PPP Loans Temporarily Expanded for Even Smaller Businesses

PPP Loans Temporarily Expanded for Even Smaller Businesses

I f you’re a sole proprietor, independent contractor or owner of a very small business, now’s your time to apply for a Paycheck Protection Program (PPP) loan.

Thanks to a temporary rule change by the Biden Administration, the SBA will ONLY accept applications for PPP loans from firms with fewer than 20 employees during a 2-week priority window: February 24 through March 10, 2021.

While the typical PPP loan is determined by multiplying average monthly payroll costs by 2.5, the updated formula will use gross income instead of payroll costs or net income, meaning you may be eligible for a bigger — forgivable — loan amount.

 

98% of small businesses employ fewer than 20 people, but have received only 45% of PPP so far, according to the SBA.

Also Keep in Mind

1) You can apply for either a first or second PPP loan. To qualify for a second loan, you must have spent or plan to spend all of your first loan, and show you had a 25% or more drop in revenue in any quarter of 2020.

2) The new rules also eliminate some restrictions on small business owners:

  • with prior non-fraud felony convictions;
  • struggling with student loan debt delinquency; and
  • who are non-citizen, U.S. residents with Individual Taxpayer Identification Numbers (ITIN).

Apply Now!

The window on this special program for extra small businesses closes March 10, so hurry and apply soon if you’re interested. Note that other types of businesses can also still apply for a PPP loan before the program expires on March 31, 2021.

Personal Tax Return Paperwork Due March 26

If you have not yet provided us with the documents to complete your individual income tax returns, please do so no later than March 26. If you will not have them ready by then, let us know if you want us to file an extension for you. To help you prepare your files, please download a copy of our 2020 Personal Tax Preparation Checklist.

Support Your Local Restaurant

The last COVID relief law passed temporarily allows a 100% business expense deduction for meals as long as the expense is for food or beverages provided by a restaurant. The previous deduction was limited to 50%. This provision is effective for expenses incurred from January 1, 2021, through December 31, 2022.

Second Round of PPP Loan Funding Now Open

Second Round of PPP Loan Funding Now Open

T/he SBA recently reopened the Paycheck Protection Program for both “First Draw” and “Second Draw” PPP loans for eligible small businesses. This second go-round is intended to make PPP loans more flexible, helpful and accessible, especially to hard-hit restaurants. Here’s how:

2nd PPP loan available Businesses that got a PPP loan the first time can apply for a second loan, as long as they’re not a public company, don’t employ more than 300 people, have used or will fully use their first PPP loan for authorized uses, and can show at least a 25% drop in gross receipts in the first, second or third quarters of 2020 compared to the same quarters in 2019.

Targeted funds for vulnerable businesses — $15 billion-$25 billion is earmarked for community development financial institutions that typically lend to minority-owned businesses in underserved communities, and for businesses with fewer than 10 employees, as well as those in low-income areas.

Restaurants get more — Restaurants and lodging businesses can apply for loans equal to 3.5 times their monthly payrolls. Other eligible businesses are limited to 2.5 times their average monthly payroll expenses. All PPP loans are capped at $2 million (down from $10 million previously).

Greater use flexibility — To be fully forgiven, at least 60% of the loan funds must be used for payroll expenses. The remaining 40% may be used to cover a now-broader array of business expenses (beyond mortgage interest, rent and utility payments), including personal protective equipment and other COVID needs, certain operations, property damage and supplier costs.

Simpler forgiveness process — Businesses that borrow $150,000 or less will simply need to submit a one-page certification, which includes the number of employees the business retained as a result of the loan and an estimate of how much of the loan was spent on payroll.

Better tax breaks — PPP loans will continue to be tax-free for recipients if used for authorized purposes. But thanks to the new law, payroll and operating expenses will still be deductible.

For more help determining your PPP loan amount and specifics, give us a call today.

Don’t Miss Out on the COVID Tax Credit for Employers

The Taxpayer Certainty and Disaster Tax Relief Act of 2020 (enacted Dec. 27, 2020), made a number of changes to Employee Retention Credits (ERC) previously available under the CARES Act. The new law makes it easier for businesses that choose to keep their employees on the payroll despite COVID-19 challenges.

Benefits/updates include:

  • The ERC has been modified and extended through June 30, 2021.
  • Eligible employers can claim a refundable tax credit against the employer share of Social Security tax equal to 70% of the qualified wages they pay to employees from January 1-June 30, 2021. Qualified wages are limited to $10,000 per employee per calendar quarter in 2021 (thus maximum ERC is $7,000 per employee per quarter, total of $14,000 in 2021).
  • Employers can access the ERC for the 1st and 2nd quarters of 2021 prior to filing their employment tax returns by reducing employment tax deposits. This must be reported on Form 941.
  • Small employers may request advance payment of the credit on Form 7200, Advance of Employer Credits Due to Covid-19. Keep in mind that Form 7200 is used to request the advance payment of employer credit, not claim it.
  • Employers are eligible if they operate a trade or business January 1-June 30, 2021, and experience either:
    – A full or partial suspension of their trade or business due to governmental orders limiting commerce, travel or group meetings due to COVID-19, or
    – A decline in gross receipts in a quarter in 2021 that are less than 80% of the gross receipts in the same quarter in 2019 (or 50% less in the same 2020 quarter).
  • Paycheck Protection Program (PPP) loan recipients can claim the ERC for qualified wages that are not treated as payroll costs in obtaining forgiveness of the PPP loan.

If you need help determining your business’s eligibility for Employee Retention Credits or filing Form 941, please give us a call. We’re here to help!

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Download Our Tax Preparation Checklist

We put together two checklists to help you pull together your 2020 tax files. If you haven’t yet, you can download them here:

If you prefer, we can email them to you (just call or email Amber at amber@premiercpaservices.com to request your copy).

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Key Filing Dates!

TODAY! Feb. 1: W-2s and 1099s due to recipients

Feb. 12: IRS begins accepting and processing 2020 tax returns

Feb. 22: Projected date for “Where’s My Refund” tool to open

Apr. 15: Tax filing deadline

Oct. 15: Tax extension filing deadline

Money Brief: Tax Filing Season Begins Feb. 12

The IRS will begin accepting and processing 2020 tax year returns no sooner than February 12, 2021. The February 12 start date allows the IRS time for programming and testing following the recent tax law changes. The IRS urges taxpayers to file electronically with direct deposit to speed processing and refunds — nine out of 10 taxpayers should receive their refund within 21 days of when they file electronically with direct deposit (assuming no issues).

We’re now accepting tax returns. If you’ve pulled together all your files, you can drop them off at our office either in person or in the dropbox outside.

2021 Appropriations Act Provides Additional Pandemic Relief

2021 Appropriations Act Provides Additional Pandemic Relief

On December 27, 2020, President Trump signed into law the newest $900 billion COVID-19 relief bill. The legislation, part of the Consolidated Appropriations Act, 2021, provides additional pandemic relief and clarifies the deductibility of business expenses paid with forgiven Paycheck Protection Program (PPP) loans. Key provisions of the new law include:

  • $166 billion for Economic Impact Payments of $600 to each eligible taxpayer (see Money Brief at right).
  • $120 billion for $300 per week in extended weekly unemployment benefits (December 26, 2020-March 14, 2021).
  • $25 billion in emergency rental aid, plus an extension of the national eviction moratorium (through January 31, 2021).
  • $325 billion in aid for small businesses, including $284+ billion for additional PPP loans; $20 billion for Economic Injury Disaster Loan (EIDL) Grants; $15 billion for shuttered live venues, independent movie theaters and cultural institutions; and $12 billion for businesses in low-income and minority communities.
  • $45 billion in transportation funding (for airlines, transit systems, state highways and more).
  • $82 billion in funding for colleges and schools, plus $10 billion in childcare assistance.
  • $22 billion for state, local, tribal and territorial governments.
  • $13 billion for emergency food assistance, including a six-month, 15% increase in SNAP benefits.
  • $7 billion for broadband expansion.

The new law also extends the Employee Retention Tax Credit and several expiring tax provisions, and temporarily allows a 100% business expense deduction for meals (up from the current 50%) as long as the expense is for food or beverages provided by a restaurant. This provision is effective for expenses incurred January 1, 2021, thru December 31, 2022.

Second Round of PPP Funds Available

The new round of PPP — or PPP2 — is similar to the first round of PPP loans, but includes several important differences:

1) PPP2 loans are available to both first-time qualified borrowers and to businesses that previously received a PPP loan. Specifically, previous PPP recipients may apply for another loan of up to $2 million if they:

  • Have 300 or fewer employees.
  • Have used or will use the full amount of their first PPP loan.
  • Can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019.

2) PPP2 loans are now available to Sec. 501(c)(6) business leagues, such as chambers of commerce, visitors’ bureaus, and destination marketing organizations, if:

  • They have 300 or fewer employees, and
  • Their lobbying activities comprise no more than 15% of their total activities, and cost no more than $1 million during the most recent tax year that ended prior to February 15, 2020.

3) Other first-time borrowers that may now apply for PPP loans include:

  • Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans.
  • Sole proprietors, independent contractors, and eligible self-employed individuals.
  • Not-for-profits, including churches.
  • Accommodation and food services operations (those with NAICS codes starting with 72) with fewer than 300 employees per physical location.

4) Borrowers that returned all or part of a previous PPP loan may reapply for the maximum amount available to them.

Perhaps the best part of the new law specifies that business expenses paid with forgiven PPP loans ARE tax-deductible. This reverses previous IRS guidance that such expenses could not be deducted.

PPP Forgiveness Criteria Expanded

As before, the costs eligible for loan forgiveness include payroll, rent, covered mortgage interest and utilities. However, PPP2 also makes the following potentially forgivable:

  • Covered worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines.
  • Expenditures to suppliers that are essential to the recipient’s current operations.
  • Covered operating costs, such as software, cloud computing services and accounting needs.

To be eligible for full loan forgiveness, PPP2 borrowers will have to spend no less than 60% of the funds on payroll over a period of either eight or 24 weeks. PPP2 borrowers may receive a loan amount of up to 2.5 times their average monthly payroll costs in the year prior to the loan or the calendar year, but the maximum loan amount has been cut to $2 million. PPP2 borrowers with NAICS codes starting with 72 (hotels and restaurants) can get up to 3.5 times their average monthly payroll costs, subject to the $2 million maximum.

The new COVID-19 relief law creates a simplified forgiveness application process for loans of $150,000 or less. It also repeals the requirement that PPP borrowers deduct the amount of any EIDL advance from their PPP forgiveness amount.

Tax Deductibility for PPP Expenses Clarified

Perhaps the best part of the new law specifies that business expenses paid with forgiven PPP loans ARE tax-deductible. This reverses previous IRS guidance that such expenses could not be deducted. The new law states that “no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income provided” by Section 1106 of the CARES Act (which has been redesignated as Section 7A of the Small Business Act). This provision applies to both PPP1 and PPP2 loans.

Keep in mind, however, that the state of Georgia may not follow the new federal rules regarding business expenses. For example, for taxable years beginning on or after January 1, 2018, and before January 1, 2019, Georgia has NOT adopted any of the 2019 or 2020 federal changes, including the federal CARES Act. So we may need to wait a bit — or file an amended state return — to find out how Georgia will handle the newly passed federal tax law.

We’re currently putting together a list of items we’ll need from you to file your taxes. Please bear with us as we negotiate all the changes involved due to COVID-19. If you have any questions, please feel free to contact us.

Source: Journal of Accountancy

Prepare Now for Tax Season

We expect tax season to be a little more chaotic this year, so we’ll be putting together a checklist of items you’ll need to supply with your paperwork for us to prepare and file your taxes. Look for it early next year!

Beginning on January 8, 2021, we’ll be open on Fridays to assist you with your tax and financial planning needs.

We’re also taking tax appointments now if you’re a new client or have major changes to your taxes. Plan ahead and call Amber at 706-632-7850 to reserve your spot. Note that you do NOT need an appointment for us to handle your tax preparation — you can just drop off your files when you’re ready.

Money Brief: New $600 Stimulus Payments

You can expect to receive $600 directly deposited into your bank account within the next week or two, if you haven’t already. Paper checks have also started mailing out. The payments are part of the COVID-19 relief package signed by President Trump on December 27. Eligible individuals who meet income limits will receive $600; couples, $1,200; and families, an additional $600 per child. As before, your most recent tax return determines your eligibility for the stimulus payment — you’ll receive the full amount if you made under $75,000 as an individual or $150,000 as a couple.

Money Brief: GDOL Update

If you are a Georgia business owner, note that your 2021 Annual Unemployment Insurance (UI) Tax Rate Notice will be delayed. The Georgia Department of Labor expects to release the notices on the Employer Portal in February. Because of this, Employer Quarterly Tax and Wage reports will NOT be accepted for the 1st quarter of 2021 until the new tax rates are released. Look for an email once the 2021 tax rate notices are published — they will NOT be mailed. If you are not already registered on the GDOL Employer Portal, be sure to register to avoid delays in receiving your notice. Go to dol.georgia.gov, click on the Employers tab, and select Employer Portal.

Money Brief: 2021 Mileage Rates Decrease

The standard mileage rate for business use of a vehicle is decreasing in 2021 — to 56 cents per mile — down from 57.5 cents per mile in 2020. The rate applies for self-employed taxpayers who deduct automobile expenses if they qualify as ordinary and necessary business expenses, and employers who reimburse their employees for operating an automobile for business.

Money Brief: EITC/ACTC May Delay Refunds

If you claim the Earned Income Tax Credit or Additional Child Tax Credit, your refund (if any) may be delayed. By law, the IRS must hold the entire refund — even the portion not associated with EITC/ACTC — until at least mid-February. If you choose direct deposit, EITC/ACTC-related refunds should be available by the first week of March.

Take a $300 Charitable Deduction Thanks to the CARES Act

Take a $300 Charitable Deduction Thanks to the CARES Act

When the Tax Cuts and Jobs Act (TCJA) was passed in 2017, it changed the way charitable contributions were handled at tax time. Basically, you can only deduct donations to charity if you itemize your deductions. And the TCJA makes itemizing less enticing for most taxpayers.

With the CARES (Coronavirus Aid, Relief, and Economic Security) Act, passed in April 2020, a certain portion of your charitable contributions may now be deductible for tax year 2020.

What Has Changed

#1 — Taxpayers who do NOT itemize deductions may now take a charitable deduction of up to $300 for cash contributions made in 2020 to qualifying organizations. Qualifying organizations include:

  • Religious
  • Charitable
  • Educational
  • Scientific
  • Literary

To make sure the organization qualifies, you can check its status on the IRS’ “Tax Exempt Organization Search” page here.

#2 — The CARES Act also suspends limits on charitable contributions. Previously, the amount of charitable cash contributions you could deduct on Schedule A as an itemized deduction was limited to a percentage (typically 60%) of your adjusted gross income. To qualify, however, the contribution must be:

  • a cash contribution;
  • made to a qualifying organization; and
  • made during the calendar year 2020.

#3 — The CARES Act temporarily increases limits on contributions of food inventory. This special rule allows enhanced deductions by businesses for contributions of food inventory for the care of the ill, needy or infants. For contributions of food inventory in 2020, business taxpayers may deduct qualified contributions of up to 25% (previously 15%) of their aggregate net income from all trades or businesses from which the contributions were made or up to 25% of their taxable income.

Don’t Forget About Qualified Charitable Distributions

Did you know that if you are 70½ or older, you can make a qualified charitable distribution from your IRA – up to $100,000 – directly to an eligible charity? This is generally a nontaxable distribution made by the IRA trustee to the charitable organization of your choice. What’s more, this qualified charitable distribution counts toward your minimum distribution requirement for the year.

We Can Help

Not sure whether you qualify for a charitable deduction? Just provide us with all your tax information and receipts come tax-time next year, and we’ll make sure you’re taking advantage of every deduction possible. As always, please feel free to contact us with questions.

 

SBA Will Require PPP Loan Necessity Form from Large Borrowers

Businesses and nonprofits that received $2+ million Paycheck Protection Plan (PPP) loans are required to complete a loan necessity questionnaire. The new forms (one for businesses and one for nonprofits) are designed to collect supplemental information to evaluate the good-faith certification PPP borrowers made that economic uncertainty made their loan request necessary.

The forms are SBA Form 3509, Paycheck Protection Program Loan Necessity Questionnaire (For-Profit Borrowers) (PDF here), and SBA Form 3510, Paycheck Protection Program Loan Necessity Questionnaire (Non-Profit Borrowers) (PDF here). They will be sent from the lender to the borrower, who will then have 10 business days to return the completed form and supporting documents. Warnings on the new forms say that, “failure to complete the form and provide the required supporting documents may result in SBA’s determination that you were ineligible for either the PPP loan, the PPP loan amount, or any forgiveness amount claimed, and SBA may seek repayment of the loan or pursue other available remedies.”

The nine-page forms each include 21 questions, many of which have multiple parts and require supporting documents. If you need assistance completing Form 3509/3510, please contact us as soon as you receive it. We can help you put the reasoning behind your PPP application into the context of the pandemic’s early days, when the length and severity of business shutdowns were unknown.

Source: AICPA

Money Brief: PPP Loan Expenses

Because Congress did not enact specific legislation affecting expenses related to Paycheck Protection Program (PPP) loans, the Treasury and IRS has clarified the tax treatment of those expenses:

  • If you took out a PPP loan that has been forgiven or you expect to be forgiven, then your expenses related to the loan are NOT deductible (whether you have filed for forgiveness or not).
  • If your PPP loan has not or will not be forgiven, then you will be able to deduct related expenses.

The reasoning: Since businesses are not taxed on the proceeds of a forgiven PPP loan, the expenses are not deductible. The Treasury is encouraging businesses to file for forgiveness sooner rather than later.

Money Brief: Tax Deductions

In an update to the Tax Cuts and Jobs Act’s $10,000 cap on state and local tax deductions, the IRS issued regulations earlier this month (Notice 2020-75) regarding taxes paid by Partnerships and S-Corps. Essentially, state and local taxes will be allowed as a deduction in computing the Partnership’s or S-Corps’ non-separately stated taxable income or loss, and are therefore NOT subject to the state and local tax deduction limitation for partners and shareholders who itemize deductions. Taxpayers can apply these rules to a tax year ending after December 31, 2017.

Money Brief: Taxpayer Relief

The IRS announced a Taxpayer Relief Initiative to help taxpayers who owe taxes but are struggling financially due to the pandemic. These initiatives include:

  • Taxpayers who qualify for a short-term payment plan may now have up to 180 days to resolve their tax liabilities instead of 120 days.
  • The IRS is offering flexibility for some taxpayers who are temporarily unable to meet the payment terms of an accepted Offer in Compromise.
  • The IRS will automatically add certain new tax balances to existing Installment Agreements, for individual and business taxpayers who have gone out of business.
  • Certain qualified individual taxpayers who owe less than $250,000 may set up Installment Agreements without providing a financial statement if their monthly payment proposal is sufficient.
  • Some individual taxpayers who only owe for the 2019 tax year and owe less than $250,000 may qualify to set up an Installment Agreement without a notice of federal tax lien filed by the IRS.
  • Qualified taxpayers with existing Direct Debit Installment Agreements may be able to use the Online Payment Agreement system to propose lower monthly payment amounts and change their payment due dates.

While tax relief is not automatic, taxpayers can request additional payment relief via a variety of other, existing options, including:

PPP Loan Forgiveness: Is It Time to File?

PPP Loan Forgiveness: Is It Time to File?

I f you were among the first to receive a Paycheck Protection Program (PPP) loan, you may have recently received a notice from your lender that payment was due. This is because those early loans generally provided for a six-month deferral period.

However, the SBA just updated its guidance to clarify the deferral period for ALL PPP loans — including those that were approved before the Paycheck Protection Flexibility Act became law on June 5. According to the new rules, lenders must extend the deferral period for PPP loan payments to either:

  1. The date the SBA remits the borrower’s loan forgiveness amount to the lender, OR
  2. 10 months after the end of the borrower’s loan forgiveness covered period (if the borrower does not apply for loan forgiveness).

What Does This Mean?

Basically, this means you have several more months. Which is good, because you probably don’t want to file for loan forgiveness until the questions surrounding tax deductibility and automatic forgiveness are resolved. Here’s why:

Deductibility of expenses: Forgiven PPP loans are not taxable income, but IRS Notice 2020-32 declared that no tax deduction is allowed for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a PPP-covered loan. The position is that allowing the deductibility of expenses paid with PPP funds would result in a double-dipping scenario. The AICPA and other organizations have urged Congress to allow full deductions for PPP-related business expenses, but congressional action has not yet been taken on this.

Blanket forgiveness: Some members of Congress have proposed legislation that would allow for a simpler forgiveness process for loans under a certain amount (possibly $150,000 and below). Again, no congressional action has been taken yet.

 

By the time the PPP loan program stopped accepting applications on August 8, the SBA had approved roughly 5.2 million loans totaling $525 billion — leaving almost $134 billion of congressionally approved funds unspent. 

What We Do Know About PPP Loan Forgiveness

If you’re eager to file for PPP loan forgiveness, keep in mind:

Forgiveness application due date: There is no defined deadline for submitting the forgiveness application, but loan payments will be required to begin 10 months after the end of the covered period (as noted above). Once you submit a forgiveness application, it triggers deadlines for lenders and the SBA. Lenders have until 60 days after the forgiveness application is received to issue a decision to the SBA. The SBA then has 90 days after receiving the decision from the lender to review the application and remit the forgiveness amount to the lender with any interest accrued through the date of the payment.

Early applications for loan forgiveness: These are permitted, but an eight- or 24-week covered period will still apply. If your loan was funded before June 5, 2020, you can choose to keep the eight-week covered period or move to the 24-week period. If your loan was funded after June 5, 2020, you must use a 24-week covered period. Whether you choose eight weeks or 24 weeks, you may apply for forgiveness before the end of the covered period — but doing so lowers the maximum eligible compensation (amounts would be prorated).

Definition of an owner-employee: The PPP loan forgiveness application established a PPP owner-employee compensation rule for determining the amount of compensation eligible for loan forgiveness. The IRS later defined an owner-employee as someone who is both an owner and an employee of a C corporation, and that the PPP owner-employee compensation rule does not apply to individuals with less than a 5% stake in a C or S corporation.

So … What Should You Do?

With so much uncertainty still hovering around the PPP loan forgiveness process, we suggest that you wait a bit longer before applying for loan forgiveness. In the meantime, document everything. Keep track of all paperwork involving your PPP loan, payroll expenses and other expenses that were paid with your loan. You’ll need to have your paperwork in order when the time finally does come to file.

If you have any other questions or concerns relating to the PPP loan program, please don’t hesitate to contact us. We’ll be happy to answer your questions.

Make Your Appointment

It’s time to make your year-end tax planning appointment. Choose an in-person meeting (limited availability), or a Zoom or phone meeting. Please call Amber at  706-632-7850 or email her to set up a date.

MONEY BRIEF #1

Good recordkeeping is an important part of tax planning and preparing for next year’s return. And it’s never too early to take stock of your record-keeping systems. Here are a few tips:

  • Develop a system that keeps all your pertinent information together. Set up dedicated folders on your computer as well as paper folders in your desk or file drawer.
  • Add tax records and statement to your files as you receive them. This includes your Economic Impact Payment Notice 1444 and any unemployment compensation documentation.
  • Notify the IRS if your address changes by filing Form 8822, Change of Address. Also be sure to notify the Social Security Administration of a legal name change to avoid delays in processing your tax return.
  • Keep any receipts, canceled checks and other documents that support your income and expenses. These include records relating to real estate property transactions, and stock purchases and sales.

For more record-keeping information, see Publication 5349, Year-Round Tax Planning Is for Everyone.

MONEY BRIEF #2

If you are undergoing an audit with the IRS, you have rights under the Taxpayer Bill of Rights, such as:

  • The IRS generally has three years from the date you file your return to assess any additional tax for that tax year. Note that the IRS has an unlimited amount of time to assess tax if you fail to file a return or file a false or fraudulent return.
  • The IRS generally has 10 years from the assessment date to collect unpaid taxes. This 10-year period can be extended if you enter into an installment agreement or if the IRS obtains a court judgment. Also, the 10-year collection period may be suspended if the IRS cannot collect money due to a bankruptcy or an ongoing collection process.
  • If the IRS concludes you owe taxes, it will issue a statutory notice of deficiency. This notice must include the deadline for filing a challenge with the tax court, typically within 90 days of the notice.
  • Generally, the IRS can only audit your tax return once for any given tax year. However, the IRS may reopen an audit for a previous tax year if the IRS finds a fraudulent return or other issues.
COVID-Related Payroll Tax Deferral Raises Questions

COVID-Related Payroll Tax Deferral Raises Questions

In an effort to reduce the burden on workers, President Trump signed a memorandum on August 8 providing for the deferral of payroll taxes from September 1 through December 31, 2020. The new rule defers the employee portion of the old-age, survivors and disability insurance (OASDI) tax and Railroad Retirement Act Tier 1 tax for those whose pretax biweekly wages are generally less than $4,000. Note: Currently this is considered a tax DEFERRAL — not forgiveness — so tax will be due at a later date.

However, because the lack of detail in the memorandum left open a lot of questions, the American Institute of CPAs (AICPA) has requested guidance from the Treasury Department on handling the tax deferral. As soon as these issues are ironed out, we’ll be able to help you implement the tax deferral in your payroll systems. Details to come!

Source: Journal of Accountancy

PPP: Don’t Rush to Apply for Forgiveness

Are you one of the more than 5 million businesses that received a Paycheck Protection Program (PPP) loan? If so, you may be ready to apply for forgiveness.

However, experts are advising most small businesses to wait a little while to apply, even though the SBA opened the forgiveness portal last week. That’s because the SBA continues to make adjustments and issue new guidance (in the form of frequently asked questions).

The delay is mostly because Congress has been unable to agree on a new COVID-19 relief bill, which would hopefully address some outstanding issues. One such issue is whether expenses covered by PPP loans will be deductible on your 2020 tax return or not.

For example, SBA guidance recently issued clarifications for:

  • Payments for vision and dental benefits, which are included in group health care and insurance premiums and are thus eligible to be paid with PPP funds.
  • Payments of transportation utility fees assessed by state and local governments, which are eligible for loan forgiveness.
  • Calculating reductions in loan forgiveness arising from reductions in employee salary or hourly wage.
  • Sole proprietors, independent contractors and self-employed individuals, who qualify to use the simplified PPP Loan Forgiveness Application Form 3508EZ.

While you wait for Congress to act, take the time to gather up your paperwork so that you’re ready to apply when the time is right. If you don’t have a separate business account for the loan proceeds, be sure to keep good books and records that show how you spent the loan funds.

If you have any questions, please don’t hesitate to contact us. We’re here to help!

Source: CNBC

MONEY BRIEF #1

You can use the IRS Tax Withholding Estimator to determine the right amount of tax to be withheld and avoid surprises on your tax bill next year. Income tax withholding is generally based on your expected filing status and standard deduction. Adjusting withholding on your paycheck or revising the amount of your estimated tax payments can help prevent penalties. This is especially important if you work in the “gig” economy, have more than one job or experienced major life changes recently. This also applies if you received unemployment due to COVID-19 layoffs.

MONEY BRIEF #2

During the 2019 fiscal year, the IRS:

  • Collected more than $3.5 trillion in taxes.
  • Processed more than 253 million tax returns and other forms.
  • Issued more than $452 billion in tax refunds.
  • Was called or visited by nearly 61 million taxpayers.
  • Received nearly 651 million visits to its website (irs.gov), where taxpayers downloaded almost 363 million files.
The Rules Keep Changing: What You Need to Know About PPP Loans

The Rules Keep Changing: What You Need to Know About PPP Loans

With new legislation being debated and constantly updated, it seems, the rules regarding Paycheck Protection Program (PPP) loans and loan forgiveness keep changing. So the current advice from experts is: Don’t rush into anything!

Congress is currently trying to work out a new COVID-19 relief package before going on recess, which is scheduled for August 8. Part of the discussions may include changes that relax the forgiveness requirements for the smallest loans, possibly those up to $150,000.

The SBA notified lenders that it would not even begin accepting PPP forgiveness submissions until new software goes live. And the expected launch date of August 10 could be delayed if new legislation changes the forgiveness process. So lenders cannot finalize their “forgiveness portals” until the SBA has finalized theirs.

___________
More than 4.8 million businesses and organizations took out PPP loans through June 30, 2020. Recent legislation extended the chance to apply for a PPP loan through August 8. And new legislation may provide the opportunity to apply for a second PPP loan. Stay tuned for details!
___________

 

The Various Deadlines

Remember, you have up to 24 weeks to use your PPP money. And since payroll costs are a significant component of PPP forgiveness, you may need to wait until your payroll provider has time to develop reports that are customized to comply with PPP guidance. The other important deadline in the PPP forgiveness process comes 10 months after the end of your loan’s covered period. At that point, if forgiveness forms have not been submitted, the funds officially become a loan that needs to be repaid.

What’s more, the SBA has not yet answered questions with regard to some specific considerations, including which types of utility expenses are forgivable, how FTE employees are treated when fired for cause, determining 2020 vs. 2019 income for self-employed borrowers, and which documents are required for submission and which are required to be retained.

Keep Your Paperwork in Order

With plenty more details to come on this subject, we’ll be sure to keep you updated as the information changes. In the meantime, take steps to prepare for the forgiveness application process by documenting how the loan proceeds are used. Gather any materials you will need to support non-payroll expenses, such as mortgage interest, rent or lease payments, and utilities. And please contact us with any questions you may have about your current situation.

No Changes to Auto Depreciation Limits

According to the IRS, there will be NO CHANGES to the limitations on depreciation deductions for passenger automobiles first placed into service in 2020.

For cars, trucks and vans that are acquired after Sept. 27, 2017, and placed in service during calendar year 2020, the depreciation limit is:

  • $18,100 for the first tax year;
  • $16,100 for the second tax year;
  • $9,700 for the third tax year; and
  • $5,760 for each succeeding year.

When no Sec. 168(k) bonus first-year depreciation deduction applies, the depreciation limit is only $10,100 for the first tax year, with succeeding years the same as above.

 

MONEY BRIEF #1

Did you know that teachers and other educators can deduct certain unreimbursed expenses on their tax returns? To be eligible, you must be a K-12 teacher, instructor, counselor, principal or aide, and you must work at least 900 hours during a school year. You can deduct up to $250 of business expenses that were not reimbursed (be sure to keep your receipts) for:

  • Professional development course fees
  • Books
  • Supplies
  • Computer equipment, including related software and services
  • Other equipment and materials used in the classroom

MONEY BRIEF #2

.With new stimulus payment legislation currently being debated in Congress, what will you do with any new funds you receive? According to a U.S. Census survey, the majority of people who received the previous stimulus check used most of it on household expenses, while 16% paid off debt and 14% saved it. Households with incomes between $75,000 and $99,999 were more likely to use their stimulus payments to pay off debt or add to savings. In contrast, 88% of households with incomes of $25,000 or less used their checks to meet expenses. In households that spent their stimulus funds, approximately:

  • 80% used it on food.
  • 78% paid rent, mortgage and/or utilities.
  • 58% purchased household supplies and personal care products.
  • 20% bought clothing.
  • 8% spent it on household goods like TVs, electronics, furniture and appliances, or on recreational goods like fitness equipment, toys and games.
Retirement Planning: Are Your Social Security Benefits Taxable?

Retirement Planning: Are Your Social Security Benefits Taxable?

If you are retired now or planning on retiring soon, you’ll need to determine if any of your Social Security benefits will be taxed. It’s an important part of figuring your income and expenses during this time of your life.

Since 1984, Social Security beneficiaries with total incomes exceeding certain thresholds have been required to pay federal income tax on some of their benefit income. And because those income thresholds have remained unchanged while wages have increased, the proportion of beneficiaries who pay income tax has risen over time. On average, more than half of beneficiaries typically owe federal income tax on part of their Social Security benefits.

Will You Have to Pay?

Here’s how to determine if your Social Security benefits are taxable:

Add one-half of your (and your spouse’s, if married) Social Security income to all your other income, including pensions, wages, interest, dividends and capital gains.

  • If you’re single and your total added-up income equals more than $25,000, then part of your Social Security benefits may be taxable.
  • If you’re married filing jointly and your total income equals more than $32,000, then part of your Social Security benefits may be taxable.

Up to 50% of your benefits may be taxable if you are:

  • Filing single, head of household, or qualifying widow or widower with $25,000 to $34,000 income.
  • Married filing separately and lived apart from your spouse with $25,000 to $34,000 income.
  • Married filing jointly with $32,000 to $44,000 income.

Up to 85% of your benefits may be taxable if you are:

  • Filing single, head of household, or qualifying widow or widower with more than $34,000 income.
  • Married filing jointly with more than $44,000 income.
  • Married filing separately and lived apart from your spouse with more than $34,000 income.
  • Married filing separately and lived with your spouse at any time during the past year.

If you’re like most, a certain percentage of your monthly retirement, survivor and/or disability benefits is potentially taxable, depending on your income and filing status. Of course, there are a lot of other factors that go into figuring your income (and expenses) during retirement. And all of that information can help you figure out the best time for you to retire.

We’re here to help you make those important calculations — and ensure they’re correct — so you can enjoy your retirement without worrying about how to pay for it. Contact us when you’re ready.

Rollover Relief for RMDs

 

If you already took a Required Minimum Distribution (RMD) this year from certain types of retirement accounts, you can roll those funds back into your retirement account, thanks to the CARES Act. The 60-day RMD rollover period has been extended to August 31, 2020.

In addition to rollovers, this also applies if you are an IRA owner or beneficiary who has already received an RMD distribution this year. You can repay the distribution to the IRA by August 31, 2020. Further, this repayment is NOT subject to the one rollover per 12-month period limitation and the restriction on rollovers for inherited IRAs.

This relief applies if you had an RMD due in 2020 from a defined-contribution retirement plan, including a 401(k) or 403(b) plan, or an IRA. It also applies if you turned 70½ in 2019 and would have had to take your first RMD by April 1, 2020. Note that the waiver does NOT apply to defined-benefit plans.

If you have any questions about this RMD relief, please don’t hesitate to contact us.

 

MONEY BRIEF #1

The PPP loan deadline has been extended to August 8, 2020, after being signed by President Trump on Saturday. This 5-week extension re-opens the application window for the Paycheck Protection Program (PPP), keeping open a source of funding for struggling small businesses while Congress works on a second, more targeted funding program. The SBA had stopped accepting loan applications on June 30 before the extension was approved. As of June 30, the SBA had approved more than $520 billion in PPP funding, with approximately $129 billion in funds remaining available.

MONEY BRIEF #2

If you received an Economic Impact Payment, you should keep Notice 1444, Your Economic Impact Payment, with your tax records.

Notice 1444 provides details about the amount of your payment, how the payment was made and how to report any payment that wasn’t received. The IRS mailed this notice to your last known address within 15 days after sending the EIP. It’s especially important to keep this notice if you think your payment amount is wrong.

When you file your 2020 tax return, we’ll use your Notice 1444 to claim any additional credits, if you are eligible for them. Keep this notice on hand with your other important tax records, including W-2s, 1099s, and other income documents and records. Remember, you should be keeping copies of your past tax returns and supporting documents for at least three years.

New & Easier PPP Loan Forgiveness Applications Now Available

New & Easier PPP Loan Forgiveness Applications Now Available

Last week, the SBA released a revised Paycheck Protection Program (PPP) loan forgiveness application and a new EZ application. These new applications reflect the changes that were made to the PPP by the Paycheck Protection Flexibility Act of 2020, which passed on June 5.

You can access the new applications here:

Revised Application Changes

The revised PPP Loan Forgiveness Application includes several changes:

  • If you own an S corporation, you cannot include health insurance costs when calculating payroll costs; however, retirement costs are eligible.
  • Safe harbors for excluding salary and hourly wage reductions, as well as reductions in the number of employees, can be applied as of the date the loan forgiveness application is submitted. You do not have to wait until December 31 to apply for forgiveness to use the safe harbors.
  • If you received your PPP loan before June 5, you can choose between using the original eight-week covered period or the new 24-week covered period.

New EZ Application Highlights

The new 3508EZ PPP Loan Forgiveness Application requires fewer calculations and less documentation than the full application. You can use the EZ application if you:

  • Are self-employed and have no employees;
  • Did not reduce the salaries or wages of your employees by more than 25% and did not reduce the number or hours of your employees; or
  • Experienced reductions in business activity as a result of health directives related to COVID-19 and did not reduce the salaries or wages of your employees by more than 25%.

New SBA Rules Issued

The SBA also issued updated rules last week for determining payroll costs and owner compensation in calculating PPP loan forgiveness under the new 24-week period.

Employees — The original PPP legislation allowed loan forgiveness for payroll costs of up to $15,385 per employee over the eight-week period ($100,000 annualized). The new rule for the 24-week period is three times the eight-week limit for full loan forgiveness, or $46,154 per employee.

Owners — If you file Schedule C, Profit or Loss From Business, or Schedule F, Profit or Loss From Farming, your PPP forgiveness calculations have also changed. For the eight-week period, the calculation is 8 ÷ 52 × 2019 net profit, up to a maximum of $15,385. For the 24-week period, the forgiveness calculation is limited to 2.5 months (2.5 ÷ 12) of 2019 net profit, up to $20,833.

Other PPP Modifications

The SBA made a few other changes to account for the Payroll Protection Flexibility Act:

  • The minimum term for PPP loans made on or after June 5 is now 5 years. For loans made before June 5, the minimum maturity remains at 2 years unless both the borrower and the lender agree to extend it to 5 years.
  • The proportion of PPP funding that must be used on payroll costs to qualify for full forgiveness drops to 60% from 75%.
  • The application deadline for PPP loans remains at June 30.

If you have any questions about the PPP loan changes, please don’t hesitate to contact us.

Source: Journal of Accountancy

Have You Been Counted?

Fannin County is lagging behind in responses to the U.S. Census. While nearly 61.4% of all U.S. residents have responded, only 57.4% in Georgia and 35.7% in Fannin have. If you haven’t been counted yet, simply go to 2020census.gov, and fill out the easy form. The count is important so that Fannin receives its fair share in federal and state funding allocations. You can check out the response rates on this interactive map.

MONEY BRIEF

An extension to file is not an extension to pay. July 15 is the deadline to both FILE and PAY your taxes for 2019. If you need additional time, you can request an extension to FILE your taxes by October 15. However, you must still PAY any taxes due by July 15. Let us know if you need us to file an extension for you.

MONEY BRIEF

Estimated tax payments for tax year 2020, which were due April 15 and June 15, are now both due by July 15. You can visit IRS.gov/payments to pay electronically. The IRS offers two free electronic payment options where you can schedule your estimated federal tax payments up to 30 days in advance with Direct Pay, or up to 365 days in advance with the Electronic Federal Tax Payment System (EFTPS).

MONEY BRIEF

Employers may have tax credits available due to the coronavirus pandemic. To help explain the credits, the IRS created a PDF that breaks down the details of the Employer Retention Credit and the credits for paid sick and family leave. The easy-to-follow charts will help you determine whether you are eligible for the credits, the amount of the credits and which wages apply to the credits.

Good News: Positive PPP Changes Are Coming!

Good News: Positive PPP Changes Are Coming!

There’s good news if you took out a Paycheck Protection Program loan. The Paycheck Protection Program Flexibility Act — recently passed by the House & Senate and expected to be signed by President Trump — gives business owners more flexibility to use loan money and still get it forgiven.

Congress passed the legislation this week because the clock on the initial 8-week window recently expired if you were among the first PPP loan recipients. A special note in the bill clarifies that June 30 remains the deadline for applying for a PPP loan. However, the deadline for spending PPP funds is pushed back to December 31.

Key Points to Know

The bill contains several important provisions that affect borrowers:

#1 — Timeframe Increased to 24 Weeks

If you have an outstanding PPP loan, you can choose to keep the original 8-week period OR switch to the new 24-week period. Keeping the 8-week period makes sense if you have already spent the funds on sufficient expenses that provide for full forgiveness.

#2 — 75% Rule Changed to 60%

The new law changes the test that at least 75% of the amounts forgiven have to be spent on payroll expenses. Now, to be eligible to receive PPP loan forgiveness, you are required to use at least 60% of the loan amount for payroll costs, and up to 40% on rent, utilities, etc.

#3 — Workforce Reduction Rule Pushed Back to December 31

Loan forgiveness is reduced in proportion to the reduction in workforce (if the same number of employees are not hired or rehired). The new law uses the 24-week period, which extends the June 30 date to December 31.

#4 —Rehire Exception Rule Modified

There’s an exemption from the reduction in loan forgiveness if you have reduced your workforce because you could not:

  • Find Qualified Employees to Hire. You must establish an inability to rehire individuals who were employees on February 15, 2020, and an inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020.
  • Restore Your Business to Full Levels of Activity. You must establish an inability to return to the same level of business activity (as of February 15, 2020) due to social distancing measures or other federal health requirements.

#5 — Repayment Period Now 5 Years

The period for repaying any PPP loans not forgiven is now 5 years (up from 2 years), while the interest rate remains at 1%.

#6 — Payroll Taxes Deferred

You are eligible to defer the payment of Social Security payroll taxes, regardless of whether you receive loan forgiveness. This allows you to defer the payment of the employer’s share (6.2%) — with 50% due in 2021 and 50% due in 2022.

Let Us Help You Figure It All Out

The new legislation is welcome news for our small businesses who need more time and flexibility to use their PPP loan funds. But it, of course, opens up new concerns, too. If you have any questions about the new legislation, please contact us and we’ll help you work through the best solutions for your situation.

Sources: CNN & Journal of Accountancy

 

 

 

MONEY BRIEF

If you have not yet reached age 59½ and need additional income during this time, you may be considering taking that money from a retirement account. The CARES Act provides an exemption on withdrawals of up to $100,000 per person from an eligible IRA or employer-provided retirement plan, such as a 401(k), 403(b) or other type of defined contribution plan.

These withdrawals are now EXEMPT from the usual 10% early withdrawal penalty, plus the 20% automatic withholding, which is used as an advance payment on the taxes that you may owe on employer-plan withdrawals.

Keep in mind that any amount you withdraw now will reduce your future retirement savings. Also, the amount will be added to your annual income for 2020 for tax purposes. The CARES Act allows you to distribute the tax burden over a period of up to three tax years, if you choose. And you can recontribute some or all of the funds that you withdrew by the third year.

Consider whether the loss of retirement savings now makes sense or not. If you’d like to work through the numbers before making any moves, give us a call.

Coming Due: PPP Loan Updates You Need to Know

Coming Due: PPP Loan Updates You Need to Know

On May 15, the SBA released its Payroll Protection Program Forgiveness Application. The Paycheck Protection Program is the forgivable loan program that allows small businesses to cover up to eight weeks of payroll costs, mortgage interest, rent and utilities. The loan amount is based on your average monthly payroll cost for 2019 multiplied by 2.5.

In order to be forgivable, at least 75% of your loan must be used for payroll costs (not including payments to independent contractors). Your forgivable amount will scale in proportion to the amount you spend on payroll, up to the total loan amount. And you must maintain the number of employees on your payroll (within certain guidelines).

Restaurant owners and other businesses have requested an extension on the eight-week forgiveness period due to extended closures. Current bi-partisan support in Congress is looking to make this change, though nothing is certain yet. If the timeline is not extended, then the portion of your loan that is not forgiven will be assessed at a 1% interest rate over 2 years, with no payments due for the first six months. There is no pre-payment penalty.

Safe Harbor Given

If you borrowed less than $2 million from the PPP, you will be given a “safe harbor.” That means that, should you be audited, you will not need to certify that your business needed the money due to economic uncertainty.

If your business borrowed more than $2 million, it may be subject to further review from the SBA. If the SBA deems that your firm lacks adequate basis for certifying that it needed the loan, the SBA will seek repayment of the loan balance and inform your lender that your loan is ineligible for forgiveness.

Tax Surprise Coming?

PPP loan recipients may be in for a tax surprise. As of now, you will NOT be able to write off expenses that would otherwise be deductible if the expenses are covered by the PPP proceeds and the loan is forgiven. That could result in a higher tax bill as you prepare to pay your first and second quarter estimated taxes, both due on July 15.

The IRS is currently blocking the deduction to prevent PPP borrowers from “double-dipping” — both exempting the PPP loan from taxes and permitting the write-off of salaries and other expenses. However, lawmakers in Congress have proposed a bill to fix the rule and allow the deductibility of expenses. The bill, the Small Business Expenses Protection Act of 2020, is currently under review in the Senate Finance Committee.

Contact Us for Help

Here at Premier CPA Services, we’re doing our best to stay on top of the constantly changing tax and financial rules — so you can make the most of these changes, keep your doors open and stay in business. If you have any questions or need guidance, please don’t hesitate to contact us. We’re here to help you, and we appreciate your business!

Are Your Important Papers Up-to-Date?

With so much going on right now, it brings to mind the need to make sure your essential documents are current and secure. Now is a good time to contact your attorney to establish or update your:

  • Will, which not only distributes your assets, but also names guardians for your children under 18.
  • Durable power of attorney for financial matters, which names someone to handle legal matters related to your finances.
  • Beneficiary designations for assets such as retirement accounts, which may be affected by the Setting Every Community Up for Retirement Enhancement (SECURE) Act.
  • Living will, which includes your healthcare wishes and considerations (i.e., medical directives and DNR orders).
  • Healthcare proxy, which authorizes another person to make medical decisions for you if you are unable to.
  • HIPAA release permitting another person to talk with medical providers about your medical history and treatment.

MONEY BRIEF #1

The IRS announced temporary changes to Section 125 Cafeteria Plans because of the Coronavirus. The IRS is offering extra flexibility to users by:

  • Extending the claims periods for you to apply unused amounts remaining in your health FSA or dependent care assistance program for expenses incurred through December 31, 2020.
  • Expanding your ability to make mid-year elections for health coverage, health FSAs and dependent care assistance programs in response to changes in needs as a result of the pandemic.
  • Applying earlier relief for high-deductible health plans to cover expenses related to COVID-19, and a temporary exemption for telehealth services retroactively to January 1, 2020.
  • Increasing (for inflation) the $500 permitted carryover amount for health FSAs to $550.

MONEY BRIEF #2

More taxpayers are using IRS.gov than ever before. As of May 8, the agency’s website had been visited a record 1 billion times — that’s up 141% compared to the same time last year.

MONEY BRIEF #3

Nearly 4 million people are receiving their Economic Impact Payment by prepaid debit card instead of a paper check or direct deposit. These EIP Visa cards are issued by MetaBank, and can be used to make purchases, get cash from ATMs or transfer funds to a personal bank account — all without fees. You can learn more at www.eipcard.com. Other EIP questions and answers can be found here: https://www.irs.gov/coronavirus/economic-impact-payment-information-center

Questions & Answers About the Paycheck Protection Program for Small Businesses

Questions & Answers About the Paycheck Protection Program for Small Businesses

We continue to receive questions from our local business owners regarding their financial relief options, particularly in regard to the Paycheck Protection Program. Established by the CARES Act, the PPP offers small businesses low-interest loans to cover payroll and other costs during the COVID-19 pandemic.

The loan, which is designed to cover 8 weeks of expenses, does not have to be paid back if at least 75% of the money is spent keeping or rehiring workers. The other 25% can be used for more payroll, rent, utilities and mortgage interest. Otherwise, it carries a 1% interest rate and must be paid back within 2 years.

While the Small Business Administration has approved more than 1.6 million loans totaling almost $350 billion since April 3rd, it has come with a host of technical glitches, an overload of applications and an exhaustion of money.

The good news is that Congress passed a new bill to replenish the PPP fund, which President Trump signed on Friday. The new law includes $310 billion in new funds, with $60 billion specifically targeted for smaller, community-based lenders and credit unions.

Following are some helpful Q&As adapted from a recent article in USA Today that we wanted to share with you:

Q: How long does it take to get a PPP loan?

A: With so many businesses applying, the SBA and banks have been overwhelmed. Some businesses have been approved for a loan in only a few hours, while others have waited several weeks … or still haven’t been approved. Once the loan is approved, however, you should receive the money within 10 days.

Note that if you’ve already applied for a loan but haven’t yet received an answer, you do NOT need to reapply. You’re already in the queue for the second round of PPP funding. But how quickly you’re approved often depends on whether your application is complete and accurate, and how your lender is prioritizing loan applications.

Click here for a sample PPP Loan Application.

Q: Why does it seem larger companies have been getting loans more quickly than smaller mom-and-pop stores?

A: Although the SBA processes the loans on a first-come, first-served basis, this requirement does not apply to lenders. So some banks have prioritized larger loans (with bigger fees) over smaller ones, and those from their “better” customers. To help address the issue, $60 billion of the new funding is scheduled to be set aside for community-based lenders, smaller banks and credit unions to assist smaller businesses.

Q: If I am self-employed or an independent contractor, am I eligible for a PPP loan?

A: Yes. Both types of workers may apply for the PPP. But in order for the loan to be forgiven, it must be tied to net profits from last year (not what you paid yourself), and not be equal to the salary you draw. Note that PPP applications for these types of workers did not start until April 10th, so you are further behind in line for loan approvals.

Q: When does the clock start running on PPP loans?

A: Immediately! The 8-week period to determine the amount of loan forgiveness begins counting on the day the money is deposited into your business bank account. So think twice about the loan if you can’t use the money right away (i.e., you don’t think you’ll be able to open in eight weeks). Payments are deferred for 6 months following the disbursement of the loan proceeds, while interest begins accruing immediately.

Q: What can I use the PPP funds for?

A: Payroll costs, healthcare benefits, mortgage interest payments, rent, utility, interest payments on debt incurred prior to February 15, 2020, and/or refinancing an SBA EIDL loan made between January 31, 2020 and April 3, 2020, all qualify. Note that you can provide raises or bonuses to your employees if you’re struggling to reach the 75% payroll threshold (as long as no worker earns more than $100,000 annually), but you cannot count independent contractors in your payroll numbers.

Q: What happens if I get a PPP loan, but still end up closing my business?

A: Due to the nature of the program, there’s no personal guarantee of collateral required. So if you have to declare bankruptcy, you should not have to repay the loan. However, if you stay in business but your sales are reduced, you will have to repay the loan.

Q: Can I apply for a PPP loan even if I’m currently making a profit?

A: Yes. The primary criteria for getting the loan is your company must have employed no more than 500 workers for whom it paid salaries and payroll taxes or paid independent contractors, and that it was operating on February 15th of this year. Loss of revenue is not a requirement, though the application form requires you to certify that “current economic uncertainty makes this loan request necessary to support the ongoing operations.”

The processes and requirements regarding the PPP can be confusing. If you need help applying or have questions about qualifying, please feel free to contact us. We’re here to help!