All posts by : Andy Lewis

Updates continue to be issued by the SBA regarding the Paycheck Protection Program (PPP) loan provisions through the issuance of new Frequently Asked Questions (FAQs). Recent focus has been placed on FAQ 31 in reference to the statement “Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business.”

Below are certain updates regarding good faith certifications and the SBA review process through May 3, 2020:

• While FAQ 31 initially focused on ‚Äúlarge companies‚Äù, FAQ 37 expanded that focus to include all businesses, both public and private.
• For those entities that have access to ‚Äúother sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business‚Äù, they do not qualify for a PPP loan. The SBA uses an example that ‚Äúit is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such company should be prepared to demonstrate to the SBA, upon request, the basis for its certification.‚Äù
• With this newly issued guidance, the SBA established a safe harbor: ‚ÄúAny borrower that applied for a PPP loan prior to the issuance of this guidance and repays the loan in full by May 7, 2020 will be deemed by the SBA to have made¬† the required certification in good faith.‚Äù
• Under FAQ 39, ‚ÄúTo further ensure that PPP loans are limited to eligible borrowers in need, the SBA has decided, in consultation with the Department of Treasury, that it will review all loans in excess of $2 million, in addition to other loans as appropriate, following the lender‚Äôs submission of the borrower‚Äôs loan forgiveness.‚Äù
• Through the Freedom of Information Act, certain information will be made public, as already evidenced by the publicity received by certain high-profile loan recipients. We anticipate this scrutiny to increase over the life of this program.
• We recommend you consult your attorney if you have concerns regarding these updates. ¬†

To review the FAQs issued through May 3, 2020, please visit https://www.sba.gov/sites/default/files/2020-05/Paycheck-Protection-Program-Frequently-Asked-Questions_05%2003%2020.pdf.

We're Here to Help

If you have any questions regarding the latest updates, or simply want to chat about your current situation, please do not hesitate to contact our office. For more specific information on the COVID-19 relief efforts, visit our COVID-19 blog.

Sincerely,

Reynolds Bone & Griesbeck PLC

On Thursday, April 30, the IRS released Notice 2020-32. The announcement effectively disallows a tax deduction for any expenses that are paid with forgiven Paycheck Protection Program (PPP) loan proceeds.

The PPP was created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a historic $2.2 trillion stimulus package. The loan program allows small businesses to borrow funds equal to 2.5 months of specified payroll from the Small Business Association (SBA). If their loan expenditures meet certain criteria—in brief, spending the money within eight weeks on payroll and other specific expenses—then the loan may be forgiven.

Generally, when a taxpayer receives loan forgiveness, they are required to report the forgiven amount as income. However, section 1106(i) of the CARES Act explicitly states that income associated with forgiven PPP loans should be excluded from gross income.

The Notice appears to be counter to Congressional intent. Senator Chuck Grassley (R-IA), the chairman of the Finance Committee, voiced his disappointment with the Notice upon its release. The IRS contends that Congress will need to act if a different result is intended.
For further details, click here to read the IRS announcement in full

We're Here to Help

If you have any questions regarding the latest updates, or simply want to chat about your current situation, please do not hesitate to contact our office. For more specific information on the COVID-19 relief efforts, visit our COVID-19 blog.

Sincerely,

Reynolds Bone & Griesbeck PLC

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.