SBA Releases Updates On PPP Forgiveness

by with No Comment Covid-19

SBA Releases Updates On PPP Forgiveness

This week, the Small Business Administration (SBA) and the U.S. Department of the Treasury released new information for recipients of loans through the Paycheck Protection Program (PPP).

The Revised PPP Loan Forgiveness Application

There are three key items included in the updated application for PPP loan forgiveness:

  1. It makes it clear that S corporation owners may not include health insurance costs in their payroll cost calculation, but they may include retirement costs.
  2. It provides additional guidance regarding the use of safe harbors in conjunction with loan forgiveness.
  3. It provides the option to use either the 8-week or the 24-week coverage period for borrowers that received PPP loans prior to June 5.

Click here to view the revised PPP loan forgiveness application.

Click here to view the instructions for completing the application.

The New EZ PPP Loan Forgiveness Application

The EZ application was created for use by PPP borrowers with relatively straightforward cases (e.g., fewer calculations and less documentation). To be eligible to use the EZ application, borrowers must fit one or more of the following criteria:

  • Be self-employed and have no employees
  • Not have reduced salaries or wages by more than 25% and not have reduced hours or employees
  • Experienced both a reduction in business due to COVID-19 health directives and did not reduce salaries or wages by more than 25%

Click here to view the EZ PPP loan forgiveness application.

Click here to view the instruction for the EZ application.

New Interim Final Rule

Just prior to releasing the revised and new applications for loan forgiveness, the SBA issued a new interim final rule. The rule addresses the fact that the Paycheck Protection Program Flexibility Act (PPPFA) increased the covered period for PPP funds from eight weeks to 24 weeks. The rule increases the cap on salaries and compensation to account for the increase in the covered period. For borrowers using the 8-week period, PPP loan forgiveness is allowed for up to $15,385 for each individual employee ($100,000 annualized to an eight-week period). For borrowers using the 24-week period, PPP loan forgiveness is allowed for up to $46,154 for each individual employee ($100,000 annualized to a 24-week period).

Additionally, the rule addresses owner compensation considering the increase in the covered period for PPP fund from eight weeks to 24 weeks. The calculation for owner compensation is more complex than that for individual employee compensation in order “to prevent owners from reaping PPP windfalls that Congress did not intend.” For borrowers using the eight-week period, PPP loan forgiveness is allowed for up to $15,385 of owner compensation. For borrowers using the 24-week period, PPP loan forgiveness is allowed for up to $20,833 of owner compensation.

Lastly, the interim final rule also adjusted previous guidance to account for changes made by the PPPFA. For loans made on or after June 5, 2020, the minimum term is five years. For loans made prior to June 5, 2020, the minimum term remains two years, unless the borrower and lender agree upon an extension. Consistent with guidance issued earlier this month, the portion of PPP funds that are required to be used on payroll costs for a borrower to qualify for forgiveness is reduced from 75% to 60%.

Our team is here to offer sound advice and assistance as loan recipients navigate through guidance, gather required documentation, and prepare to apply for loan forgiveness. Contact us today to discuss how we can accommodate your unique situation. 

 

How IT Spending Will Change When Business Resumes

by with No Comment Advisory

How IT Spending Will Change When Business Resumes

Most states are starting to relax stay-at-home restrictions. As such, businesses are developing plans for bringing employees back to work. Many businesses are already affected by the pandemic and their future looks grim. Specifically, we are going to look at the IT sector and examine what spending might look like in a post-lockdown economy.

Disruption

The COVID-19 pandemic has resulted in an unprecedented disruption in businesses. As a result, management has tried to reduce costs to survive or risk shutting down. IT departments have suffered the most with major budget cuts due to a reduction in revenue. As a result, non-urgent purchases have been eliminated; initiatives have been suspended; employees have been terminated.

Of course, technology also has been playing a great role in supporting businesses during the pandemic, especially by enabling work at home and maintenance of communication with clients. But there are expectations for major challenges when businesses get back to normal. For instance, the post-coronavirus business world expects travel restrictions, office distancing, trouble with business continuity, and pandemic regulations. As for onsite work in the office, challenges will include distributed collaboration, endpoint data protection, scalable administration, and secure access to corporate data.

It also appears that the impact will vary from industry to industry. Companies that depend on face-to-face contact are in danger of lost income and bankruptcy. At the same time, other businesses are thriving.

Consider digital marketing industries. With more businesses moving online, there will be a rise in the purchase of IT-related expenditures such as software. The entertainment sector has found solace in digital platforms, while there is an increase in the work-at-home trend.

The Future

Despite the uncertainties, some predictions can be made.

One certain thing is that the impact on IT spending will vary depending on the IT stack. While the infrastructure, branch networking, middleware, and enterprise apps might see a drop, areas such as communication/collaboration, cloud storage, security, and compliance will likely see an increase in spending as more people work remotely.

While the impact on the IT industry will vary, we could see a lot of new innovations. Such innovations might include customer-facing and worker productivity apps. Some companies may increase spending on innovations to help outperform their competition.

Another factor affecting IT spending is the size of a business. While big businesses may get back to normal after a few months, small businesses will need to tread carefully. As such, IT spending for different-sized businesses will not be similar.

A decision to have employees continue working at home means that IT expenditures will take a different shape. While there will be less need for office equipment, there will be an increase in spending to enable offsite work.

There could also be more spending by businesses investing in continuity strategies such as more remote locations, new training in information and communications technology (ICT), and automation of processes.

This also will depend on business operations. Consider a business that had already migrated to the cloud before the COVID-19 pandemic. Such businesses did not suffer much disruption compared to those still using on-premise applications and proprietary data centers. Thus, IT spending for both types of businesses will vary in the future.

Lastly, businesses will want to invest in projects that are likely to provide a return on investment faster.

Conclusion

The disruption to businesses by the COVID-19 pandemic is like none previously encountered. One thing is certain: Things will not bounce back to the known normal. Rather, we should expect a new normal. And, as we have seen through the examination of certain IT expenditures, the success of each industry is dependent on various factors.

Initially, everyone will be focused on survival, and not so much on growth. Cost optimization, investing in and prioritizing operations that keep the business running will win the day.

Why Sequence of Returns Risk Matters Now

by with No Comment Advisory

Why Sequence of Returns Risk Matters Now

That year or two when you are closing in on your retirement date, followed by a year or two after you retire, are the worst times for a sustained market decline. Market analysts call this scenario the sequence of returns (SOR) risk – because once your principal has been significantly reduced, there is not enough time in the market left for you to recover those losses. 

Two things will likely happen. First, the amount of retirement income you can withdraw each year is irrevocably reduced. For example, if you were planning to withdraw 4 percent a year from a $350,000 portfolio, you would have received a supplementary income of $14,000 a year. But if your principal drops to $280,000 a year, your 4 percent draw will generate only $11,200 a year. If you need that additional money, you will have to increase your draw to about 5 percent of the principal each year. 

This leads us to the second consequence of a market decline: your principal will diminish faster. The longer you live, the greater your chances of running out of money. 

How Big Is This Problem?

Because the coronavirus pandemic has sent stock markets reeling over the past few months, SOR risk has become a widespread concern. According to research by Spectrem Group, at the end of 2019, there were 11 million millionaires in the United States. By the end of March this year, at least half a million of those people were no longer millionaires.  

While losses among millionaires may be disconcerting, the situation is far more dire for middle class investors, who might not have several hundred thousand dollars to spare in their retirement portfolio. 

Strategies for Offsetting SOR Risk

If the last recession is any indicator, the economic recovery going forward could take several years. That is not good news for people who were looking forward to retiring soon. This group may want to seriously consider the merits of delaying retirement and continuing to work longer, such as: 

  • Allowing their portfolio time to recover
  • Continuing to contribute to tax-advantaged retirement accounts
  • Enabling their Social Security benefits to accrue higher¬†

Another strategy to help protect your portfolio against future SOR risk is to position a larger allocation to fixed-income assets and/or an annuity. While this might limit your potential for income growth in the future, these assets are backed by more reliable payors and less subject to the vagaries of the stock market. By diversifying your current assets, you can build multiple streams of reliable income to protect you from the future threat of market losses, a global pandemic, or changes in Social Security benefits. 

It is worth considering that once we emerge from this current crisis, legislators will have to find a way to deal with the federal deficit and growing debt. The Social Security program was already projected to cut benefits by 2035 without any new funding solutions. Now, that threat is even further exacerbated by the enormous jump in unemployment numbers. This situation leaves even fewer people paying into the Social Security and Medicare programs. 

For these reasons, it is very important to address today’s challenges presented by the sequence of returns risk. Explore ways to develop multiple income streams to protect your current assets and ensure they last throughout your lifetime.

Congress at Work: In the Wake of the Coronavirus Pandemic, Congress Passes the Most Expensive Single Spending Bill in American History

by with No Comment Advisory

Congress at Work: In the Wake of the Coronavirus Pandemic, Congress Passes the Most Expensive Single Spending Bill in American History

The Congress at Work series of articles is designed to give you a glimpse of various types of legislation currently under consideration. While either the Senate or the House of Representatives may initiate a bill proposal, be aware that many bills never become law. They may never make it out of committee, be blocked by a Senate filibuster, be delayed, lack sufficient votes, never be agreed upon by the two houses or be vetoed by the president. 

Paycheck Protection Program and Health Care Enhancement Act (HR 266) – This is a multilayered legislative bill divided into four distinct sections. Phase 1 authorized funding for coronavirus preparedness and response; specifically, for measures such as vaccine development and public health funding. Most of the money was allocated to the Department of Health and Human Services. Approximately 81 percent of funds were allocated domestically, with the other 19 percent allocated internationally. 

Phase 2 allocated $104 billion for three specific objectives: 1) Require private health insurance plans and Medicare to cover COVID-19 testing; 2) Expand unemployment insurance by $1 billion and loosen up eligibility requirements; 3) Provide for paid sick leave at an employee’s full salary, up to $511 per day, and paid family leave at two-thirds of a worker’s usual salary. 

Phase 3 provided stimulus checks to individuals and “grants” to small businesses meeting specific criteria, such as keeping employees on the payroll for two months. This phase of the bill represents by far the most expensive single spending bill ever enacted in American history, at about $2.2 trillion. 

And finally, the last phase of the bill provided funding to replenish the Paycheck Protection Program (PPP) for small businesses and shore up public health measures, such as virus testing and hospital funding. The bill was signed into law by the president on April 24. 

VA Tele-Hearing Modernization Act (HR 4771) – This bill amended previous guidelines to allow appellants to appear in cases before the Board of Veterans’ Appeals by picture and voice transmission from locations outside the Department of Veterans Affairs. The bill was introduced by Rep. Joe Cunningham (D-SC) on Oct. 21, 2019 and signed into law by the president on April 10. 

Safeguarding America’s First Responders Act of 2020 (S 3607) – Sponsored by Sen. Chuck Grassley (R-IA), this bill was introduced on May 5 and passed in the Senate on May 14. The legislation is designed to extend death benefits to public safety officers whose deaths are caused by COVID-19, and for other purposes. The bill is currently under consideration in the House. 

Law Enforcement Suicide Data Collection Act (S 2746) – Sen. Catherine Cortez Masto (D-NV) introduced this legislation on Oct. 30, 2019. The act would require the director of the FBI to provide information on suicide rates in law enforcement, among other purposes. It was passed in the Senate on May 14 and is currently being considered by the House. 

HEROES Act (HR 6800) – The HEROES Act was introduced on May 12 by Rep. Nita Lowey (D-NY). In response to the COVID-19 outbreak, this bill is designed to provide emergency supplemental appropriations for a variety of applications, including assistance to state, local, tribal and territorial governments; further expansion of paid sick days and family and medical leave; unemployment compensation; nutrition and food assistance programs; housing assistance; payments to farmers; and the Paycheck Protection Program. It also outlines several potential tax credits and deductions and requires employers to develop and implement infectious disease exposure control plans. The House passed this bill on May 15; it is currently in the Senate for consideration.

Positioning Yourself as a Valued Advisor

by with No Comment Careers

As a fledgling accounting professional, you know a lot, but you still have a ton to learn. One struggle for many young accountants is establishing relationships where they are considered trusted and valued in a professional capacity. Today we want to offer you some tips for positioning yourself as a valued advisor in your field.

Get to Know Your Clients’ Industries

Think about who you turn to when you need advice. If your sink backs up, you call an experienced plumber. Parenting issues? You consult someone who you consider to be a good parent. It is the same when a client requires advice about the issues that they face. They want to talk to someone who knows them, knows their business, and knows their industry.

In order to become this person in your clients’ eyes, you need to get to know their industry—and then communicate your knowledge to them. The first part is easy because the internet contains a wealth of free information. We suggest that you regularly read newsletters, blogs, and websites focused on your clients’ industries. Once you are fully immersed in their industry, you need to let your clients know that you are paying attention. Consider these methods:

  • Bring up recent industry happenings in a conversation with your client
  • Share a relevant article with them via email, along with your take on the issue
  • List any industry association memberships in your website bio and on your LinkedIn page
  • Attend industry events, especially ones that your clients attend too
  • Pick out clients who have struggled to maintain a solid cash flow position. Reach out to them to offer business coaching sessions.
  • Make a list of firm clients who are business owners nearing retirement age. Connect with them an ask if they would like to schedule a facilitated buy-out discussion.

Identify New Service Opportunities

As you seek to position yourself as an advisor who adds significant value for your clients, presenting them with new service offerings is a great method. The best part is, you already have all of the information you need to identify these opportunities. You know who your clients are—how long they have been in business, how much profit they made last year, what goals they are working towards. Drawing on this information, sort your clients into categories based on similar circumstance. Next, choose an area in which to pursue further services. For example:

Seek Out Advice from an Experienced Professional

Within your accounting firm, you are surrounded by experienced professionals. It is in their interest to support your career growth, because your success is the success of the firm as a whole. Consider reaching out to an individual who you respect and want to emulate, such as your manager, boss, or another experienced colleague on the career path that you are seeking. Ask them questions that are professional but also demonstrate personal interest. The goal is to convey your sincere interest—and adding in a touch of flattery never hurts. Try one or more of the following:

  • What is something you wish you already knew or were taught early on in your career?
  • If you could start over, what would you do differently?
  • What are your big-picture career goals?
  • What are your strategies for building confidence in new client relationships?
  • Can you offer me some advice on how to serve clients well and leave them pleased?

Not only will questions like this result in some great career advice for you, but they will get you noticed within your firm for your desire to learn and excel in your career.

When it comes down to it, determined and consistent effort is what will help you transform into a valued advisor in the eyes of both your clients and your colleagues. It is a slow process, but certainly a worthwhile one. We hope that these tips will inspire you to spend some time focusing on building your professional reputation. 

Senate Passes Paycheck Protection Flexibility Act

by with No Comment Covid-19

On Wednesday night, the Senate voted unanimously in favor of the Paycheck Protection Flexibility Act. This new legislation makes key adjustments to the timeline for spending Paycheck Protection Program (PPP) funds and revises how loan recipients are required to allocate the money.

The President is expected to sign the bill into law.

Here is a brief overview of the key provisions contained in the bill:

  • Loan recipients now have 24 weeks to spend the funds. Previously, they had to use all the money within eight weeks.¬† Eligible recipients who received a loan before the date of enactment may elect to use the shorter 8-week period, if desired.
  • The percentage of the loan money required to be devoted to payroll expenditures has been reduced from 75% to 60%. This item does come with a new catch‚Äîif a borrower fails to spend at least 60% of the loan money on payroll, then the entire loan becomes unforgivable.
  • The minimum term period for PPP loans is extended from two years to five years.
  • PPP loan recipients whose loans are forgiven may delay payroll tax payments (the employer‚Äôs share of FICA payroll taxes) for two years. Half of the taxes are due in 2021 and the other half in 2022.¬† Previously, Section 2302 of the CARES Act excepted any taxpayer who had PPP indebtedness forgiven from being eligible for the payroll tax deferral.
  • The deadline for rehiring employees and restoring wages to pre-pandemic levels is extended from June 30, 2020 to December 31, 2020.
  • Loan recipients may mitigate a reduction to ¬†loan forgiveness due to headcount if they can provide evidence that, despite good faith efforts, they were unable to recall a portion of their workforce and/or that it was not possible to sufficiently reopen their business in a way that complies with safety standards.
    The deferral period for repayment is changed from 6 months to until the date the forgiveness amount is remitted to the lender.  If a recipient does not apply for forgiveness, the deferral period is 10 months.

Paycheck Protection Program Loan Forgiveness Best Practices

by with No Comment Advisory

Paycheck Protection Program Loan Forgiveness Best Practices

Whether the impact is on a global, national, or individual industry level, this pandemic is already changing the way businesses are operating on a day-to-day basis. As we venture past the peak of the pandemic, businesses are going to have to adapt to the new world in which they reside in order to survive. The Paycheck Protection Program loan has become a lifeline for small businesses. Some of these loans may even be forgiven if businesses meet certain criteria. These criteria include: making sure your business truly qualifies for the PPP funding, at least 75% of the funds must be used for payroll expenses, and use the rest for eligible expenses. This article discusses some best practices for qualifying for loan forgiveness.

To view this article, click HERE to access the original content.

New SBA Guidance Regarding Paycheck Protection Program – Q&A #46

by with No Comment Covid-19

On May 13, the Small Business Administration (SBA) issued additional guidance regarding the Paycheck Protection Program (PPP). They added a highly anticipated new question and answer to their lengthy FAQ: “How will SBA review borrowers’ required good-faith certification concerning the necessity of their loan request?”

One of the requirements when submitting a PPP loan application is a self-certification by the applicant that the loan is necessary to support their ongoing operations in light of the current economic circumstances. Many borrowers called for further clarification on this point out of fear that they would later be judged as having made a false self-certification and face potentially severe civil or criminal penalties.

The clarification on May 13 describes a safe harbor for borrowers who, when combined with their affiliates, receive PPP loans of $2 million or less. Those who receive PPP loans of $2 million and less will be deemed to meet the required certification concerning the necessity of the loan request in good faith. The SBA clarifies the thinking behind the creation of this safe harbor, explaining that:

  1. Borrowers with loans of this size are unlikely to have access to other sources of liquidity during this difficult economic time.
  2. The creation of the safe harbor will dispel a lot of uncertainty that these smaller businesses had about accepting PPP loans, thereby helping the program to operate more smoothly.
  3. Discounting this set of loans from the review process will allow the SBA to better handle the large workload they have before them and focus their efforts on the subsection of borrowers whose self-certifications may not be genuine.

The SBA clarification also addressed what will happen, if in the course of a review, a borrower who receives more than $2 million lacked an adequate basis for their good-faith certification as required to obtain their PPP loan. If this is the case, the borrower will need to return the full amount of the loan. If they do so, the SBA will not “pursue administrative enforcement or referrals to other agencies.”

It is important to note that this is only a safe harbor for meeting the economic uncertainty certification. Borrowers still must track expenses during the covered period and apply for loan forgiveness with their lender.

Playbook for Re-Opening Your Business

by with No Comment Advisory

Playbook for Re-Opening Your Business

As the country and even the world shift their attention to the seeming long-lasting impact of the Coronavirus, updates appear to be coming out each day. Whether the impact is on a global, national, or individual industry level, this pandemic is already changing the way businesses are operating on a day-to-day basis. As we venture past the peak of the pandemic, businesses are going to have to adapt to the new world in which they reside in order to survive. Specifically, within the small business industry, changes such as new regulations and employee health monitoring are occurring. 

To view this article, click HERE to access the original content.