2020.  

Payroll costs and benefits include 

  • salary 
  • bonuses
  • vacation time
  • parental or family leave
  • medical or sick leave
  • allowance for separation or dismissal
  • group healthcare
  • insurance premiums
  • retirement benefits, and 
  • state and local taxes.  

Application Process

Starting April 3, 2020, small businesses and sole proprietorships can apply for a Paycheck Protection Program loan. Independent contractors and self-employed individuals can also apply starting on April 10, 2020. 

The SBA is offering PPP loans through June 30, 2020 or until the funds run out, whichever occurs first.  

To apply for a PPP loan, a Borrower must seek out an existing SBA 7(a) lender. If a Borrower is not aware of an SBA 7(a) lender, they should first contact the bank they currently use and see if their bank qualifies. Otherwise, Borrowers can go to http://www.SBA.gov/pa and look at “Loan Volume Report” to see what banks are lending SBA 7(a) loans in Eastern PA (look under heading “From Our Office” of the page).  

Please be aware that not all banks who are SBA 7(a) lenders are offering this loan, so it may take some work to find one.          

The SBA included a sample application form that you can review to know what information the SBA needs. To apply, a business will need at minimum:

  1. the average monthly payroll
  2. the number of jobs
  3. the purpose of the loan 
  4. applicant information (EIN/SSN, address, owner name, etc.)
  5. the operating agreements/organizational documents
  6. payroll documentation (As each lender will require different documentation, we recommend pulling everything for the past year in preparation of what the lender will ask for), and 
  7. certifying information on the business and each owner that owns more than 20% of the company, including:
    1. that current economic uncertainty makes the loan necessary
    2. that they will use the funds to retain employees and maintain payroll or make mortgage payments, lease payments, or utility payments for eight weeks following the loan, and
    3. that they have not and will not receive another loan under the PPP program between February 15, 2020 and December 31, 2020.

Loan Terms

The SBA will defer your loan payments for six months, but interest will continue to accrue. However, they do not require any collateral or personal guaranties from Borrower. Also, neither the government nor the lenders will be able to charge any fees related to this loan.  

The maturity on a PPP loan is two years, and the interest rate is 1%.  

Forgiveness

The SBA will 100% forgive the loans upon certain conditions.  

A borrower will owe money when the loan is due and payable if they use loan funds for anything but payroll costs, mortgage interest, rent, and utility payments during the eight weeks after they receive the loan. 

However, due to the high use of this program, a borrower must use 75% of the loan for payroll costs.  The SBA also caps payroll costs at $100,000.00 on an annualized basis for each employee.  

In addition, the SBA may reduce or eliminate forgiveness for a borrower if they

  • do not maintain their staff and payroll
  • reduce their full-time employee headcount
  • reduce salaries by more than 25%, or
  • fail to re-hire their employees  

Borrowers have until June 30, 2020 to restore their fulltime employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.  

Please note that lenders are overwhelmed with applications for this program. Apply early, but be patient on the loan turnaround.  

Additionally, the SBA does not require a Borrower to look for funds elsewhere prior to applying to this program. This is known as the “Credit Elsewhere” requirement, and it has been waived under the CARES act for the SBA PPP and SBA EIDL programs.   

If employers need more assistance than what the Paycheck Protection Program offers, they may apply for an Economic Injury Disaster Loan directly through SBA.

Nichole Baer is an attorney at Russell, Krafft & Gruber, LLP, in Lancaster, Pennsylvania. She received her law degree from Stetson University, College of Law and practices in several areas including BusinessCommercial Real EstateEstate Planning, and Estate Administration.

Due to the economic impact caused by COVID-19, hundreds of thousands of Pennsylvania residents have found themselves unexpectedly unemployed or underemployed. The federal and state governments have responded with changes to the unemployment compensation system to provide some additional economic assistance to qualifying employees. This article summarizes the changes, the process for applying for unemployment compensation, and how to get more information about the process.

Before we dig into the specific changes, due to the tremendous volume of applications, the Pennsylvania Office of Unemployment Compensation (“UC Office”) is struggling to keep up. The high number of people filing for unemployment is delaying processing time and making it increasingly difficult to get access to answers.

The Pennsylvania UC Office answers many questions that claimants may have in their UC Benefits COVID-19 FAQs. Employers can find the answers to many of their UC-related questions here.

The best way to get a response from the UC Office is to email them at uchelp@pa.gov.

When emailing, provide your full name as it appears on your claim and the last four digits of your Social Security Number.

Filing a Claim for Unemployment Compensation

To determine if you are eligible for UC benefits or other COVID-19 related benefits, review the scenarios listed on this eligibility chart.

In addition to or in lieu of UC benefits, UC rules may entitle you to (and require you to exhaust) Emergency Paid Sick Leave or Emergency Family Medical Leave available under the Families First Coronavirus Response Act.

Claimants can calculate their weekly benefit rate here.

Claimants are also strongly encouraged to file for UC benefits online. The UC Office’s “How to File” page contains a great deal of information to help claimants start the process. A separate page labeled “Filing an Initial Claim” lists some additional quick tips on filing here

Suspended Rules

The UC office has suspended some of the existing UC rules to make it easier for claimants to file for and receive benefits. The two main changes are:

  1. The UC Office no longer requires claimants to prove they have applied for or searched for a new job or register with PACareerLink. 
  2. Eligible claimants are now able to receive benefits for the first week they are unemployed.  

After Filing

The Pennsylvania Office of Unemployment Compensation has provided the following guidelines for what you can expect after filing a UC claim:

  • If you are eligible for unemployment compensation, you will receive two letters and a four-digit PIN. Your PIN will arrive in the mail.
  • If approved, your first benefit payment should arrive within four weeks of filing.
  • Continue filing your bi-weekly claim, even while waiting for approval.
  • If you receive your financial determination and find an error, you can file an appeal.

Federal CARES Act

Additional Unemployment Benefit

Under the federal CARES Act recently signed into law by the President, claimants will receive an additional $600 per week from March 29, 2020 through July 31, 2020. These payments will begin after the UC Office modifies its system.

Fortunately, the UC Office will backdate claims so that the claimant is paid from the time they are separated from their job (on or after March 29, 2020) or otherwise become eligible under the CARES Act. 

Self-Employed Individuals

The CARES Act will also provide unemployment benefits to those who are self-employed, independent contractors, and gig workers. The UC Office is currently working to implement a system for these payments. 

The UC Office will update its website with more information as it becomes available. Importantly, those qualifying under this provision should NOT file a claim through the existing system if they are not otherwise eligible for UC benefits.

Unemployment Compensation Exhaustees

The CARES Act provides for additional weeks of UC benefits for those who have exhausted their benefits. Additional information will be posted on the UC Office’s website as it becomes available.

Health Insurance

If you lose your job, UC rules enable you to continue healthcare coverage through your former employer under COBRA. If you opt to take COBRA, you are required to pay the entire premium. Unfortunately, this can be an expensive option to maintain health insurance.

Alternatively, job loss is a qualifying event that will allow you to enroll in a health insurance plan under the Affordable Care Act outside of open enrollment.

Potential Fraud Issues

Unfortunately, some people are taking advantage of the vulnerabilities created by COVID-19 and are attempting to defraud those filing for benefits. This deception is especially true when it comes to UC.  

Beware of fraudulent unemployment websites.

The Office of Unemployment Compensation will never ask you to pay for UC services or to provide credit information. 

Always ensure you are on the Pennsylvania Office of Unemployment Compensation site (the web address will start with uc.pa.gov) when

  • filing for benefits
  • changing your personal info, or
  • signing up for direct deposit. 

Do not give any information over the phone without independently verifying that the caller is who they say they are. The best way is to hang up the call and call the office directly to confirm that they called you. Do not rely on that caller to provide you with a call-back number.

Laura McGarry is an attorney at Russell, Krafft and Gruber, LLP in Lancaster, Pennsylvania. She received her law degree from Penn State Law and provides legal counsel to individuals and businesses in Lancaster and surrounding communities.

The Small Business Administration is doing everything it can to establish programs that relieve some of the financial burden COVID-19 has caused the business community. One of the programs it is offering is the Economic Injury Disaster Loan (EIDL).

What is the EIDL?

The EIDL is a working capital loan, and businesses can use it for 

  1. fixed debts (such as rent)
  2. payroll
  3. accounts payable, and 
  4. some bills that would have been paid had the disaster not occurred  

In total, the EIDL provides up to $2 million in loan assistance with a 3.75% rate for small businesses and a 2.75% rate for nonprofits. The maximum loan term for EIDL is 30 years; however, no payments are due for the first year.  

Also, the EIDL may not be used to pay other federal loans. 

Am I eligible for an EIDL?

The SBA bases eligibility for the EIDL on the size of the business, type of the business, and financial resources.   

Eligible borrowers include: 

  1. businesses with less than 500 employees, 
  2. sole proprietorships (including independent contractors), 
  3. ESOP with less than 500 employees, and 
  4. private nonprofits.  

Applicants who are ineligible include: 

  1. anyone engaged in an illegal activity
  2. a principal applicant (someone who owns 50% or greater ownership interest) who is 60 days delinquent or more on child support
  3. farms
  4. businesses that derive more than one-third of their gross annual revenue from legal gambling activities
  5. lobbyists, and 
  6. state/local/municipal governments

Do I need collateral?

The maximum unsecured loan amount is $25,000. Any loan over that amount will require collateral – real estate if it is available. 

However, the SBA will not decline a loan for lack of collateral. Instead, the SBA will require the borrower to pledge what collateral is available.  

The SBA can also take a lien on inventory and business equipment. In addition, the SBA will take a junior position to other lenders.  

What do I need to apply?

The application for an EIDL is through the SBA. The EIDL application relies on a series of self-certifications from the business and the business owners.  

For the twelve months before January 31, 2020, borrowers will need to know:

  • the gross revenues of their business
  • the cost of goods sold
  • lost rents (for rental property owners)
  • the cost of operating expenses (for nonprofits)
  • other reimbursements the company will receive (such as business interruption insurance), and 
  • the number of employees.  

The loan processor may also request that a business fill out additional forms and may request 

  • federal income tax returns 
  • a current profit and loss statement, and 
  • a personal financial statement 

What else should I know about the EIDL program?

There are no costs to apply for an EIDL, but there are costs associated with the documents required to secure the loan, such as recording costs. There is also no obligation to take the loan if the SBA offers it.  

If, after the SBA approves the loan, the borrower needs more money, they can submit additional supporting documents and request an increase to the loan.

If the borrower requires fewer funds, they can request a reduction. 

If the SBA denies the loan request outright, the borrower will be given up to six months to provide new information and submit a written request for reconsideration.   

EIDL Advances: the SBA Economic Injury Grant

The EIDL also offers an emergency advance of up to $10,000 known as an economic injury grant. During the application process for an EIDL loan, the SBA will ask businesses if they want to apply for the advance. If yes, it will ask them to provide their direct deposit information.  

The advance is available within days following a successful submission of the SBA application, and most notably, the SBA does not require businesses to repay it.

While you’re waiting, get an SBA Express Bridge Loan

If a small business already has relationships with an SBA Express Lender, it may apply for a bridge loan of up to $25,000. The bridge loan will have a fast turn around and can be used as either a term loan or a bridge loan while waiting for an SBA EIDL to fund.  

You are not excluded from one COVID-19 relief loan simply because you have taken out another.

Borrowers may obtain one or all of the other CARES Act loans (Paycheck Protection Program, EDIL, or economic injury grant) in addition to receiving the 6-month payment subsidy on a presently held SBA 504 loan. However, a Borrower cannot duplicate the use of the funds between the programs (no double-dipping).  

If you’re unsure if you qualify for an EIDL, one of our attorneys can help you.

Nichole Baer is an attorney at Russell, Krafft & Gruber, LLP, in Lancaster, Pennsylvania.  She received her law degree from Stetson University, College of Law and practices in several areas including BusinessCommercial Real EstateEstate Planning, and Estate Administration.

**UPDATE 5/9/2020**  Governor Wolf ordered all foreclosures and evictions delayed until July 10, 2020.  If a mortgage company, landlord or manufactured home park owner has already sent out the required paperwork to start a foreclosure or eviction (Act 6 or 91 Notice, Notice to Quit, MHCRA Notice, etc.), they have to start all of the time requirements on July 10.  Anyone who has not sent out those notices has to wait until July 10 to send them.  If you keep track of the days from when you sent a notice – and you should – you should revise your reminder dates to start from July 10.  That means, for example, that the soonest anyone can file a complaint in foreclosure (for a property that requires an Act 6 or 9 Notice) will be August 12, 2020.

Another of the many questions that have come up during the coronavirus crisis is: What happens if you cannot make your mortgage or rent payments? Or, if you are a bank or landlord: What can you do if your mortgagor or tenant cannot make their monthly payments?  

CARES Act offers homeowners with federally-backed mortgages forbearance

The CARES Act contains a section on Credit Protection, but it only applies to holders of federally-backed mortgage loans. That means that the mortgage has to be owned or backed by a federal agency. These federal agencies are:

  • U.S. Department of Housing and Urban Development (HUD)
  • U. S. Department of Agriculture
  • Federal Housing Administration (FHA) (Includes reverse mortgages)
  • U.S. Department of Veterans Affairs (VA)
  • Fannie Mae
  • Freddie Mac

If you do not know who holds or services your mortgage, the federal Consumer Financial Protection Bureau (CFPB) has instructions on how to find out.  

None of these federally-backed mortgage holders can take any actions to foreclose against a mortgagor until May 18, 2020.

The CARES Act also says that if a homeowner asks their federally-backed mortgage holder for forbearance – not making mortgage payments – the mortgage holder may give them up to six months, with the option to extend another six months. 

If the mortgage holder does allow the owner to delay payments, the mortgage holder has to report that the owner is up to date to the credit bureaus. 

CARES Act offers landlords with federally-backed mortgages forbearance

If a landlord has a federally-backed mortgage for a 1 to 4 unit building, the landlord can receive the same forbearance as any other mortgagor.  

If the landlord gets forbearance, the landlord may not evict a tenant because of the failure to pay rent. The landlord cannot charge late fees or interest to the tenant.  Also, if the landlord tries to evict a tenant for reasons other than failure to pay rent, the landlord must give 30 days’ Notice to Quit instead of the normal 10. 

Again, these limitations only apply to landlords who receive forbearance from their federally-backed mortgage.

Pennsylvania restricts legal actions for foreclosure and eviction

Even if your mortgage is not a federally-backed mortgage covered by CARES, no one can start legal actions to foreclose or evict anyone. The Pennsylvania State Courts are closed to all “non-essential business.” 

The state has extended this restriction through April 30.

These changes do not mean that a bank or landlord cannot charge late fees or interest to someone who has fallen behind on payments. But there is no place to enforce collection until at least the end of April.  

Lancaster County closes courts

Lancaster County Courts have followed the guidance from the Pennsylvania Supreme Court. That is, Lancaster has closed all of the Court offices and Magisterial District Offices except for certain emergency matters. 

This closure also goes to April 30.

Other Counties also restrict legal actions for foreclosure and eviction

The Pennsylvania Unified Judicial System website has compiled all of the various county court orders. It looks like all of the Courts and District Justice Courts are closed to evictions and foreclosures.  

The way each Court is handling these delays are a little different, so you should check the specific county for changes.  

Associations should consider waiving interest and late fees

Condominiums and Homeowners’ Associations are not covered by the CARES Act. However, the restrictions on starting or following through on any legal action to collect assessments apply to them as well. An Association can send demand letters, but they will not be able to file a District Justice complaint or take any action in their county’s Court of Common Pleas.  

The CARES Act does not prohibit associations from adding interest and late fees to past due assessments. However, I think that Associations should consider waiving these until this crisis passes. The Association can either do this across the board or consider it on a case by case basis.  

Aaron Marines is an attorney at Russell, Krafft & Gruber, LLP, in Lancaster, Pennsylvania. He received his law degree from Widener University and practices in a variety of areas including BusinessCommercial Real EstateLand Use, Land Planning and Zoning matters.