PPP

PPP2 Overview

Questions about PPP2? Here is an overview:

How much is the loan amount?

The amount is 2.5 times your average monthly payroll during 2019 or trailing 12 months. For hotels and restaurants the amount is 3.5 times average monthly payroll.

How to qualify?

  1. You must have 300 or fewer employees
  2. Have already used or plan to use your original PPP funds
  3. Can demonstrate at least a 25% reduction in revenue during a least one quarter of 2020 when compared to 2019.

When can you start applying?

You can start applying for a second draw PPP now, however, the SBA will initially only accept loan applications from participating community financial institutions.

What is the deadline?

The deadline is March 31, 2021

What can the proceeds be used for?

The loan proceeds can be used for payroll costs, benefits, mortgage interest, rent, utilities, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations. The bottom line is that it can be used for many business expenses.

How can it be forgiven?

You must use the entire loan proceeds on covered expenses, stated above, and at least 60% on covered payroll.

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PPP Loan Forgiveness

It sounds like it would be straightforward to have your PPP loan forgiven, but that’s like saying the tax code is straightforward. Here are details and confusion on loan forgiveness:

8 Week Period

Qualified expenses have to be paid or incurred during the 8 week period after receiving the loan. Is it incurred or paid? The statute is not clear.

75%/25%

At least 75% of loan proceeds need to be spent on payroll costs. The other 25% can be used for interest costs, rent, and utilities. It looks like rent of vehicles, etc. is considered rent also. What about bonuses, and do they count? Unclear also.

Full-Time Equivalent  (FTE) Calculation

The definition of FTE is not in the statute. It is still not clear if the hours of part-timers should be combined to determined full-time equivalents.

Documentation Needed for Forgiveness

You will need to provide documentation verifying FTE’s, payroll tax filings, financial statements verifying payment of debt obligations, and any other documentation the Administrator determines necessary. What exactly does the last requirement mean? I would think that it means that you better have good bookkeeping.

Are you more confused? I am sure that more guidance will be issued, but hopefully very soon.

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COVID-19 Updates: I Received my PPP Loan, Now What?

If you received your PPP loan, what should you do now?

The main purpose of the PPP loan is to keep your employees on payroll and the proceeds should be used for:

  • Payroll costs, including payment of state and local taxes based upon compensation
  • Group healthcare benefits and retirement
  • Interest on mortgage obligations
  • Rent
  • Utilities (electricity, gas, water, telephone, or internet)

How to obtain forgiveness

  • Your loan forgiveness will be reduced if you decrease your full-time employee headcount during the covered loan period.
  • Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
  • You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.
  • 75% of the proceeds must be used towards payroll costs
  • The period to use the proceeds is the eight week period after receiving the loan

The act excludes from payroll costs the compensation of individual employees that make an annual salary of $100,000. Also, the whole point of this loan is to help pay your employees for two months plus other critical expenses during this time period.

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COVID-19 Tax and Financial Updates 04-17-2020

Tax Updates

  • Some taxpayers have started to receive their Economic Impact Payments
  • The CARES Act also provided retroactive tax law changes, such as allowing improvements to nonresidential buildings to be eligible for bonus depreciation (the ability to be expensed 100% in one year), while reducing the number of years of depreciation from 39 to 15 years
  • Business losses from 2018, 2019, and 2020 are eligible to be carried back up to five years and losses carried to 2019 and 2020 can now offset 100% of taxable income versus 80% previously

Paycheck Protection Program Info

  • The PPP loans have reached their maximum in less than two weeks, and now we have to wait to see if there will be an increase to the limitation.
  • So far, not one client has informed me that they received funds from the PPP

Adapting to the Situation

  • We hear stories from our clients and others who are making changes to their businesses to help adapt and survive through this financially. Some changes include:
    • Virtually serving clients and customers, when possible
    • Creating new services that are in demand now
    • Selling products online versus traditional retail
  • It also appears that there is a renewed sense of putting things in perspective, focusing on what is important, not living just to work, and a general sense of community. I like those changes.

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COVID-19 Tax and Financial Updates 04-10-2020

Here are the latest updates and some reminders:

Tax Updates

  • Tax deadlines: both New Jersey and New York have finally extended the tax deadline from April 15th to July 15th.
  • If you have an existing installment agreement with the IRS, payments due between April 1 and July 15, 2020 are suspended.
  • CARES Act economic impact payments: payments will begin this month and you do not have to take any action if you filed a return for 2018 or 2019.

Paycheck Protection Program Info

  • Sole proprietors, independent contractors, and self-employed persons can start applying for this loan starting today
  • The banks are completely overwhelmed with loan applications and some have temporarily stopped taking new applications, especially if your business does not have an existing relationship with the bank
  • The information required consists mainly of prior year’s payroll filings, loan applications, etc.
  • The program will be available until June 30, 2020
  • We are not sure how long it will take to receive funding, but if you have received funding, then please let us know

Existing SBA Loans

  • The SBA will automatically pay the principal, interest, and fees of current 7(a), 504, and microloans for a period of six months.
  • The SBA will also automatically pay the principal, interest, and fees of new 7(a), 504, and microloans issued prior to September 27, 2020.

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