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Maximizing Your PPP Benefits and Employer Tax Credits

By |2021-03-04T11:04:33-08:00March 4, 2021|Categories: Business Taxes, COVID-19|Tags: , , , , , , |0 Comments

In 2020, Congress passed a flurry of COVID-19 related legislation designed to help employers retain and pay their employees and stay in business. This relief has been offered primarily in two forms:

  • Paycheck Protection Program (PPP): PPP loans have been made available to qualifying small businesses to help them stay afloat and retain and pay as many of their employees as possible. A business receiving a PPP loan can then apply to have the loan forgiven; that is, whatever portion of the loan was used for qualifying payroll and expenses.
  • Employer tax credits: Additional employer tax credits have been made available to help employers cover the cost of sick and family leave for employees, employees who need to care for someone with coronavirus (including a child whose school or daycare is closed due to the coronavirus), and retaining employees when operations have been partially or fully suspended due to government orders during the pandemic.

Understanding and taking full advantage of these benefits within the parameters stipulated in the legislation can be challenging for small-business owners. At SWC, we’re here to help.

In this post, we provide an overview of the COVID-19 pandemic relief programs for which your business may be eligible. When preparing your business tax returns this year, your accountant or CPA should be asking you for copies of payroll tax returns and should be initiating additional consultations with you to see if you are eligible for any of the new employer tax credits. We say should because that’s how we handle this at SWC.

Wait! Before You File Your 2020 Tax Return, Read This

Don’t rush to file your 2020 tax returns. Consult with us first for three important reasons:

  1. Both the PPP and the new employer tax credits provide potentially significant benefits for your business, and we want to make sure you reap the maximum benefit.
  2. The new employer tax credits cannot be claimed on the same payroll being used for the PPP loan forgiveness. When completing your tax return and submitting documents for PPP loan forgiveness, you need to be sure you’re not confusing the two benefits.
  3. Your state may not follow all the federal guidelines. We can help ensure that your state taxes account for any differences.

If you feel pressured to file your 2020 tax returns and are uncertain about any of the details related to the PPP or new employer tax credits, we strongly encourage you to file for an extension. With that recommendation in mind, it’s important that you take the time to consult with your tax advisor.

Sorting Out PPP Rounds 1 and 2

Congress provided two rounds of PPP loans — one in the spring of 2020 and another near the end of 2020. If you have taken advantage of the PPP, you should understand the rules and the differences between the two rounds (or “draws.”)

Important: The Coronavirus Aid, Relief and Economic Security (CARES) Act, enacted in March 2020, was silent on whether expenses paid with the proceeds of first draw PPP loans could be deducted. The IRS took the position that these expenses were nondeductible. However, the Consolidated Appropriations Act, 2021 (CAA, 2021), enacted at the end of 2020, provides that expenses paid from the proceeds of both first and second draw PPP loans are Continue reading… Continue reading… Continue reading…

How to Get PPP Loan Forgiveness

By |2021-02-03T17:18:36-08:00February 3, 2021|Categories: Taxes|Tags: , |0 Comments

If you’re an owner or manager of one of the more than 5 million U.S. businesses that received a loan under the Paycheck Protection Program (PPP) — you can now have that loan converted to a grant and forgiven.

However, if you don’t apply for PPP loan forgiveness within 10 months after the last day of the covered period for the loan your business received, then the possibility of deferment ends. At that point, your business will be required to begin making loan payments to your PPP lender.

If your business is a Paycheck Protection Program borrower, it is eligible for loan forgiveness if you used the funds for eligible payroll costs, business mortgage interest payments, rent, or utilities during either the 8- or 24-week period after you received the loan.

Paycheck Protection Program Loan Basics

For the uninitiated, the Paycheck Protection Program (PPP) is a $659-billion economic relief program established as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act to help small businesses, self-employed workers, sole proprietors, certain nonprofit organizations, and tribal businesses remain solvent and continue paying their workers during the COVID-19 pandemic. Under the PPP, a qualifying small business (generally with fewer than 500 employees) could obtain a loan of up to $10 million at a very low interest rate (1 percent) and have the loan forgiven after proving that the money was used for qualified payroll and other expenses.

The following table provides an overview of the PPP Loan program. Continue reading… Continue reading… Continue reading…

Update on How to Have Your Paycheck Protection Program Loan Forgiven

By |2020-05-29T11:22:27-07:00May 28, 2020|Categories: COVID-19|Tags: , |0 Comments

If you read our April 29 post, “How to Determine Loan Forgiveness Under the Paycheck Protection Program,” or if you’re an owner or manager of one of the nearly 4 million U.S. businesses that received a loan under the Paycheck Protection Program (PPP) — you’re probably starting to wonder how to go about having that loan converted to a grant and forgiven.

SBA Paycheck Protection Program Loan Forgiveness Application

For the uninitiated, the PPP is a $659-billion economic relief program established as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act to help small businesses, self-employed workers, sole proprietors, certain nonprofit organizations, and tribal businesses remain solvent and continue paying their workers during the COVID-19 shutdown. Under the PPP, a qualifying small business (generally with fewer than 500 employees) could obtain a loan of up to $10 million at a very low interest rate (1%) and have the loan forgiven after proving that the money was used for qualified payroll and other expenses.

Earlier this month, the Small Business Administration (SBA)released its PPP Loan Forgiveness Application along with detailed instructions for completing and submitting the application.

The form’s instructions help you understand how to apply for forgiveness of your PPP loan, consistent with the CARES Act. and to simplify the process, the instructions and form include several measures to reduce compliance burdens, including: Continue reading… Continue reading… Continue reading…

How to Determine Loan Forgiveness Under the Paycheck Protection Program

By |2020-04-29T15:08:05-07:00April 29, 2020|Categories: COVID-19|Tags: , |1 Comment

The recent $669-billion Paycheck Protection Program (PPP) established by the Coronavirus Aid Relief and Economic Security (CARES) Act has been enacted to a chorus of mixed reviews.

The PPP provides loans of up to $10 million per eligible small business to cover payroll costs and other qualifying expenses (such as rent and utilities) to keep small businesses afloat and employees paid until government agencies allow them to reopen. Perhaps best of all, the total amount of each loan used to cover payroll and qualifying expenses may ultimately be forgiven. In other words, the U.S. government won’t require repayment under certain conditions.

Since banks started taking applications for PPP loans, the program has been plagued with controversy — from big businesses getting the lion’s share of the allocated funds to employers having to contend with furloughed and laid off employees who do not see the value in returning to work because they may be able to earn more by remaining on unemployment.

Paycheck Protection Program Forgiveness Loan Calculations

If your company applied for and was approved for a PPP loan, all of this controversy may be water under the bridge. Now your concern is focused on how much of the money you received in the form of a PPP loan will need to be paid back. This post addresses that concern — both for businesses with employees and for self-employed individuals.

Loan Forgiveness for Businesses with Employees

If you own a business and have employees working for you, the amount of your Paycheck Protection Program loan that will be forgiven is said to be equal to the following payments made, and the costs incurred during the eight-week period beginning on the loan origination date (the first disbursement date):

  • Payroll costs:
    • Gross salary, wages, commissions, or tips paid to employees (based on an annual wage of up to $100,000 per worker)
    • Vacation, parental, family, medical, or sick leave (excluding any family or sick leave covered under the Families First Coronavirus Response Act and reimbursed through payroll tax credits)
    • Termination allowances
    • Group health care benefits, including insurance premiums
    • Retirement benefit payments
    • State and local payroll taxes
  • Mortgage interest on a mortgage taken out by the borrower for real or personal property incurred prior to Feb. 15, 2020 (not including prepayments)
  • Rent on a lease taken out before Feb. 15, 2020
  • Utilities for service begun before Feb. 15, 2020

The entire amount of the Paycheck Protection Program loan is supposed to be forgiven if you meet all three of the following conditions: Continue reading… Continue reading… Continue reading…

Estimating Your Paycheck Protection Program Loan Amount

By |2020-04-10T18:05:58-07:00April 10, 2020|Categories: COVID-19|Tags: , |0 Comments

If you’re a small-business owner, sole-proprietor, freelancer, or independent contractor, you may be wondering just how much money you are eligible to borrow under the Paycheck Protection Program (PPP).

For those unfamiliar with the Paycheck Protection Program, it is part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law on Friday, March 27, 2020. As of April 3, businesses with fewer than 500 employees, and other entities that qualify as small businesses, are eligible for loans of up to $10 million to keep them afloat and their workers paid for up to eight (8) weeks, without having to pay back the portion of the loan used to cover payroll and other qualified costs — mortgage interest (or rent) and utilities.

Paycheck Protection Program Loan Amount

The short answer to how much money your business may be eligible to borrow under the Paycheck Protection Program is this:

  • You can borrow up to 2.5 times your monthly payroll costs or up to $10 million, whichever is less; however,
  • When you apply for a PPP loan, the bank will want a more precise estimate of your payroll costs and other qualified costs.

In this post, we provide some general guidance on estimating your Paycheck Protection Program loan amount based on our interpretation of law. Your bank (or your accountant if you’re not a client of our San Diego Tax Planning Firm) can help you determine the exact amount based on your bank’s interpretation of the law.

Calculate the Maximum Amount You Can Borrow

The Small Business Administration provides the following step-by-step instructions for calculating the maximum amount you can borrow under the Paycheck Protection Program: Continue reading… Continue reading… Continue reading…

Answers to Paycheck Protection Program Questions

By |2020-04-08T17:37:43-07:00April 8, 2020|Categories: COVID-19|Tags: , |0 Comments

Since the Payroll Protection Program (PPP) launched on Friday, April 3, 2020, small-business owners have been hard-pressed to find banks that will accept PPP loan applications. Many banks and small-business owners say they are struggling to understand Small Business Administration (SBA) and U.S. Department of Treasury PPP-related rules and regulations.

In addition to puzzling over these mandates that govern the distribution of funds, banks find themselves scrambling to get personnel and processes in place to properly handle the application and approval process.

Here at Stees, Walker & Company LLP, we are encouraging small-business owners who are waiting for banks to get up to speed on the Payroll Protection Program to make preparations in advance. See last week’s post, “Get Ready for the Paycheck Protection Program NOW!”

For the uninitiated, the Payroll Protection Program was established as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was signed into law on Friday, March 27, 2020. The PPP has allotted $349 billion to provide small businesses with low-interest loans of up to $10 million per loan to keep them afloat and their workers paid for up to eight (8) weeks.

Sole proprietors, freelancers, and self-employed individuals are also eligible. To qualify, applicants need not put up any collateral or make any personal guarantee of repayment Payments are deferred for up to six months and, most importantly, the portion of the loan proceeds used to cover payroll and qualified operating expenses (which can be up to about 25 percent of the total loan amount) are likely to be forgiven.

Part of the reason for the delay among banks and small-business owners is confusion over the rules and the process. To clarify the rules, on April 7, 2020, the Small Business Administration (SBA) issued clarifications, many of which address how small businesses should determine their payroll costs. Following is a condensed version these clarifications: Continue reading… Continue reading… Continue reading…

Get Ready for the Paycheck Protection Program NOW!

By |2020-04-01T15:26:59-07:00April 1, 2020|Categories: COVID-19|Tags: , , , , |1 Comment

Following the signing of the Coronavirus Aid, Relief, and Economic Security (CARES) Act on Friday, March 27, 2020, the Small Business Administration (SBA) and the U.S. Department of Treasury announced a mobilization effort of lending institutions — including banks and credit unions — to provide small businesses with the capital they need in these times of living under the Federal government’s Slow the Spread guidelines, which are now in effect until April 30, 2020.

The CARES Act establishes the new Paycheck Protection Program (PPP) to help businesses with 500 or fewer employees stay afloat and keep their workers employed and paid for up to eight (8) weeks. The program, which was announced earlier this week and includes access to $349 billion in funds, is expected to be up and running by April 3 (this Friday), at which time small-business owners can go to a participating SBA 7(a) lender, bank, or credit union, apply for a loan, and be approved the same day. Perhaps best of all, the SBA will forgive the portion of the loan proceeds that are used to cover the first eight (8) weeks of payroll costs, rent, utilities, and mortgage interest.

Paycheck Protection Program

The Paycheck Protection Program will be available retroactive from Saturday, Feb. 15, 2020, so employers can rehire their recently laid-off employees through Tuesday, June 30, 2020.

This program’s intent is to help small businesses like those we work with here at Stees, Walker & Company, LLP, stay afloat and retain employees until the social distancing rules are relaxed and business owners can quickly ramp up businesses to pre-COVID-19 levels. To do that, we all need to retain our most valuable assets — our employees.

Below, starting with loan terms and conditions, is a rundown of how the Paycheck Protection Program works, and other thoughts on how to prepare yourself now to tap into this important business resource.

Loan Terms and Conditions

Following are the loan terms and conditions: Continue reading… Continue reading… Continue reading…

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