Hi There!
Here are PPP loan updates as of today:
Deadline to Apply for a PPP Loan:
June 30, 2020
There was the possibility that the deadline would be extended, but it appears at this late stage that no such change is forthcoming. Therefore, every effort should be made to file an application by the end of business today.
Percentage of Loan to Apply to Payroll:
60%
This percentage has been reduced to allow for greater loan forgiveness, thus giving more small businesses the opportunity to transform their loans into fully forgivable grants (ie: no need for repayment).
Remaining Items Where the Loan Proceeds can be Spent (the remaining 40%):
Rent, Utilities, Mortgage Loan Interest
These items are unchanged from all previous guidance.
Covered Period for Loan Forgiveness:
24 weeks
This is a significant increase over the previously allowed 8 weeks, meaning business owners can extend the usage of the PPP proceeds for up to six months to reach 100% forgiveness.
When to File a Loan Forgiveness Application:
Anytime on or before the maturity date of the loan
There is no longer a need to wait until the entire covered period is up before you apply. For example, if a business has used all of the loan proceeds for payroll after 13 weeks of its testing period, the owner can apply for loan forgiveness at that point. This takes the loan “off the books” earlier than under previous rules. All forgiveness applications will be processed by the same bank that gave you the loan. Only a few banks have set a date they will start accepting and processing the forgiveness applications.
By now, we have a list of all our clients that have the PPP loan. After July 15, we will start contacting everyone to see where you are in the spending down of loan proceeds and if you want/need our assistance with the forgiveness application.
Taxability of the Loan Forgiveness:
The administration has said the PPP debt forgiveness will not be taxable income.
However
, the IRS has subsequently said that since the business will be paying business expenses (payroll, rent, utilities) with those untaxed funds, then the business cannot deduct those expenses in accordance with current tax law.
For example: If you paid $400k of payroll in 2020, and $140k of it was paid with PPP money, then you will only be able to deduct $260k of payroll. We will address this with everyone during tax planning.
Other Notable Changes:
The new loan forgiveness application is an “EZ Application”, meaning it is much easier to complete and is shorter in length.
The FTE (Full time Equivalent) staff requirement of not reducing staff by > 25% has exceptions. Business owners who could not maintain a consistent headcount during the testing period can apply for relief in many ways, and
SKP can assist
in identifying these exceptions and applying them to each client’s circumstances as the need arises.
Thank you and be well!
Rich Pavano, CPA
203.933.1679
