Small Businesses Feeling the Impact of the Government Shutdown
The U.S. government has been shut down now for two weeks, and perhaps no one feels it more than the nation’s small businesses. The longer the shutdown lasts, the greater the impact it will have on these small businesses and their customers. Even if the shutdown ends tomorrow, small businesses could be impacted for many weeks to come. These businesses should look to the future and try to minimize the impact from the shutdown. Here are just a few ways that Phoenix small businesses are being directly affected.
EINs
The government shutdown is adversely impacting new businesses as they apply for or wait for their employment identification number (EIN). An EIN is the corporate equivalent of a social security number, and is necessary for a new business to open a bank account, pay its employee’s salaries and seriously start the operation of the business. For these people who are just getting their businesses off the ground and cannot obtain their EIN online, it is difficult to predict how long they will have to wait because even after the shutdown ends, it can be anticipated that there will be a considerable backlog of people waiting for their EIN. The bottom line is that a number of new businesses will be unable to open up shop until the shutdown ends and the IRS helpline is back in operation.
SBA Loans
Small businesses that were about to or were in the process of applying for SBA-sponsored loans are finding themselves waiting in queue until they can hear whether they have qualified for a small business loan, or when they will see these dollars in their bank accounts. This is because the government shutdown has frozen all SBA-backed loans. Typically, the SBA guarantees between $90 million and $193 million in loans every business day. Businesses who were counting on an SBA loan will have to look for other options. Many will be forced to turn to high-interest, short-term borrowing to help them get through this shutdown. Once the shutdown ends, anticipated SBA backlogs are projected to be at least six to eight weeks.
Taxes
Unfortunately, the shutdown of the Federal government does not mean that taxes do not have to be paid until the government is up and running again. But it does mean that if you have a tax issue that you were hoping to resolve, the shutdown at the IRS will make that difficult, if not impossible. If you were counting on a tax refund check, or if your bank account has been frozen pending a resolution of a tax issue, you won’t be getting your money during the shutdown. Also with the closure of IRS taxpayer services (such as toll-free assistance phone lines), the ability to negotiate tax abatements and other issues with the IRS will likely be delayed. Small business owners should then take some procedural precautions such as keeping a good record of their tax liabilities, and being prepared to react to any other possible delays. It is important to recognize that any scheduled payments due to the IRS are still expected to be paid on time.
Employment Verification
Employers are required to run every potential new hire through E-Verify, the federal government’s electronic employment verification system. During the government shutdown, however, this system is not available and employers are not able to use this mandatory system before hiring employees. This puts employers in a difficult position. What is an employer to do when the same government who requires it to use a system before hiring no longer makes that system available? And no one really knows what the consequences there will be for the employer that cannot e-verify a new employee within the required three days of hiring. Some businesses will need to make difficult decisions on how to manage new hires in the meantime.
The purpose of this article was not to list all the possible consequences of the government shutdown on businesses. Your business may experience other disruptions not addressed in this article. With no telling how much longer the nation will have to ride out this shutdown, small business owners will continue to feel the impact. If your small business is feeling the stress of the government shutdown, talk to a professional at Gunderson, Denton, and Peterson to ensure you are in the best position possible to rebound quickly once things get back up and running again.
Written By Brad Denton – Gunderson, Denton & Peterson, P.C.
Mesa Office: 1930 N Arboleda #201
Mesa, Arizona 85213
Office: 480-655-7440
Fax: 480-655-7099
Email: brad@gundersondenton.com
Website: https://gundersondenton.com
Phoenix Office: 40 N Central Ave #1400
Phoenix, AZ 85004
Phone: 480-325-9937
Website: https://gundersondenton.com/phoenix