For the past few weeks, we have been constantly talking about the Paycheck Protection Plan (PPP). Perhaps an overkill, but the program has been a lifesaver for a variety of our clients, and it has provided a great shot in the arm for others.
Finally last week, we got definitive guidance from the Small Business Administration (SBA) about forgiveness!
But first there’s this: GREAT news for those who have smaller PPP loans (<$2MM).
The Treasury and SBA just released a new FAQ #46 that states:
“[a]ny borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.”
Essentially, if your PPP loan is UNDER $2MM, then you will not be forced to re-examine this reality, and your initial certification of “economic uncertainty” will be considered sufficient.
There are some warnings for those who may have gotten the loan and did not need it AND it is over $2MM. If that’s you, let’s talk.
But this should be a sigh of relief for many: essentially, if you are under $2MM in loan amount, the SBA (likely) will not audit your loan.
YOU STILL MUST COMPLY WITH FORGIVENESS REQUIREMENTS. But that’s between you and your lender. And we can help with that.
Speaking of forgiveness, the new guidance from the SBA includes instructions and an application.
There are still some issues with the SBA’s guidance that the American Institute of CPAs (AICPA) is pressing to get resolved (specifically regarding the 8-week period during which these expenses need to be spent), but to rehash, the forgivable costs are:
1) Payroll Costs, which include:
- Salary, wages, commissions or similar
- Cash tips or the equivalent
- Payment for leave
- Allowance for separation or dismissal
- Housing allowance or stipend
- Payments for group health care benefits, including group health care coverage
- Payment of any retirement benefits
- Payment of state and local taxes assessed on the compensation of employees
2) Mortgage Interest on real or personal property (owned by the business) or rent under a leasing agreement for agreements in effect prior to 2/15/2020.
3) Utilities, which includes payment for expenses such as electricity, gas, water, transportation, telephone, or internet access. Service must have been established prior to 2/15/2020.
4) Any Economic Injury Disaster Loan (EIDL) to be refinanced (the initial advance will also be wrapped into the PPP loan).
A few more details about Payroll Costs:
- 75% of eligible costs are to be used for payroll. If you spend less than 75%, the forgiveness is reduced.
- Only the equivalent of the first $100K in annualized payroll costs can be counted (that is, it cannot exceed $15,385).
- This doesn’t include payments to independent contractors.
There are a lot more nuanced payroll rules, but those we’ve outlined above are the biggies.
There is a two-page application for forgiveness that businesses will submit to their lender, which includes a Schedule A along with a Worksheet for Schedule A, and each Schedule/Worksheet has a set of instructions. It looks a bit daunting, but we expected no less.
We can help with all of this. Let us know … you know where to find us.
The Team at Legacy CPA
We are grateful for our chance to serve you and your business, ~Contact.FirstName~ — and we are dedicated to its success, in every season.
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