Monthly Archives: April 2020

SBA Issues Supplemental PPP Guidance

On April 14, the Small Business Administration (SBA) released new guidance regarding the Paycheck Protection Program (PPP), a $350 billion program that targets aid to small businesses dealing with losses resulting from the coronavirus pandemic. The PPP was created as a part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law on March 27th.

In the new release, the SBA published specific information on a variety of areas where applicants have had questions, including:

• Guidance to help individuals with self-employment income understand how to calculate the maximum loan amount they can receive through the program. They will need to use Form 1040, Schedule C, Profit or Loss From Business, which will be provided with the PPP loan application.
• Instructions on how to report the self-employment income of partners in a partnership. Up to $100,000 (annualized) of the income may be reported as a payroll cost on a PPP loan for the partnership. The SBA clarified that individual partners should not submit separate PPP loan applications.
• Guidance regarding the eligibility of some particular business concerns for the PPP program and clarification regarding pledge requirements for PPP loans.

For further details on the SBA supplemental PPP guidance, check out this article from the Journal of Accountancy or visit the PPP loan FAQ page.

For more specific information on the COVID-19 relief efforts, visit our CARES Act FAQ blog.

Achieving PPP Loan Forgiveness

Businesses that have managed to secure financing through the Paycheck Protection Program (PPP) are fortunate—but also saddled with a lot of red tape. Business owners and managers should be careful that they adhere strictly to the terms of the program in order to qualify for loan forgiveness.

In response to the coronavirus pandemic, Congress created the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The historic $2.2 trillion stimulus bills included $350 billion towards the PPP, a forgivable loan program targeted to aid small businesses dealing with losses resulting from the coronavirus pandemic. Unfortunately, the Small Business Administration (SBA) loan program, which was rapidly flooded with applications, quickly maxed out the money available for emergency loans. Congress is expected to authorize more funds for the program in the near future.

While business owners who did manage to secure a PPP loan are fortunate, they have a lot of work ahead of them. In order to qualify for loan forgiveness, the PPP funds must be used for certain allowable purposes, including:

• Salaries, wages, commissions, or similar compensations (up to $100,000 per year per employee, prorated);
• Cash tips or equivalent;
• Employee leave, including parental, family, medical, or sick (excluding family or sick leave under the Families First Coronavirus Response Act);
• Allowances for dismissal or separation;
• Group healthcare benefits, including insurance premiums;
• Retirement benefits;
• State or local taxes on employee compensation (not including the employer‚Äôs share of FICA payroll taxes, Railroad Retirement Act taxes, or other required U.S. income tax withholdings);
• Continuation of group healthcare benefits during employee leave and insurance premiums;
• Mortgage interest, rent, and utility payments incurred prior to February 15, 2020;
• Compensation and income of up to $100,000 per year (prorated) for sole proprietors and independent contractors.

Money used for any of the allowable purposes listed above could qualify for 100% forgiveness; loan money used for non-allowable purposes must be repaid. This means that businesses who take on PPP loans must shoulder a big burden of new reporting requirements. Failure to keep thorough records of how the loan money is used could result in loss of forgiveness for some portions of the loan money. For detailed information specific to loan forgiveness, click here.

In order to qualify for loan forgiveness, recipients will need to provide banks with specific information, including up-to-date financials. Organizations that have a controller or other such financial administrator on staff are more likely to be in a good position to meet the stringent reporting regulations. Businesses without such a team member would benefit greatly from securing outside help in order to adhere to the strict rules.

If your organization falls into the latter category, or if your financial administrator is not up to the task alone, you should seriously consider reaching out to RBG to discuss your options when it comes to outsourced accounting services. Our outsourcing team is prepared to help guide organizations in navigating the maze of PPP forgiveness regulations and more. We can assist you with:

• ¬†Accounting catchup and cleanup for the first quarter of 2020
• ¬†Assistance with payroll cost calculations needed for the PPP application
• ¬†Help with performing real-time reporting in order to adhere to loan forgiveness regulations
• Advice and guidance for post-pandemic success

Our team is here to offer sound advice, clear guidance, and knowledgeable input to help you achieve financial relief during this fraught time. Contact us today to discuss how we can accommodate your unique situation. 

For more specific information on the COVID-19 relief efforts, visit our CARES Act FAQ blog.

CARES Act FAQ: Payroll Tax Deferral

On March 27th, President Trump enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The historic $2.2 trillion stimulus bill contains a variety of provisions, including a deferment of payroll taxes for employers.

Below, we address some of the common questions regarding these tax law modifications. If you cannot find the answer to your question, please do not hesitate to reach out to your Reynolds Bone and Griesbeck PLC advisor for further assistance.

For whom does the CARES Act provide a payroll tax deferral?

All employers can defer making some Social Security tax payments under the CARES Act.

How much can an employer defer?

Prior to the CARES Act, for 2020, employers were required to pay a 6.2% Social Security tax on the fist $137,700 of wages paid to employees. The CARES Act allows the deferment of any employer Social Security taxes that would be owed for wage payments made between March 12, 2020 and December 31, 2020. So that means an employer can defer 6.2% x any wages of $137,700 or less for each of their employees.

By when does an employer need to make the payments that they defer?

The employer must deposit at least 50% of the taxes by December 31, 2021 and the remainder of the taxes by December 31, 2022.

How do I go about deferring my payroll tax payments?

Employers should work with their payroll provider, payroll department, or payroll software to set up the tax deferrals.

How does the payroll tax deferral operate in connection with the Payroll Protection Program?

It is not currently clear how the PPP exclusion will apply for employers who defer payroll tax payments prior to receiving a loan through the PPP. Further guidance is expected, and we will update this article once information is available.

For more specific information on the COVID-19 relief efforts, visit our CARES Act FAQ blog.

CARES Act FAQ: Mid-Sized Business Lending Program

On March 27^th, President Trump enacted the Coronavirus Aid, Relief, and Economics Security (CARES) Act. The historic $2.2 trillion stimulus bill includes $454 billion to support Federal Reserve emergency lending facilities to help mid-sized businesses dealing with losses resulting from the coronavirus pandemic. The legislation instructs the US Department of the Treasury to create a Federal Reserve program designed to funnel financing to banks and other lending institutions that make direct loans to mid-sized businesses.

Below, we address some of the common questions we are encountering about the PPP. If you cannot find an answer to your question, please do not hesitate to reach out to your RBG accounting advisor for further assistance.

What are the eligibility requirements for the mid-sized business loan program?

The CARES Act defines eligible mid-sized businesses as those with between 500 and 10,000 employees that have “not otherwise received adequate economic relief in the form of loans or loan guarantees provided under this act.” In other words, businesses that do not qualify for a Small Business Administration economic injury disaster loan (as expanded by the CARES Act) or a Paycheck Protection Program loan.

Additionally, recipients must meet the following criteria:

• They must be US corporations, be based in the US, have significant domestic operations, and employ the majority of their workforce within the US.
• They must self-certify that the loan requested is needed to support their ongoing operations due to the economic impact of the COVID-19 pandemic.
• They must not be a debtor in a bankruptcy proceeding.

What are the terms of the loans?

The CARES Act sets neither a maximum loan amount nor a maximum maturity date. It does establish that the interest rate will be capped at 2% annually and that payments on both principal and interest will not be required in the first six months of the loan, at least. Please note that these loans are not eligible for forgiveness.

What restrictions do businesses who apply for these loans agree to?

The CARES Act includes several lending conditions beyond what is traditionally required. Loan recipients are required to certify the following:

• They will use the loan funds to retain at least 90% of their workforce until September 30, 2020, with full compensation and benefits.
• They intend to restore at least 90% of their workforce capacity, as it existed on February 1, 2020, with full compensation and benefits no later than four months after the declaration of a public health emergency is rescinded.
• They will not perform stock buybacks for the term of the loan (with an exception for existing contractual obligations to do so).
• They will neither outsource nor offshore jobs for the term of the loan plus two years.
• They will not breach the terms of any pre-existing union contracts for the term of the loan plus two years.
• They will not oppose the unionization of their employees for the term of the loan plus two years.
• They will adhere to the following compensation requirements for the term of the loan plus one year:
  • A freeze on executive pay – No employees or officers who earned $425,000 or more in 2019 may receive a raise. Additionally, any severance packages may not exceed two times their 2019 earnings, for these employees.
  • Under the above provision, any employees or officers whose total compensation would still exceed $3 million may not receive more than 50% of the amount that is in excess of the $3 million.

What other details are forthcoming?

There remains a multitude of uncertainties surrounding this program. Taxpayers are still waiting for additional guidance regarding what type of collateral will be required for loan security and whether interest on the loans might be forgiven. Furthermore, the U.S. Treasury has yet to provide any guidance or procedures for applications and the information that they will require. 

Where's My Recovery Rebate?

As part of the recently enacted Coronavirus Aid, Relief, and Economic Security (CARES) Act, direct economic recovery payments are being distributed to eligible American taxpayers. Distribution of recovery rebates began this week.

If you are expecting a federal recovery rebate, but have not yet received it, visit the IRS website for more information. The IRS recently released a tool to provide information about:

• Your payment status
• Your payment type
• Whether the IRS needs more information from you, including bank account information

In order to access information about the status of your recovery rebate, you will be asked to supply the following information:

• Your Social Security Number or Individual Tax ID Number
• Your date of birth
• Your street address and ZIP or postal code

Please note: you may be asked for specific information from your 2018 or 2019 tax return (if you have filed). We recommend having your tax return(s) on hand in case more information is needed.

Having trouble receiving your recovery rebate? You may have one of the following issues: 

1. Are you eligible for a recovery rebate? To receive any portion of the recovery rebate, you must fit all of the following three criteria: (1) be either a U.S. resident or citizen, (2) not be the dependent of another taxpayer, and (3) have a work-eligible Social Security Number. Additionally, there is an income limit set for receiving the rebate. You can read more here.
2. Is your bank/mailing address up to date? The IRS will use the direct deposit information you supplied on your most recent tax return (either 2018 or 2019) to send your recovery rebate. If you received your last tax refund via a physical check, your rebate will be mailed to the residence you listed on your most recent tax return (either 2018 or 2019). For more information on how to update either of those items, please click here.
3. Did you file a tax return? If you did not file a tax return in the last two years (2018 and/or 2019), the IRS needs more information from you. For guidance on how to submit the information required, review the information for non-filers by clicking here.

For more specific information on the recovery rebate, including in-depth information regarding eligibility, please visit our CARES Act FAQ blog.