As I outlined in a recent post, the IRS extended the individual tax date for filing, but not business and estimated tax dates, which are the ones that small business owners and their tax preparers truly need.
You can share this great article from Money Magazine with them, outlining the issues, or just ask them to google “AICPA tax deadline small business” — there are a ton of great articles that explain why the need for them to act is so great.
We in the small business accounting and tax world would immensely appreciate your taking a few moments of your time to help us and our small business clients out — it has been a tax season like no other and we need your assistance to make it to the other side.
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.
– Same as last year, the new date was announced after the March 15 deadline for filing S-Corp and Partnership tax returns; due to a long list of new guidance and still-awaited guidance, this forced us to do extra work to put approximately 75% of our clients in this category on extension. – The extension does not apply to C-Corps and Co-ops, whose returns are still due on the original date of April 15th. This category represents approximately 15% of our struggling small business clients. – The May 17th extension is only for 2020 tax year filings and, quite problematically, does not apply to first-quarter 2021 estimated taxes due on April 15th, which almost all of our clients are required to pay.
Furthermore, when recently questioned about whether or not there was a way the IRS could help small business owners by coordinating the first-quarter payment with the new deadline, Rettig flatly refused: “no”. Pressed regarding the consequences that not extending this due date would have on small business owners, Rettig said that they had to draw a line somewhere to keep wealthy taxpayers from “gaming the system” (for one month, really?); that small business owners challenged by this could just call the IRS if they have a problem (because that’s been going so well this season?); and tried to point out that the penalties aren’t really that high (so suck it up, and never mind that the state penalties are out of control?).
I cannot begin to express the frustration and disappointment with this decision, and I am not alone.
“The announcement is far too selective in who is receiving relief,” Barry Melancon, AICPA’s president and chief executive, said in a statement. “Failure to include estimated payments nullifies any benefit of a postponement since the tax return work has to be done to calculate estimated payments.”
“While this is welcome news for some taxpayers, there are a number of concerns that this limited extension does not address,” writes Frank Washelesky of ORBA. “The IRS extension does not extend the time for paying first quarter estimated income taxes for the 2021 tax year. It is difficult for taxpayers to determine the amount of the estimated tax required without, at least, a reasonable estimate of their 2020 tax situation. Without an extension of these payments, the filing extension to May 17, 2021 has minimal value for many taxpayers.”
Here’s what the problem is: most small business owners need to pay quarterly estimated taxes to the IRS based on either: 1) 100% of the prior-year’s tax liability; or, 2) 90% of the current-year’s tax liability (which we can’t know yet, so we extrapolate based on the actual profit from the quarter).
Based on a somewhat complex set of rules (which are often different at the state level), small business owners and their tax advisers calculate the actual amount to submit. But they generally need to know both these amounts — which is impossible if their tax return for 2020 hasn’t been filed yet. See why this mismatch in dates is a problem?
And to spice things up even further, not all states are going along with the IRS rules. Taxpayers and their advisers need to check with each agency separately (here’s a good running list at-a-glance). Illinois recently decided to comply with the IRS dates, meaning that the quarterly estimated tax problem exists with our Department of Revenue as well.
“This selective decision by the IRS unfortunately creates more bureaucracy and confusion and is out of sync with real world stresses that taxpayers, tax practitioners and small businesses are dealing with,” said Melancon.
We in the accounting profession would be greatly appreciative if you could contact your Congressional Representatives and Senators and ask them to move ALL tax return and payment due dates, including estimated tax payments and corporate taxes.
I know it’s a pain, but AICPA insists that this type of grassroots work really does have an impact… and if you care about the physical and mental health of your tax preparer, and about the anxiety level and financial well-being of millions of small business owners, you’ll hopefully take a moment to make our request go a bit further.
Thank you!
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.
I recently wrote about reasons to hold off on Paycheck Protection Program (PPP) forgiveness applications for the time being. Among them is the complex interaction between PPP and the Employee Retention Credit (ERC), which previously was not permitted as an option for financial relief for those that had received PPP funding.
Because ERC is now available for small businesses who have accepted PPP funds — but not for the same payroll dollars (no double-dipping) — there are some pretty complicated calculations that, if done right, could generate a great deal of financial relief to a lot of independent business-owners in need.
The notice explains (1) who are eligible employers; (2) what constitutes full or partial suspension of trade or business operations; (3) what is a significant decline in gross receipts; (4) what is the maximum amount of an eligible employer’s employee retention credit; (5) qualified wages; (6) how an eligible employer claims the employee retention credit; and (7) how an eligible employer substantiates the claim for the credit.
Summary of the 2020 Employee Retention Credit
As a reminder, the 2020 ERC is a payroll tax credit available to business owners whose operations have been fully or partially suspended by government order, or who have seen a drop in income of more than 50% compared to the same quarter in the previous year. (Note: in the new IRS guidance it also states that if “the business’s suppliers are unable to make deliveries of critical goods or materials due to a governmental order”, your business may be eligible for ERC — even though there was no governmental order in your area.)
The credit comprises 50% of up to $10,000 in wages to each employee. The credit cannot be taken on wages that were paid for by PPP funds — but as long as there is no double-dipping, PPP recipients can claim other wages for the purpose of ERC.
Keep in mind that the ERC is complex, and this blog post will not walk you through the specifics — I’ve included a list of some of my favorite resources below. The goal here is to share the steps in our firm’s approach toward these calculations for our clients.
So let’s start with a couple of things to be aware of before we go through the steps that my firm plans to walk through come May/June.
First, the ERC is not generally as valuable as the PPP. It is a payroll tax credit, rather than actual cash funding (though you can file for an advance on it).
And the ERC did not get the benefit of having Congress declare its related expenses deductible, like the special treatment that PPP costs received. So you will lose all the deductions for the payroll tax dollars on which you receive the credit. Deductions aren’t worth as much as credits, so you still come out ahead. But if you’re choosing PPP or ERC for a given payroll dollar, you want to pick the PPP first — up to the minimum 60% requirement for that loan to be forgiven.
However, once you’ve reached that 60% requirement, if you can use non-payroll costs for the remaining 40%, then you “free up” the rest of the payroll dollars to be used for ERC. So you’ll want to work on PPP1 forgiveness applications at the same time as 2020 ERC calculations — they are related to each other, and changing one will potentially affect the other.
But what does this mean for companies filing income tax returns for 2020? Businesses that later decide to retroactively claim the ERC will need to file amended income tax returns — or preferably, put their income tax returns on extension until they have claimed the ERC for 2020. We had previously thought that cash-basis filers could potentially claim the income for the credit and the associated reduction in payroll costs on the 2021 income tax return, but that was ruled out with the most recent IRS guidance.
Steps to Evaluate Payroll for PPP vs ERC
The hope is that in most cases you’ll be able to do Steps One and Two and skip the rest. But just in case, Steps Three and Four will take you the rest of the way there.
Step One When figuring out how to combine ERC and PPP, literally make a calendar for each client and work from that.
a) Determine dates for which you qualify for ERC, based on either: – the full or partial shut-down period, or – a gross receipts decline of 50% over the same quarter in 2019 (the latter qualifies you from the beginning of that quarter to the end of the quarter where receipts go back up to 80%)
Keep in mind that both scenarios may apply, but for different periods — for example, the business was shut down on 3/18/20, and then later fully reopened… and then the 50% revenue drop started in the following quarter.
Note: you may want to find out the exact dates that your client’s city/county/state decreed full-capacity indoor dining was illegal — for those dates, restaurants qualify for ERC based on “full/partial shut-down” rules. If your client is a gym, bar, or other type of non-essential business that had hours limited, find out the exact full-or-partial shut-down dates decreed for that industry in that specific area.
b) Determine PPP covered period. For most folks, this will be the 24 weeks starting on the date of loan fund disbursement.
c) Determine the “bookend” periods — the time both before and after the PPP covered period; for the timeframe when the client qualified for ERC but was not in the PPP realm.
Step Two You may be able to skip the rest of the steps by eyeballing whether you’re able to claim the entire 2020 ERC of $5k per employee (on the first 10k paid to each) all in one quarter — for most businesses this would usually be the final quarter of the year. Then, not only will you not have to worry about overlapping PPP and ERC payroll dollars, but you also will be able to claim this through most payroll companies and not have to manually amend the 4Q 2020 Form 941. Double-bonus!
If not, then see if you can get the full $5k per employee ERC (again, on the first 10k paid to each) using only the periods before and after the PPP1 covered period. You at least eliminate the need to juggle the PPP payroll dollars along with the ERC payroll dollars during the covered period.
Step Three If that’s not an option — if you can’t get to the full 10k within the bookend periods — then:
Before you work on PPP1 forgiveness, subtract whatever the 2020 unallocated ERC balance is after Step 2 (not to exceed 10k of wages per employee) from the payroll amounts during the PPP covered period — before putting numbers in the forgiveness application, just to make sure you can still get full forgiveness at this rate. This is just a “gut check” to see if you can eliminate the need to run the actual ERC calculations for the PPP covered period.
If so, then go ahead and take ERC on the difference, even if you haven’t figured out the specifics of your PPP1 forgiveness yet.
Step 4 If you can’t get full forgiveness on PPP1 at this rate, then go ahead and fill out the PPP1 application in full, using only 60% of the PPP funds to allocate payroll.
Then see how many payroll dollars are “left over” to be used for ERC.
And remember that you can use payroll from employees who made over $100k annually for ERC during the PPP period — because those dollars are not eligible for PPP (due to rules and limitations specific to that program), but they are eligible for ERC.
You can also count — for ERC purposes — dollars that were above 60% of the PPP loan, and therefore are not needed for forgiveness (presuming the business has sufficient eligible costs to make up the 40% “non-payroll” portion of PPP forgiveness).
Think of it this way: you are effectively reducing the ERC subtraction amount per-employee from PPP forgiveness until you get to full PPP forgiveness… and taking 2020 ERC on the balance (since as I mentioned before, the PPP payroll dollars are more tax-advantaged than the ERC dollars).
Does this four-step process sound easy? No! It’s not. It may not in fact be worth it for most small business clients to pay a professional to scoop up the remaining piddly amounts in the PPP covered period — in which case, consider just using Steps One and Two: the amounts in the bookend periods, or even better, just the amount from the final quarter (because that way they don’t have to pay you to manually prepare a 4Q Form 941, either).
But reviewing this approach before going in and working on all the client ERC and PPP calculations should help a great deal in identifying where the bulk of the payroll dollars are that will qualify for the ERC program, and will allow you to make intelligent decisions about which periods to mine for this type of financial relief for your small business clients.
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.
Many clients and colleagues have reached out to me over the past two months to ask whether they should apply for PPP1 forgiveness yet, and my answer (and that of the AICPA) is still “not quite yet”. But rather than just pushing off the question of “but when” into the future, I wanted to publicly share our company’s strategy and timeline for handling these applications.
The deadline to apply for Paycheck Protection Program (PPP) forgiveness is 10 months after the end of the covered period — which for most folks for the first round was 24-weeks — so that wouldn’t be until sometime in July 2021 for the earliest borrowers. (It’s not really a deadline, but it’s the date on which the lender will start requiring loan payments, so I think of it as one.)
We’re planning to dedicate May & June 2021 to working through all our existing clients’ PPP forgiveness applications. There are many clarifications we’re still waiting for (they keep dribbling out of Congress, IRS, and the SBA bit by bit, with occasional leaps), and the interaction between the PPP and other types of financial relief is complex.
An example of how the changing rules affect applications: the EIDL advance grant was previously supposed to be subtracted from PPP forgiveness; but by asking our clients to wait on their forgiveness applications, they were able to take advantage of a December 2020 change that removes this requirement, saving them many thousands of dollars. (Though thankfully, it sounds like SBA will eventually refund those amounts to businesses who applied before this new rule went into effect.)
As if these reasons weren’t enough, in a recent on-demand AICPA Town Hall, they mentioned that: – Most lenders are not actively taking forgiveness applications because their teams are focused on administering PPP2. – SBA is working very slowly on forgiveness process because they are also focused on PPP2. – The new simplified form for $150k and under will not be worked into the SBA system until sometime in March.
Between the constantly-changing rules for PPP and the guidance and calculations needed for ERC, we’re still following the recommendation of the AICPA and asking folks to hold off on PPP1 forgiveness applications, until tax season is behind us all and the IRS can focus on the remaining questions, allowing us to be methodical and consistent in our approach.
There’s no reason to be nervous about holding off on forgiveness — of the one-third of PPP loans that have been submitted for forgiveness, fully 99% of the loan dollars have been forgiven. The very small amount that have not are small loans at only 1% interest. Furthermore, by waiting you are giving your business the best chance at maximizing other types of financial relief, especially as the new Biden-Harris administration is in the process of changing rules to make them more attainable for a larger number of the smallest businesses out there, as well as Congress creating new funding opportunities.
(For tips on planning for the potential Employee Retention Credit, see my next blog post.)
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. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
A slide from this morning’s CPA Loan Portal-AICPA update.
Big changes yet again in the world of the Paycheck Protection Program (PPP), where it sometimes seems the only constant is change.
The White House released a Fact Sheet early yesterday indicating immediate changes to the program intended to shift focus to small businesses with few or no employees, and increase program access to those who may otherwise have been shut out.
The five main changes, as summarized in the CPA Loan Portal-AICPA slide above (from this morning’s webinar), are in two different areas — “Focusing On Small Businesses” and “Increasing Program Access”, and are as follows:
Starting Wednesday, a temporary pause in applications for 20+ employee businesses.
New eligibility calculation rules for Schedule C self-employed (see below).
Borrowers with non-fraud convictions will no longer be prevented from applying.
Student loan delinquency will no longer prevent borrowers from applying.
Clarify that ITIN applications for non-citizens will be accepted.
The biggest take-away for our client base is #2 above — this particular section of the White House statement:
Help sole proprietors, independent contractors, and self-employed individuals receive more financial support. These types of businesses, which include home repair contractors, beauticians, and small independent retailers, make up a significant majority of all businesses. Of these businesses, those without employees are 70 percent owned by women and people of color. Yet many are structurally excluded from the PPP or were approved for as little as $1 because of how PPP loans are calculated. To address this problem, the Biden-Harris administration will revise the loan calculation formula for these applicants so that it offers more relief, and establish a $1 billion set aside for businesses in this category without employees located in low- and moderate-income (LMI) areas.
The SBA followed up with their own release shortly afterwards, stating, “The 14-day exclusivity period will start on Wednesday, February 24, 2021 at 9 am, while the other four changes will be implemented by the first week of March. The SBA is working on the program changes and will communicate details throughout this week.”
What does this mean for applicants and their advisors?
PPP loans are based on wages to employees, which are subject to “payroll tax” (or “Social Security & Medicare taxes”). Whereas for certain types of one-person companies that don’t have payroll, the amount is calculated based on the net profit from IRS 1040 Schedule C — the amount on which “self-employment tax” is paid (also known as “Social Security & Medicare taxes”).
As CNBC reports, because of this method of defining “payroll” for the self-employed, some applicants saw very low loan amounts in previous rounds of the program, because they make very little in profit.
To “fix” the issue, the SBA is revising the formula to match what it uses for farmers. This basically means that they will calculate loan amounts from gross income instead of net profit.
This means that millions of small business owners who posted a loss in 2019 or 2020 will still be able to apply for PPP funds, based on their revenues before deductions are taken.
This sounds wonderful — and to some extent is — but it’s inherently unfair to partnership owners, who also have their PPP loans based on self-employment income. It’s also unfair to the millions of Schedule C filers who already applied for both rounds of the PPP without the benefit of this changed rule.
In a Forbes article from yesterday afternoon, Brian Thompson pointed out, “even more important is the question of whether this formula will be retroactive for those sole proprietors who have already applied. We don’t know yet whether these businesses will be allowed to gross up based on the new formula.”
As for small business advisors, it puts us back in a sprint again, during an already-grueling tax season. This morning, we developed our plan internally for next steps, which is to identify:
1) Clients who file Schedule C; 2) Who have not filed for PPP; 3) Because they have a loss or very low income on Line 31 of their 2019 Schedule C.
Then we’ll reach out to each one of them to explain that they may in fact be eligible for PPP after all, and to offer to prepare their application through our CPA Loan Portal, as we’ve been doing since early January for all our clients who qualify.
Although I am extremely grateful for this opportunity for small business owners, the inequity of the situation is extremely upsetting; we will see if additional changes are made that allow partnerships and prior applicants to use the same rules. But even if those concessions are made, there is an inherent issue with using gross revenues rather than net — which is that other types of single-member companies (S-corps, C-corps, Non-profits and Co-operatives) did not have the same option, and I know quite a few that suffered from lack of PPP funding as a result; even harder-hit were newer companies that did not show a 25% decrease from 2019 to 2020. (It’s hard not to go up from zero.)
I could go on, but I won’t, because it’s tax season and I have to take care of client deliverables in the midst of it all. Who knew that client financial relief would be such a moving target?
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. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
This past Wednesday, February 17th 2021, I was honored once again to participate in State Representative Will Guzzardi’s FREE Facebook Live series designed to help his constituents — and anyone else who wants to tune in — to learn about financial relief during Covid-19.
The full-length webinar is FREE, as are the slides, resources and links to walk you through the application process. Additionally, a PDF version of the slides is available for download here:
We covered the following topics: 1) Paycheck Protection Program Summary 2) Current Program Overview 3) Eligibility 4) How To Apply 5) Where To Apply 6) Forgiveness Basics 7) Resources & Questions
Please share far and wide to help small business owners learn about the current status of the Paycheck Protection Program and how they can determine eligibility and apply for a non-taxable forgivable loan to help their companies stay afloat during these challenging times.
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. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
I’ll cover the following topics: 1) Paycheck Protection Program Summary 2) Current Program Overview 3) Eligibility 4) How To Apply 5) Where To Apply 6) Forgiveness Basics 7) Resources & Questions
Slides will be available through Rep. Guzzardi’s office by request, and I will link to a recording here on my blog.
As an exciting bonus, the webinar will be translated into Spanish, by the talented Elsa Prado. She was kind enough to invite me as a guest on her Spanish-language show Alas de Amor this past Saturday — and I managed to pull off about 85% of it without resorting to English, though she was kind enough to expertly translate when I did.
In either language, please join us to learn about the current status of the Paycheck Protection Program and how you can determine eligibility and apply for a non-taxable forgivable loan to help your business stay afloat during these challenging times.
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. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
From the Chicago Department of Business Affairs & Consumer Protection:
The U.S. Small Business Administration (SBA) Paycheck Protection Program will support small businesses throughout the country with up to $284 billion toward job retention and certain other expenses. Businesses apply for PPP loans through a bank, credit union, community lender, online lender or other participating lenders. Please note that some lenders may not be participating in the program – please contact your preferred lender to determine if they are participating. Learn more at sba.gov/ppp and find a lender using the SBA Lender Match Tool. While BACP does not manage the Paycheck Protection Program, we will be holding webinars and continuing to share information in the coming days and weeks. The first webinar, “The Paycheck Protection Program and Other Emergency Funding Opportunities,” will be presented by the U.S. Small Business Administration and Accion Chicago on Tuesday, January 19, at 3:00 pm.Register and learn more at chicago.gov/businesseducation. More webinars will be planned in the coming weeks – stay tuned! To learn more about the PPP, please visit these links:
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. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
January 11, 2021: The next round of the popular Paycheck Protection Program technically opens today — but only for a very small number of lenders, called Community Financial Institutions. According to CPA Practice Advisor, “To promote access to capital, initially only community financial institutions will be able to make First Draw PPP Loans on Monday, January 11, and Second Draw PPP Loans on Wednesday, January 13. The PPP will open to all participating lenders shortly thereafter.”
In the finance industry, this is being referred to as the “Soft Launch” of the PPP. The reason for this tiered approach is that these institutions (CFIs), and the disadvantaged businesses they often represent — many of them from underserved communities — were mostly shut-out of the first round of PPP back in April. Brian Thompson published a great article in Forbes yesterday, explaining the details, that I encourage you to read. In short, the SBA is trying to equalize access to business ownership and support for black and brown communities. So if you’re not in one of these groups, today’s opening is not meant for you. Please be patient.
Although only this small group of lenders will be the included in the Soft Launch, unfortunately very few of them will be prepared to take full loan applications this week. These CFIs are generally only accepting applications from their existing customers, and do not have the processing capacity to receive an influx of applications, especially from those outside the communities they serve.
My recommendation is to continue with the strategy that you have already devised — whether that’s working with your existing banking relationship, or with your CPA to apply through a lending portal (I am using the CPA Business Funding Portal, a joint program between the AICPA and biz2credit — more here — you can also use the platform for free to help prepare applications to be sent to clients’ existing lenders).
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. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
Initially only community financial institutions will be able to make First Draw PPP Loans on Monday, January 11, and Second Draw PPP Loans on Wednesday, January 13. The PPP will open to all participating lenders shortly thereafter.
Updated PPP guidance outlining Program changes to enhance its effectiveness and accessibility was released on January 6 in accordance with the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act.
Key PPP updates include (underlines are mine):
PPP borrowers can set their PPP loan’s covered period to be any length between 8 and 24 weeks to best meet their business needs;
PPP loans will cover additional expenses, including operations expenditures, property damage costs, supplier costs, and worker protection expenditures;
The Program’s eligibility is expanded to include 501(c)(6)s, housing cooperatives, destination marketing organizations, among other types of organizations;
The PPP provides greater flexibility for seasonal employees;
Certain existing PPP borrowers can request to modify their First Draw PPP Loan amount; and
Certain existing PPP borrowers are now eligible to apply for a Second Draw PPP Loan.
A borrower is generally eligible for a Second Draw PPP Loan if the borrower:
Previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses;
Has no more than 300 employees; and
Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020. (Updated since to provide an option for annual comparison for those without quarterly records.)
The guidance included two interim final rules (IFRs).
The 82-page IFR “Business Loan Program Temporary Changes; Paycheck Protection Program as Amended” consolidates the rules for PPP forgivable loans for first-time borrowers and outlines changes made by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, P.L. 116-260.
The 42-page IFR “Business Loan Program Temporary Changes; Paycheck Protection Program Second Draw Loans” lays out the guidelines for new PPP loans to businesses that previously received a PPP loan.
In addition, the SBA released a three-page “Guidance on Accessing Capital for Minority, Underserved, Veteran and Women-Owned Business Concerns.” That guidance includes a commitment from the SBA to make at least the first two days of the PPP application window open exclusively to applications from community financial institutions that serve minority- and women-owned businesses.
AICPA Firm Services Vice President Lisa Simpson got up at 5 am on the morning the SBA guidance was released, and was ready by 3 pm — slide deck and all — to share it with us on the AICPA Town Hall. The hour-long episode is free and available to the public — it’s all excellent, but her presentation in the first half-hour will give you almost everything you need to know. I’ll attempt to summarize it here, but honestly… you’re doing yourself a favor to sit down and watch it.
Here’s a summary of what I consider to be the highlights:
SBA program will open January 11, in phases, as outlined above (minority-owned businesses were the last to receive assistance first-time around).
March 31st is last day to apply for PPP (first- or second-round).
For payroll costs used in calculating the loan amount (x 2.5 months, or x 3.5 for the hospitality industry, including restaurants), one can use: a) 2019, b) 2020, or c) 12-months’ prior to application.
Borrowers that want a 2nd PPP must show a 25% quarterly revenue loss in any quarter of 2020 compared to the same quarter in 2019 (or annual, see below). The SBA is streamlining this for loans under $150k. It will not require supporting documentation to be submitted with the application but only later, when applying for forgiveness.
Businesses trying to show the quarterly 25% revenue drop for 2nd PPP loans can cite an annual reduction of 25% and submit copies of annual tax forms to verify. SBA and Treasury say this will help small borrowers that may not have quarterly revenue information readily available.
For details on both first-draw and second-draw maximum loan amounts and eligible costs, this Journal of Accountancy article is the best summary I have read so far.
The AICPA has been very generous in encouraging us to share its slides from the Town Halls in order to get the word out. Here are a few “best of” from Thursday’s session. Again, I encourage you to watch for yourself to get some clarity.
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. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
