SBA Resource Center
Resources and information related to:
Paycheck Protection Program (PPP)
Economic Injury Disaster Loan (EIDL)
WEBINAR – Recap of Recent Tax Act
Overview of the NEW tax act for businesses and individuals!
COVID Stimulus programs recap—does your organization qualify?
With the COVID relief package passed in late December, many are still reviewing the rules to see if they qualify. There were numerous changes retroactive to the beginning of the CARES Act (March 2020) and many new changes going forward in 2021 which has made this new bill cumbersome to navigate. Based on the rules known today, we have provided different categories that most taxpayers are falling under, which we hope helps you navigate all the changes.
Your organization received PPP funds in the year of 2020, will my business qualify for the second round of PPP?
- Many businesses and self-employed individuals fall in this category. The first question you need to ask, have you experienced a 25% reduction in gross receipts during any quarter of 2020 as compared to the same quarter in 2019? If so, then you might be eligible. We do know the original PPP and EIDL grants are excluded from gross receipts, however, there is uncertainty as to whether the other stimulus funds should be included (Nebraska stabilization, HHS, CFAP, etc.). For now, exclude all stimulus payments in your gross receipts so you can determine how your operations truly performed each quarter. Note: special rules apply if you started business in 2019.
- If your original PPP loans have not been forgiven, you may be eligible to request a recalculation of your first round PPP and increase your eligible loan amount. We recommend you talk with the lender that assisted you the first time to see if you are eligible for an increase based on the revised rules.
Your organization never received PPP funds in the year of 2020, can I apply?
- For any business that had payroll and you didn’t apply for funds the first time for whatever reason, you can still apply. You have time to apply as a “first-time” borrower if you feel the conditions warrant the needed funds for your business. The criteria and rules for the most part follow the initial PPP funding rules (average monthly payroll multiplied by a factor of 2.5).
- For sole-proprietor farmers that file a Schedule F, special rules apply in computing eligible “payroll”. Farmers can calculate their payroll by using Schedule F, line 9 gross income (capped at $100,000), divided by 12 months and multiplied by a factor of 2.5. For a farmer with more than $100,000 of gross receipts and no employees, the max loan amount is $20,833. If the farmer had employees, a slightly different computation is required. If you received a lessor amount under the first round of PPP and your loan has not been forgiven, you can request the additional amount.
Not eligible for any additional PPP, now what?
- If you received first round PPP funding and you’ve already received loan forgiveness, there are still a few new benefits from the latest stimulus. If you also previously received the EIDL grant, your loan forgiveness was likely reduced by the EIDL. In a retroactive change, the EIDL no longer reduces the forgiveness amount, so lenders will be working with the SBA to ensure all borrowers receive full PPP loan forgiveness. Watch for more communication from your lender on this.
Employee Retention Credit—credit to reduce payroll taxes:
- Another stimulus credit that organizations need to be aware of is the Employee Retention Credit. Under the CARES Act in March 2020, any business that received the PPP could not also use the Employee Retention Credit. Under the new act, this has been repealed back to March 2020. Essentially, businesses can potentially receive up to 50-70% refund of wages up to $10,000 of wages per employee by keeping their employees during the pandemic. For 2020, analyze if your business revenues for Q2, Q3 and Q4 dropped by 50% or more as compared to the same quarters in 2019 OR if your organization was partially or fully suspended as mandated by the government. If you meet either criteria, you may be eligible to claim the tax credit on your Form 941. Special rules apply if you received the PPP, which guidance is forthcoming from the IRS/Treasury.
Paycheck Protection Program (First-Time) Borrower Application Form
Effective January 8th, 2021. Application also available at: https://www.sba.gov/document/sba-form-2483-paycheck-protection-program-borrower-application-form
Paycheck Protection Program Second Draw Borrower Application Form
Effective January 8th, 2021. Application also available at: https://www.sba.gov/document/sba-form-2483-sd-ppp-second-draw-borrower-application-form
Spreadsheet updated January 11th, 2021.
WHAT YOU CAN DO NOW TO PREPARE FOR ROUND TWO PPP LOAN APPLICATIONS
List of items to consider:
First, figure out if you are eligible to apply:
- Run quarterly income statements for 2019 and 2020. Companies demonstrating a 25% or more reduction in gross receipts in any quarter in 2020 as compared to the same quarter in 2019 are eligible to apply. Special rules apply to new businesses that started in 2019 or 2020.
If you are eligible to apply, then work on gathering the following items:
- Head count numbers for 2019 and 2020. Companies with 300 or fewer employees are eligible to apply. For restaurants and other companies with an NAICS code starting with 72, the 300-employee limit is for each location.
- 2019 and 2020 payroll reports.
- 2019 and 2020 forms 941, 940 and State Unemployment tax returns.
- 2019 and 2020 health benefit expenses (health insurance, group life and disability, and vision and dental).
- 2019 and 2020 employer retirement plan contributions.
- Watch for emails from us and your local banks regarding the new process surrounding round two of the PPP.
For Schedule C Filers
For Schedule C filers (i.e. self-employed businesses) be prepared with a balance sheet and income statement (or financial records) that can be used to generate your Schedule C – likely much earlier than you typically would have this done. Lenders required a Schedule C for prior PPP loans.
For Schedule F Filers
There is a special provision for farmers and ranchers who file a Schedule F. They can calculate their eligibility using 2.5 times their monthly 2019 gross income with a monthly maximum gross income of $100,000. Therefore, the maximum loan amount in this case would be $20,833 ($100,000 x 2.5 / 12). Although it appears only the 2019 Schedule F will be required, we encourage you to get your 2020 farm income/expenses finalized in case there are further requirements.
UPDATE TO ORIGINAL PAYCHECK PROTECTION PROGRAM LOAN RULES
Information for those who took loans under the Paycheck Protection Program (PPP) in the spring of 2020. This article has been revised to take account of changes to the PPP enacted by the Consolidated Appropriations Act, 2021 (CAA, 2021).
CAA, 2021 CHANGES TO PAYCHECK PROTECTION PROGRAM SECOND DRAW
This article discusses changes to the Paycheck Protection Program enacted by the Consolidated Appropriations Act, 2021 (CAA, 2021).
NEW LAW’S TAX PROVISIONS THAT AFFECT BUSINESSES
This article discusses changes made by the Consolidated Appropriations Act, 2021 (CAA, 2021) to tax provisions that affect businesses.
IRS FINALLY RULES ON PPP EXPENSE DEDUCTION
The IRS has issued Revenue Ruling 2020-27 which denies any taxpayer the ability to deduct expenses that have been forgiven under the PPP loan program in 2020. This is also true if you wait until 2021 to ask for forgiveness. This follows the past IRS’s logic that expenses related to tax-exempt income are not deductible. This could all change if Congress passes further stimulus provisions that would include making these deductions available, and the President is willing to sign any new such stimulus measures into law. There is momentum in wanting to make this happen, but we do not know when.
The Treasury is encouraging taxpayers to apply for forgiveness as soon as possible, but it may be better to wait until 2021 to optimize the amount and mix of expenses to be forgiven just to offer the ability of deferring these expenses as not deductible until next year. Some planning may need to take place to provide an optimal tax situation for you. If you’ve already applied and received forgiveness, then we will proceed with whatever rules are given to us.
You may want to fill out your application and only provide enough expenses to get full forgiveness. That is all that you are required to provide as far as expenses. After year-end you have more flexibility and control to get a more favorable result.
The IRS also issued Revenue Procedure 2020-51 which grants a safe harbor allowing certain taxpayers who reasonably know that they will not get full forgiveness of those expenses or will not apply for forgiveness to allow a deduction on the taxpayers’ 2020 tax return limited to those amounts. This would have to be disclosed on your tax return when filed.
This is the best guidance that we have at this time regarding the deductibility of forgiven expenses under the PPP loan program. Hopefully, future legislation will change this, but until then this is the interpretation of the current law.
COVID-19 Business Life Cycle
Timeline of how COVID-19 could affect small businesses.
In response to the novel coronavirus (COVID-19) pandemic affecting the business community across the country, Congress has announced several disaster-related expansions to small business financial relief options. These programs include two main categories:
- SBA Economic Injury Disaster Loan (EIDL)
- Coronavirus Aid, Relief, and Economic Stability (CARES) Act 2020: Paycheck Protection Loan (PPL)
PLEASE NOTE: Work with your banker to determine which program best fits your business needs. Being proactive by reviewing your cash flow needs, reviewing these programs and gathering information can save time if you need cash flow for your business operations.
Other notes that we have found out since the enactment of the law:
- Borrowers may apply for an EIDL grant in addition to a loan under the EIDL and PPL provided the loans are not used for the same purpose.
- You can apply for multiple companies with common ownership assuming they are separate legal entities.
- Below is a summary of the loans. We recommend that you work with your banker on the right loan for your business and the proper way to apply. You will have to submit the following information with your lender (as of 3/30/2020 these are the forms that are recommended to fill out. Forms subject to change as programs develop but it will get you prepared overall).
It is expected that it will take 21-31 days after an application is approved for funds to be disbursed.
SBA Economic Injury Disaster Loan (EIDL)
The SBA Economic Injury Disaster Loan was authorized by Congress to make loans available to small businesses and private, non-profit organizations to help alleviate economic injury caused by COVID-19.
EIDLs are available for “affected businesses” to help them pay bills and other expenses during the period of time when their business is disrupted due to the pandemic. These loans may be used for fixed debts, payroll, accounts payable, and other bills that cannot be paid. The loans cannot, however, be used to refinance long-term debts.
- Maximum Loan Amount: $2 million
- Loan Term: Up to 30 years
- Annual Interest Rates: 3.75% for businesses; 2.75% for non-profits
- Timeline: It is expected that it will take 21-31 days after an application is approved for funds to be disbursed.
- Go to EIDL Application
- You can complete the EIDL application for a loan of up to $2Million.
- Loans will be given on a first come, first serve basis.
- As part of the loan, a $10,000 advance may be available in the form of a non-taxable grant. This grant can be funded to applicants in as few as three days.
- Loan funds can be used for purposes such as mortgage/rent, utilities and employee sick leave related to COVID-19 illness.
- If you are incorporated, there are several other forms showing your monthly income and expenses, etc. so an accountant may be required. The legal and/or accounting costs appear to be reimbursable.
- As with most government forms, some of the fields are not clear on what is requested but it is fairly straightforward. You can fill out the forms online and download them to your computer and then upload them to the SBA site.
A Disaster Assistance loan officer may request you to fill out the following additional forms:
Additional Filing Requirements Economic Injury Disaster Loan (EIDL)
Request for Transcript of Tax Return
Schedule of Liabilities (Notes, Mortgages and Accounts Payable)
SBA Paycheck Protection Program Loan (PPP)
Key Points of a PPP Loan
Qualifying businesses include:
- Businesses with up to 500 employees or which meet the applicable size standard for the industry as provided by SBA’s existing regulations.
- Businesses in the accommodation and food services industries with more than one physical location but no more than 500 employees at each location.
- Nonprofit organizations.
- Eligible independent contractors and sole proprietors.
Loans will be available through SBA and Treasury approved banks, credit unions, and some nonbank lenders.
Aspects of the loan:
- Borrowers can borrow 2.5 times their monthly payroll expenses, up to $10 million.
- Annual interest rate: Cannot exceed 4%
- Applicable uses for the loan proceeds include: payroll; rent; utilities; mortgage payments and other debt obligations.
- In some circumstances, portions of this loan can be forgiven based on maintaining a certain percentage of payroll.
- There are calculations to compute the forgiveness part so don’t assume any or all of it will be forgiven.
Question: The amount of forgiveness of a PPP loan depends on the borrower’s payroll costs over an eight-week period; when does that eight-week period begin?
Answer: The eight-week period begins on the date the lender makes the first disbursement of the PPP loan to the borrower. The lender must make the first disbursement of the loan no later than ten calendar days from the date of loan approval.
Updated 5:00pm – 4/8/20
This is a summary of this PPL loan and the calculations for forgiveness. CORONAVIRUS EMERGENCY LOANS – Small Business Guide and Checklist prepared by the U.S. Chamber of Commerce
PAYCHECK PROTECTION PROGRAM LOANS
Frequently Asked Questions (FAQs)
PPP Loan Forms:
These forms and information are possibly some of the information you will need to be prepared for your banker. Forms subject to change with additional guidance from SBA.
Small Business Paycheck Protection Program Overview
Paycheck Protection Program (PPP) Information Sheet: Borrowers
McMill CPAs & Advisors will make every attempt to provide our clients with the most up to date information. However, the information contained on this page can update hourly, and there may be instances where it is out of date. If you have questions on any of the items please contact your advisor.