Tag Archives: financial assistance

COVID-19 Financial Relief, Education, Tips

Final Restaurant Revitalization Fund (RRF) SBA Report Due April 30, 2023 — Here’s How to File

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In this YouTube video, I demonstrate how to use the AICPA RRF tracker tool for SBA reporting.

Only 60% of restaurants that applied actually received funding for the popular Restaurant Revitalization Fund program (RRF), due to a failure of Congress to replenish the kitty with leftover PPP money, as was envisioned. (A substitute Restaurant Revitalization Tax Credit bill is currently languishing.) After the SBA disbursed the last of the funds in November of 2022, you might think that all was said and done on the topic; but in fact, recipients of those funds still need to report to the SBA that the money was indeed used according to the program’s rules.

There were three SBA reporting dates: December 31, 2021; December 31, 2022; and a final report date of April 30, 2023 — which is fast approaching. The RRF eligible expense period, however, allows costs from the very beginning of the pandemic, February 15, 2020, clear through to March 11, 2023. The two year-end reporting dates were intended as just a progress report of what the recipients had spent so far in eligible costs.

The great news for most businesses was that if all the RRF funds were allocated to eligible costs before the first reporting date, no additional reporting was required. If not, then the business needed to come back the following year and report a second time. At this point, most restaurants have (hopefully) already submitted their final report.

However, for those who missed the first two reporting dates; or somehow didn’t expend all the funds before the end of 2022; or simply did not understand how to report properly; or didn’t realize what a wide date range of eligible expenses they could use… there is one shot left at a final report to the SBA, or they risk having to pay back the funds.

This blog post (with a 20-min video walking you through the process) is our suggestion of how to translate the info you already have in your bookkeeping software into a format that will easily conform to the Restaurant Revitalization Award Portal requirements.

Sample email from SBA regarding the initial RRF year-end reporting

Spoiler alert: the process takes more than 5 minutes. It can easily take an hour or more. The actual entering of data into the SBA RRF portal is the part that only takes 5 or so minutes.

Our recommendation is to download the free Restaurant Revitalization Fund Tracker from the American Institute of CPAs (AICPA) website (as with their PPP Forgiveness Calculator, you do have to register for an account, but there’s no charge). However, instead of entering each individual transaction on the form (as it’s designed for you to do), our suggested shortcut is to take the information you already have in your bookkeeping file and enter each category as one line — then subtract all the non-RRF grants and assistance received, so that you’re not double-dipping.

As mentioned earlier, the RRF period runs from February 15, 2020 — the very beginning of the pandemic — to March 11, 2023. So we suggest you run a Profit & Loss for your company for the period of February 15, 2020 all the way through March 11, 2023 (or February 28, 2023 if you’re doing this before March 2023 is reconciled), and use those numbers to report what has been spent so far. Then enter the non-RRF grant funds as negative numbers on the same Expense Tracker tab, so that they net against each other. The result will be the data you submit to the SBA at restaurants.sba.gov once you log in to your portal.

I recorded a video illustrating the whole process back in December 2021 — the one big difference is simply the ending date of the report you’ll run.

Here are the steps:

Step 1 – download the AICPA RRF Tracking Tool
Step 2 – enter the name of your company in the Summary tab, cell A9
Step 3 – enter the RRF amount in the Expense Tracker tab, cell C6
Step 4 – run your Profit & Loss from 2/15/2020-2/28/2023 (or 3/11/23 if you’re doing this in April 2023)
Step 5 – export to Excel and save to your RRF file folder
Step 6 – on the Expense Tracker tab, enter summary amounts from the Profit & Loss for Payroll, Rent, Utilities, Food & Beverage, Maintenance, Supplies, Covered Supplier Costs, and Business Operations Expenses

Tip: skip Mortgage Payments, Debt Service, Outdoor Seating Construction, and Depreciation, or ask your accountant for help with these, as they are usually on the Balance Sheet or in the Non-Operating Expense section of the Profit & Loss, and are therefore harder to DIY.

Tip: Business Operations Expenses are all operating expenses that are not already accounted for in one of the other categories.

Step 7 – IMPORTANT: enter all the non-RRF grants and financial assistance as negative amounts on the Expense Tracker tab — this is to prevent any double-dipping
Step 8 – go to restaurants.sba.gov and log in
Step 9 – enter your name, address, EIN, phone, and email (if this information is not already there)
Step 10 – enter the amounts from the Summary tab — Note: you cannot enter more than the total RRF grant, so you may need to reduce one or more of the categories so that you don’t exceed the total.
Step 11 – if you have allocated all the RRF funds, certify as such — you will not be required to repeat this progress report next year; if you have not allocated all the RRF funds, you will be able to “Save” but not “Submit”.

You have until March 11, 2023 to allocate all the funds (aka spend them on eligible expenses), and until April 30, 2023 for final reporting. If it turns out you didn’t have enough eligible expenses from 2/15/20-3/11/23 using Profit & Loss Operating Expenses, then take some time to work with your accountant to determine if you have debt service, mortgage payments, capital expenses for outdoor seating, or depreciation that counts toward allowable costs.

In all cases: make sure to subtract all other grant income from expenses so you are not double-dipping!

23-minute video walking you through the whole process in Dec 2021

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

IRS, Tips

Struggling With Taxes? Here’s Where To Get Help

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(c) Nataliya Vaitkevich

The past three years have been challenging in so many ways, to so many people — but as a tax preparer, I can confidently say that the inability for the IRS to provide its usual level of customer service has been among the most impactful. Luckily, recent Congressional funding to make up for years of inadequate budgets, combined with Treasury Secretary Yellen’s direction that IRS priorities should include clearing the backlog of unprocessed tax returns and improving customer service, seem to be making a difference.

Pre-pandemic, the IRS offered all sorts of taxpayer assistance options, but the inability to offer in-person services, as well as the intense strain that government financial relief programs placed on the already-stretched agency, made it impossible to offer even the most basic of support programs. The good news is that some of the Taxpayer Assistance Centers are reopening to the public, one Saturday each month for walk-in help without an appointment.

On March 11, April 8 and May 13, from 9 am to 4 pm, certain IRS Taxpayer Assistance Centers will offer in-person service and assistance to meet taxpayers’ needs. The IRS recommends that you come prepared and bring documents such as photo ID, Social Security cards, IRS notices received, proof of bank account information, and so on. Professional foreign language interpretation will be available through an over-the-phone translation service. For a list of addresses, visit the IRS’s website announcement and then click the plus-sign to the left of your date of choice. Scroll down to your state, and all the addresses of the participating offices will be listed.

The IRS also notes various options for obtaining free tax preparation services locally:

The IRS has also published a series of “Tax Time Guide” news releases designed as a resource to help taxpayers file an accurate tax return. And US News & World Report recently published a list of free and low-cost tax preparation resources. It’s not a magic wand, but after a few rough years, you’re no longer alone when it comes to navigating tax season.

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

COVID-19 Financial Relief, Education, Tips

Tips & Tricks for Restaurant Revitalization Fund (RRF) Year-End Reporting

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With one week left before year-end, it’s possible that you are among the folks who received an email (below) back in October but hasn’t yet reported to the SBA on the eligible expenses incurred so far. This blog post (with a 20-min video walking you through the whole process) is our suggestion of how to translate the info you already have in QuickBooks into a format that will easily conform to the Restaurant Revitalization Award Portal requirements.

Sample email from SBA regarding RRF year-end reporting.

Spoiler alert: the process takes more than 5 minutes. It can easily take an hour or more. The actual entering of data into the SBA RRF portal is the part that only takes 5 or so minutes.

Our recommendation is to download the free Restaurant Revitalization Fund Tracker from the American Institute of CPAs (AICPA) website (like their PPP Forgiveness Calculator, you do have to register for an account, but there’s no charge). However, instead of entering each individual transaction on the form (as it’s designed for you to do), our suggested shortcut is to take the information you already have in your QuickBooks file and enter each category as one line — then subtract all the non-RRF grants and assistance received, so that you’re not double-dipping.

The RRF period runs from February 15, 2020 — the very beginning of the pandemic — to March 11, 2023. The year-end reporting is just a progress report of what you’ve spent so far that is eligible for RRF program fund allocation. So we suggest you run a Profit & Loss for your company for the period of February 15, 2020 all the way through November 30, 2021 (or whatever your most recently reconciled month-end is), and use those numbers to report what has been spent so far. Then enter the non-RRF grant funds as negative numbers on the same Expense Tracker tab, so that they net against each other. The result will be the data you submit to the SBA at restaurants.sba.gov once you log in to your portal.

I’ve recorded a video illustrating the whole process — but in case you want a follow-along checklist, here it is:

Step 1 – download the AICPA RRF Tracking Tool
Step 2 – enter the name of your company in the Summary tab, cell A9
Step 3 – enter the RRF amount in the Expense Tracker tab, cell C6
Step 4 – run your Profit & Loss from 2/15/2020-11/20/2021
Step 5 – export to Excel and save to your RRF file folder
Step 6 – on the Expense Tracker tab, enter summary amounts from the Profit & Loss for Payroll, Rent, Utilities, Food & Beverage, Maintenance, Supplies, Covered Supplier Costs, and Business Operations Expenses

Tip: for now, skip Mortgage Payments, Debt Service, Outdoor Seating Construction, and Depreciation, or ask your accountant for help with these, as they are usually on the Balance Sheet or in the Non-Operating Expense section of the Profit & Loss, and are therefore harder to DIY.

Tip: Business Operations Expenses are all operating expenses that are not already accounted for in one of the other categories.

Step 7 – IMPORTANT: enter all the non-RRF grants and financial assistance as negative amounts on the Expense Tracker tab — this is to prevent any double-dipping
Step 8 – go to restaurants.sba.gov and log in
Step 9 – enter your name, address, EIN, phone, and email (if this information is not already there)
Step 10 – enter the amounts from the Summary tab — Note: you cannot enter more than the total RRF grant, so you may need to reduce one or more of the categories so that you don’t exceed the total.
Step 11 – if you have allocated all the RRF funds, certify as such — you will not be required to repeat this progress report next year; if you have not allocated all the RRF funds, you will be able to “Save” but not “Submit”.

If you have not allocated all the funds yet, then follow this same process next year by December 31, 2022 — you can run the Profit & Loss from 12/1/2021-11/30/2022 at that point and follow the same approach. Most folks will have sufficient eligible expenses from 2/15/2020-11/30/2021 to “use up” the whole RRF grant, but after subtracting other grant income from expenses, may find that they still have a balance left over that they can allocate costs to when reporting at the end of 2022.

You have until March 11, 2023 to allocate all the funds (aka spend them on operating expenses, and until April 30, 2023 for final reporting. If it turns out you didn’t have enough eligible expenses from 2/15/20-11/30/21 using Profit & Loss Operating Expenses, then take some time to work with your accountant to determine if you have debt service, mortgage payments, capital expenses for outdoor seating, or depreciation that counts. You can report these in next year’s RRF Program Post-Award Report, along with next year’s Profit & Loss Operating Expenses. In all cases: make sure to subtract all other grant income from expenses so you are not double-dipping!

23-minute video walking you through the whole process — Merry Christmas!

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

COVID-19 Financial Relief, Education, IRS, Tips

IRS Finally Issues Guidance On Employee Retention Credit (ERC)

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It finally happened… the IRS released long-awaited guidance on the Employee Retention Credit (ERC):
• August 4 – Notice 2021-49 and accompanying IR-2021-165
• August 10 – Rev. Proc. 2021-33

Some major questions were answered:
• Whether wages of more than 50% shareholders and their spouses are considered qualified wages for the purpose of the credit.
(Mostly “no”, unless you’re an orphan with no living siblings or kids. Much frustration abounds — more on this later.)
• Whether cash tips are included in qualified wages.
(Yes. Good news!)
• Whether full-time employees or full-time equivalent employees should be used to calculate the number of employees to determine whether a business is a small or large eligible employer.
(Head-count, not FTEs. Good news again!)
• Timing of the wage deduction disallowance.
(Must be on 2020 tax return, so amend if already filed.)
• Does gross receipts for ERC include PPP, SVOG, RRF?
(Mostly “no”, as long as you treat them consistently. More good news!)

They also released rules on changes made to the ERC by the American Rescue Plan Act (ARPA) regarding:
• Recovery Start-up Business
• Severely Financially Distressed Employer

There were other significant updates to the ERC as well, including clarifications as to:
• If an employer may claim both the ERC and the Internal Revenue Code Section 45B “Tip Tax Credit” that applies to food and beverage workers.
(YES! You can double-dip. Truly shocking, and good news.)
• Instructions on amending filed income tax returns returns after receiving the ERC.

Thankfully, the AICPA shared numerous resources on these in this week’s Town Hall — I strongly recommend viewing the AICPA TV session called “Employee Retention Credit: Your Questions Answered”. In this video, Kristin Esposito and April Walker review the IRS notice and explain guidance on the common questions listed above.

Additionally, AICPA released two Tax Adviser Articles:
• Guidance on claiming ERC
• New safe harbor for ERC gross receipts calculation

They are also putting together a panel of practitioners for a September Town Hall, to discuss how each is dealing with client returns based on this new guidance.

In addition to all the AICPA goodies, our go-to legal resource, Alan Gassman and Brandon Ketron recorded a “PPP and ERC Update” video on August 7th that explores (and vents) Notice 2021-49 (it was recorded prior to Rev. Proc 2021-33, so there’s no reference to the fact that PPP, SVOG, and RRF receipts are not included in gross income for ERC qualification purposes).

Which is a good segue to circle back to the frustration derived from the IRS’s “letter of the law” guidance. The basic idea is that if owners have any living relatives (regardless of association with the business), their wages do not qualify for ERC — but those of an orphan with no siblings or offspring would. Unsurprisingly, this didn’t go over well in the accounting and legal communities:

NCCPAP blasts IRS guidance on Employee Retention Credit | Accounting Today

Newly Issued Employee Retention Credit Guidance Punishes Owner Employees If They Have Living Family Members | Forbes

Practitioners call for fixes to the Employee Retention Credit | Accounting Today

IRS Issues Additional Guidance for Claiming the Employee Retention Tax Credit | Gould & Ratner LLP – JDSupra

I suspect the IRS is attempting to force Congress’s hand by taking the sloppily-written legislation at face value and therefore releasing a ridiculous literal interpretation they know could not have been intended. But without sufficient administrative authority to read their own preferences into it, the IRS has now put Congress in a position to have to release new legislation to explicitly spell out their original intent. Will this happen anytime soon? Do we hold off on filing client 941-X returns in the meantime? Or is Congress too busy to right this wrong?

We’ll be mulling these questions over in the next few weeks, with the intention of making a game-time call with enough time to get our September 15th extended business tax returns filed.

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

COVID-19 Financial Relief, Tips

National Endowment For The Arts (NEA) Grant Application Deadline 8/12

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Reminder from Arts Alliance IL:
National Endowment for the Arts (NEA) ARP Grant Application Deadline this Thursday!

Arts organizations can now apply for American Rescue Plan grants from the National Endowment for the Arts! And more importantly, for the first time organizations that have not received NEA funds in the past are eligible. 

NEA ARP funding can be used to cover general operating costs. If you have never applied for an NEA grant before, there are many resources available on the NEA website or you’re welcome to reach out to us for basic application questions. The deadline for arts and culture organizations is August 12!

Learn more about how to apply here.

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

COVID-19 Financial Relief, Education, IRS, Site News, Tips

How To Apply For PPP Forgiveness (Loans Over $150K, Non-ERC-Eligible Companies)

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From the PPP forgiveness guide at – https://bench.co/blog/operations/ppp-loan-forgiveness/

For over a year I’ve been answering the question, “when should we apply for PPP Loan Forgiveness?” And for over a year I’ve been responding, “not yet; there’s still so much that’s up in the air” — as AICPA (thankfully) recommended we wait for legislation from Congress as well as guidance from both the SBA and IRS.

Well, on June 24th, they gave us the green light in the AICPA Town Hall Series. Lisa Simpson said that if you have worked out the interplay between PPP and the Employee Retention Credit (ERC), then you should go ahead and apply.

This means that if you are a sole proprietor or partnership and have no employees, you are ready to apply — since ERC is only an issue if you have W-2 employees or are a W-2 employee of your own company. See my recent blog post for easy instructions.

It also means that if you have employees (or are an employee yourself), but you know that your company does not qualify for ERC, you are ready to apply. See below for less-than-easy but still DIY-worthy instructions.

(Of course, this means that if you qualify for ERC and haven’t worked out the interplay yet, you should consider holding off for now — consider using my recommended approach to moving forward with PPP Forgiveness without jeopardizing ERC, highlighted in a recent blog post.)

So… now what?

For borrowers of more than $150k who had no wage or FTE reductions, or who qualify for a safe harbor/exemption:

  • As your loan was higher than $150k, you do not qualify to file the simplest PPP Forgiveness form (3508S). However, presuming you followed all the rules and had no reductions, you do qualify for the “EZ” form (3508EZ). Please make sure your lender allows you to use this approach. For reference, here is the forgiveness application form (pages 1-4) and instructions – but for the actual forgiveness process, instead of filling the form out, you will apply through your lender’s loan portal and it will walk you through the steps. Please carefully read through the checklist and instructions on pages 5-9.
  • Please also read through this Form 3508EZ Step-by-Step guide before beginning the process at your lender’s portal, as the questions you will be asked mirror the actual application.
  • Some important tips when going through the process:
    • Have your original PPP loan application and loan documents handy so you can make sure the info on your forgiveness application matches it exactly (legal name, DBA, address, NAICS code, EIN/SSN, loan number, number of employees at time of loan application).
    • Number of employees at time of loan application and forgiveness application are both simple head-counts, not FTEs or full- vs. part-time or anything else.
    • Covered Period is the date you received the funds through 24 weeks later, unless you determined a shorter period would be advantageous.
    • We recommend the “Amount of Loan Spent on Payroll Costs” total is not any higher than the minimum needed for forgiveness.
    • “Requested Loan Forgiveness Amount” should be the exact full total of your PPP Loan.
    • If you were unable to operate at full capacity, you may check the second box on the checklist, which means there is no requirement to fulfill the FTE (full-time equivalent) test.

Regarding backup documentation that you must submit with your application, keep in mind that what is considered acceptable support is up to each individual lender.
 – Payroll: your lender may ask you for bank account statements, payroll tax form 941s, and canceled checks for benefit invoices as proof of payment.
 – Nonpayroll: For rent/mortgage/utilities payments, your lender may ask for documentation that the obligation/services existed prior to 2/15/2020. They are likely to ask for proof of payment for all amounts claimed in this section.

If there is any concern that you might not have fulfilled the wage reduction or FTE tests, or that you do not meet a safe harbor or exemption for them, we strongly suggest working with a trusted advisor to prepare your PPP Forgiveness application, as it gets extremely complicated. Our approach, to be safe, has been to download the free Form 3508 PPP Forgiveness Calculator from the AICPA, regardless of which form you qualify to submit, so as to run all the numbers for the wage reduction test, and fill out the information to see if you are exempt from the FTE test or not. If you are not exempt, the AICPA also offers a free FTE calculator. We then suggest you retain these files as backup in case of audit, even if you end up passing all the tests and qualifying to submit a simpler form than the full 3508.

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

COVID-19 Financial Relief, Education, IRS, Site News, Tips

Client Options for Claiming The Employee Retention Credit (ERC)

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Note to readers: the issue outlined below only applies to 50%-or-greater shareholders — which means the business is a corporation — and their spouses who work at the company. It does not apply to sole proprietors or partners — those two groups do not get paid via payroll and therefore are not eligible. Shareholders who own less than 50% are eligible if the business meets the other requirements to claim the credit.

If you are a 50%-or-greater shareholder and your company qualifies for the Employee Retention Credit for either 2020 or 2021, please read on.

I truly cannot believe that it’s June 2021 and I’m writing a blog post to help people choose the least-worst 2020 Employee Retention Credit interpretation — because even though the pandemic is starting to show in our rearview mirrors, we are still living in a universe totally devoid of IRS guidance on the topic of ERC shareholder eligibility. Accountants jokingly refer to this mystery as the Tax Advisers’ “Area 51” on #TaxTwitter.

What am I talking about? And why am I so annoyed? Let me set the scene:

1) Many small business owners are eligible retroactively for the 2020 Employee Retention Credit (ERC), and the IRS decided that the corresponding reduction in wages for that credit needs to be on the 2020 tax return.

2) However, the company’s Paycheck Protection Program (PPP) Forgiveness application needs to be prepared before calculating the amount of the ERC, in order to maximize the amount of financial relief the client receives between the two programs. Therefore, at our firm, these returns are all on extension while we run these calculations.

3) Now that the first round of PPP loans are nearing the end of the payment deferment period — and to be fair, we’re also only a few months away from the tax return extension deadline — we would like to finalize those calculations and returns. (Reminder: there is no “deadline” for applying for PPP Forgiveness — per the SBA, “borrowers can apply for forgiveness any time up to the maturity date of the loan. If borrowers do not apply for forgiveness within 10 months after the last day of the covered period, then PPP loan payments are no longer deferred, and borrowers will begin making loan payments to their PPP lender.”)

4) The catch is — that the IRS has still not released guidance on whether or not 50%+ owners of a corporation are eligible for the credit (or their spouses who work for the business). Accountants are split down the middle on what the existing legislation, which is extremely unclear, tells us on the topic. As such, we either need to take a position or continue to wait for IRS guidance.

What’s that? You’re saying the IRS has still not issued essential guidance on a credit that was created in the first month of the pandemic? Yes. Yes, I am.

Recently, both the AICPA and Tony Nitti, two of my most trusted sources, have weighed in on this with a big “why is the IRS dragging their heels on this” reaction. Nitti went as far as to say, “Are wages paid to greater than 50% owners eligible for the credit? If I had a nickel for every time someone emailed me this question, I could afford to stop shamelessly and relentlessly shilling this newsletter. It is absolutely amazing that a full year after the ERC was created, we still don’t have a definitive answer.”

Okay, enough backstory. As a small business owner, what are your options? I call them Choice 1 (yes) and Choice 2 (no) for short:

  • #1 Calculate ERC as if owners are eligible and file 2020 income tax returns accordingly. This would result in a higher tax for clients (because more wages are disallowed as deductions). Submit PPP Forgiveness applications, but hold off on submitting ERC claims (941-Xs) until guidance is released. If guidance indicates that owners are eligible, file the ERC claims accordingly. If guidance says owners are not eligible, then amend the income tax returns and file the ERC claims accordingly.

This approach may make the most sense when there are two 50%-owners on payroll, and not many other other staff — as the increased credit would be worth the wait, compared to the total credit without owners.

  • #2 Calculate ERC as if owners are not eligible and file 2020 income tax returns accordingly. This would result in a lower tax for clients (because fewer wages are disallowed as deductions). Submit PPP Forgiveness applications, and submit ERC claims (941-Xs) — rather than holding off on these as in the above option. If guidance is eventually released that indicates owners are not eligible, then no action is needed. If guidance indicates that owners are eligible, then decide whether it is worth amending the income tax returns and ERC claims to get the additional funds.

This approach may make the most sense with only one 50%+ owner and many employees, as the cost to amend all returns and claims will probably not be worth the additional credit.

The goal with both approaches is to get PPP Forgiveness applications and tax returns filed as soon as possible, with the best balance between wage deductions and potential wage credits.

While I was tempted to pick one of these two approaches and inform all clients of our choice, I decided — especially with advice from an AICPA Town Hall — that this is a decision that each client needs to make for themselves. We’re happy to explain the potential costs and benefits of each approach and make a personal recommendation for each client’s individual situation, but the decision should be theirs. We recommend other CPA firms take a similar approach.

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

COVID-19 Financial Relief, Education, IRS, Tips

2020 Employee Retention Credit FAQ

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I recently received a few questions based on earlier blog posts, discussions with colleagues, and Slack conversations, and thought it might be helpful to readers to share them all here.

  1. Q: I attended the Compass seminar you recommended and it was super-helpful.  I noticed that she didn’t have anything on row 30 of her 941-X,  but on the other example we discussed, there were Line 30 entries on her 941-X that was generated by Gusto. Should I have something on line 30?

A: The Compass seminar presenter made a couple mistakes and they issued corrected pdfs afterwards – if you took the course, make sure you have the file called “Corrected_Forms_941-X_for_Case_Study.pdf” to refer to as you are preparing amended 941s to claim the Employee Retention Credit.

The first correction was that column 4 on the 941-X should be negative (even though that math makes no sense on the face of the form).

The other correction was that Lines 30 and 31 are blank in their original examples and should have totals on them. In the seminar, they had entered amounts on the Worksheet 1, Step 3, Line 3a (and 3b if there was health insurance), but then I think they just forgot to also enter them on the face of the form. (In the Worksheet it says these numbers come from Form 941, Lines 21 & 22 – and those correspond to Form 941-X, Lines 30 & 31.)

We built our own Excel version of Worksheet 1 to make all these calculations easier — not hard to do: just copy the last page of the IRS Form 941 instructions, paste into Excel, and set it up to do the simple math. We also made the following notes in Step 3:
a) For Step 3a, “This data will come from the ERC spreadsheet Total Wages row 20 (make sure to add Q1 + Q2 when preparing Q2). Enter on 941-X line 30.”
b) For Step 3b, “This data will come from the ERC spreadsheet Total Benefits row 21 (make sure to add Q1 + Q2 when preparing Q2). Enter on 941-X line 31.”.
c) For Step 3d, “Enter on 941-X line 27 *make sure amount in column 4 is a negative.”
d) For Step 3h, “Enter on 941-X line 18 *make sure amount in column 4 is a negative.”
e) For Step 3i, “Enter on 941-X line 26 *make sure amount in column 4 is a negative.”

  1. Q: Let’s say your PPP2 window is March 1 through August — it sounds like you’re not required to use wages from March 1-31 for your PPP2 forgiveness? You can take all of 1Q 2021 towards ERC and then use wages from April 1 and beyond for PPP2 forgiveness?

A: Yes, exactly – what we are doing in our firm is this: we calculate the minimum amount of wages + health insurance that are needed for PPP – and we use SUTA and retirement first, so that we use as few actual wage + health insurance dollars as possible (because ERC doesn’t use SUTA & retirement). That gives us a “target” that we use in our ERC calculations.

Then we assign wages + health insurance for the PPP period to each employee so as to maximize what’s left over for ERC. The difference has been really amazing, and worth the extra work.

So rather than picking wages to use for ERC based on which quarter they’re in to make it easier for filing, we’re picking them based on what maximizes the amount for ERC.

But the point is — that you can do it however you want, which was the second-to-last big piece of guidance I needed to make this system work to my clients’ advantage the most. (The other piece, whether 50%+ shareholder-EEs count for ERC, is something we’re still waiting on the IRS for. No one can believe they haven’t shared this yet.)

Follow-up question: Where did we land if we have to use every employee for the same duration for PPP forgiveness? So let’s say in the 24-week window you only need 13 weeks to get to forgiveness if you’re including everyone. Instead, could you use 3 employees for 24 weeks and then 2 employees for just 8 weeks (as an example off the top of my head). Or do you have to use all 5 employees for 13 weeks, or whatever it takes? Because in option 2, you’d have 3 extra weeks for the lower paid employees to use for ERC. If that makes sense what I’m asking.

A: There’s no requirement for PPP on a per-employee basis – it’s just a total dollar amount. Amazingly flexible. This analysis is accurate.

  1. Q: The Compass presenter mentioned something about the more than 50% shareholder and whether those wages count. I’ve got two clients who have employee shareholders, and I hadn’t really considered this yet. Do I count their wages?

A: We don’t know! We’re helping clients decide what to do on a case-by-case basis, using this approach (I wrote this up for RRF but it’s still valid for anyone who’s left):
Restaurant Revitalization Fund: Client Options for Tax & ERC Filings | The Dancing Accountant

Follow-up question: Regarding the Shareholder wages— Let me see if I understand it. I have a C-corp where one employee was the founder and basically has 90% of the stock. Is it a question as to whether he counts? And his wife works there as well. So it sounds like either way I cannot include her? Another employee has 10% of the stock. So he counts for sure, right?

A: The 10% employee counts for sure, and we don’t know about the 90% C-corp owner or the spouse that works there, which is why I’m making my clients choose Option 1 or 2 in the blog post I referenced. By coincidence, they reiterated in today’s AICPA Town Hall that we still don’t freaking know the answer here.

  1. Q: What date do I date the JE for “ERC Receivable”?  Is it the last date of the quarter for that 941X? (Rather than the date I send the amendment.)

A: Yes, because the IRS decided to be massive jerks and require this to be subtracted from deductible wages in the year of the payroll, rather than the year of the amendment, even for cash-basis tax filers.

Personal rant: after the past two tax seasons, have to admit that I hate Chuck Rettig with a passion.

  1. Q: So if I do form 941Xs, do I need to also send 7200s? Or is that an either/or situation? We definitely want refunds (not just applying refund towards future payments.)

A: No, the Form 7200 is only for advance payments — you would file it to get an advance payment of the refund before the end of the quarter in which you qualify. Once the quarter ends, you claim the credit on the Form 941, and reconcile the amount you’ve already applied to receive in advance. By all accounts I’ve heard, it’s not worth the trouble.

  1. Q: Finally–if I do the 941x’s myself, then do I need to notify that particular payroll company what I’ve done?

A: Not according to Gusto, because it only affects the cash paid, not the liabilities or reported amounts. It’s treated as an overpayment that will be refunded, so it doesn’t change things on their end — but I’m not sure about other payroll companies.

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

COVID-19 Financial Relief, Tips

Restaurant Revitalization Fund Update: What To Expect Next

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Excerpt from SBA email informing an applicant that their application for the RRF was approved.

The Journal of Accountancy reported on May 10th that, “a week after opening the $28.6 billion RRF, the U.S. Small Business Administration (SBA) said late Monday afternoon that it had begun sending out more than $2 billion in a first round of funding to restaurants, bars, and other eligible applicants.”

For the first 21 days the SBA will prioritize reviewing applications from small businesses owned by women, veterans, and socially and economically disadvantaged individuals.

After the first 21 days, the SBA will fund all eligible applications on a first-come, first-served basis. Approved applicants should expect an average of 14 days for processing, review, approval, and funds distribution.

So what will this approval look like for you and your clients? The SBA will send an email with the subject “SBA Restaurant Revitalization Fund – Congratulations – Award Approved”. Enough phishers are out there that it pays to be careful, and so some recipients have ignored it because it seems too good to be true, or were suspicious of the no-reply@sba.gov email address. Remember that the SBA will not ask you for any information or provide a link for you in this email. Do not click on any links. If you have any questions, please contact the SBA’s RRF call-center support at 1-844-279-8898. The are available Monday-Friday, from 8 am – 8 pm ET.

When you log into the SBA’s RRF portal that you registered for before applying — restaurants.sba.gov — you will see, on the left-hand side, a “Status” tab. If your application was approved, it will list your award amount, SBA Number, and application status will say “SBA Decision (Approved)”.

The SBA will process the funding of the award directly to the bank account you provided during the application. Again, do not enter any bank information — this was verified during the application process and the SBA will not ask you for it again. If you have any concerns, please call their support line at 1-844-279-8898. The award will be funded within seven business days of the email notification — check your bank account as the final confirmation that this is real.

Make sure to use the restaurants.sba.gov portal to check your application’s status and monitor any messages from the SBA. They will send an email if they have any issues funding the award, but if you are worried about phishing or the message going to your spam folder, the portal and the call center are resources you can access.

UPDATE: For those not yet in the approval stage: it may appear that your application has reverted to a previous step. Please don’t panic — if more information is needed to process your application, you will receive a note directly from the SBA with an email ending in @sba.gov.

In yesterday’s Journal of Accountancy, they noted that the RRF program received 266,000 applications seeking a total of $65 billion, far more than the $28.6 billion Congress allocated the program. As a result, it has less than half the money needed to fund the existing requests.

“Unless Congress passes legislation providing the RRF with fresh funding, the program looks certain to provide the vast majority of its funding to eligible businesses owned by women, veterans, and socially and economically disadvantaged individuals. The American Rescue Plan Act, P.L. 117-2, which created the RRF, mandated that those businesses, which have submitted 147,000 applications totaling $29 billion, receive priority review for the first 21 days of the program,” the Journal notes.

The SBA said it would keep the RRF application portal open for now, because it still has some portion of funding set aside for eligible establishments with 2019 annual revenue of not more than $50,000.

After the first 21 days, the SBA will fund all eligible applications on a first-come, first-served basis, which is why it was so important to submit on Day One.

UPDATE: The Independent Restaurant Coalition released a fact sheet late this afternoon outlining what’s next and it deserves a read.

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

COVID-19 Financial Relief, Education, POS - Point of Sale, Tips

Restaurant Revitalization Fund: Are You Ready?

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It’s almost here! The SBA Restaurant Relief Fund will begin accepting applications on Monday, May 3 at 11 am Central Time. Are you ready? What should you be doing to prepare?

To our surprise, the SBA announced last week that all eligible restaurants should apply the moment the portal opens on Day One, regardless of whether they are in the priority groups or not. Those not eligible for review in the first 21 days will be time-stamped and reviewed first-come-first-served in the following period. Therefore, if you are a restaurant owner of any type, make sure to take these steps between now and Monday morning if you haven’t already. Don’t wait until the portal opens to get started — be prepared in advance!

First, calculate your potential grant amount to make sure you are eligible. Do not include state and local Covid-19 grants, or PPP funding, in “gross receipts”. For my clients, I recommend you use “gross receipts minus returns and allowances” on Line 1c (Line 3 for Schedule C filers) of your business tax return. The financial relief, by contrast, should either be on the “Other Income” line (state & local grants), or not entered at all (in the case of PPP), as they are considered non-operating income. Ask your tax preparer if you are unsure.

Follow the instructions in this chart to estimate your RRF grant amount. If you were in business prior to 2019, use Calculation #1 — this will be the vast majority of restaurants.

If the amount is less than $1000 (or negative), you are not eligible. Although it’s frustrating that funding will not be available, at least you don’t have to go through the rest of the steps — silver lining!

Presuming your result is $1000 or more, please take the next steps seriously. Funding for this program is not sufficient for the number of applicants. This is your chance to be ahead of the game.

  1. Watch a recent SBA webinar that walks you through the registration and application process.
  2. Review this short, handy step-by-step guide.
  3. Download and review screenshots from the portal.
  4. Register for an SBA RRF Portal account (unless you are applying through your Square/Toast POS). Do not wait until the program opens to register — the system opened up for registration this past Friday at 8 am Central.
    • Note: you will need a cell phone to get a Two-Factor Authentication code; this is required when setting up an account.
    • This registration is independent of any other SBA account you might have — the RRF portal is a separate website/login.
    • Bookmark this site and make sure you have everything you need to easily log in when the program goes live.
  5. If applying through your Square or Toast Point of Sale (POS) system, familiarize yourself with their guidelines. We recommend you only use this option if 1) nearly all of your gross receipts run through the POS; or, 2) your 2020 tax return is not available.
  6. Read the SBA RRF Program Guide.
  7. Read the definitions for “priority groups” (women-owned, veteran-owned, socially-or-economically-disadvantaged individual-owned) — especially for those with more than one owner — to determine if you can self-certify or not.
  8. Download and fill out the sample application.
    • You will need to know things like your business entity type, tax ID #, PPP Draw 1 & 2 loan numbers, bank ACH info, owner percentages and tax ID #s, and your very first day of sales.
    • As mentioned above, if you were in business prior to 2019, you should use Table 1 and ignore Tables 2 and 3.
    • Use this filled-out application as your cheat-sheet when filling out the online application when the system goes live.
  9. Make sure you have all your supporting documentation saved to a single, easily-accessible folder on your computer, and that you have clearly named each file. Acceptable file formats are: PDF, JPG, GIF, TIFF or PNG.
    • Preferred proof of gross receipts decline will be your 2019 and 2020 tax returns (unless you are applying through Square/Toast).
      Your 2019 tax return and your 2019 & 2020 POS reports are also acceptable, though they may not include all your gross receipts, so we recommend using tax returns if you have them.
    • In addition, you may need the most recent three months of bank statements for the account that will be receiving the grant money, if the “auto-connect your bank” option does not work for some reason.
    • Clarity, precision, and organization is what’s important — not volume. Remember that a real human being will review the application at some point. Feel free to include a cover page that explains how you have organized things and what is where, the naming structure, etc.

If you have everything ready-to-go, it should only take 20-25 minutes to complete the application online when the system goes live.

Tips and notes:

  • Use the most modern browser possible — the current version of Chrome, Edge or Safari.
  • There are hover-tips practically everywhere on the portal that are really helpful, as well as an excellent searchable “KnowledgeBase” in the lower-right-hand corner of the website.
  • The SBA recommends you use the “auto-connect your bank” option instead of manually entering your ACH info — it will move through the process much faster and you will not need to upload three months of bank statements. You will be asked to select which of the bank accounts (if you have more than one) to link.
  • When signing, make sure your Title fits the entity type. (e.g., “Owner” rather than “CEO” for a sole proprietor).
  • Digital signature via Docusign at the end — if it doesn’t work, make sure your antivirus is disabled or try another browser.
  • There’s going to be personally-identifying info (PII) during registration and/or signing to make sure you are the person you say you are, so make sure to fill this return out yourself, rather than have your CPA or anyone else do it. Feel free to have them help you prepare the application that you will use for reference ahead-of-time instead if you need assistance.
  • You will get a confirmation ID. Please take a screenshot of this page.
  • If you realize afterwards that you made a mistake, call the call center and they will delete your application and you will have to start over.
  • The SBA will send a message through the portal’s message center if there are follow-up questions. You will receive an email each time there is a message; you do not need to log back in until you get a status notification, but it might be a safe thing to do in case something gets stuck in spam.
  • You can reach the SBA RRF call-center at 1-844-279-8898 for any issues or questions.

And finally… a few words to set expectations: I have every confidence that the SBA RRF portal servers will go down at some point. Instead of asking non-priority applicants to wait three weeks, they are asking literally every eligible restaurant in the country to apply at the same moment. The SVOG site went down on the first day and it took weeks for them to re-open it — and there are far more restaurants out there than performance venues. Obviously the SBA learned from that experience, so I am hopeful they are addressing these concerns… but it seems a staggered, time-stamped approach would have been safer. All that said, just do what the SBA recommends and apply in the first few minutes, but do not be surprised if you have to click “refresh” all day long. Maybe don’t make any other plans for the day just in case. For up-to-the-minute info, check twitter — either search for RRF or #RRF — this was an amazing community for the SVOG folks to come together for information and support when their issue occurred.

Good luck, everyone!

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.