Paycheck Protection Program (PPP) Updates
The House, Senate and President signed the PPP update bill into law. Here are the changes:
🔸Amount of loan needed to be spent on payroll moves from 75% to 60%
🔸Amount of time to spend the funds moved from 8 weeks to 24 weeks (or end of 2020)
🔸Pushes back June 30th deadline to rehire workers to December 31st
🔸Repayment term of unforgiven amount moves from 2 years to 5 years
A few more updates we talk about in this weeks Small Business Tax Savings Podcast:
🆓 Free Tool for Forgiveness Application: https://lnkd.in/shrtslug
💰Funding is still available if you have not already received PPP funds
PPP Loan Certification Clarification, Taxability and Forgiveness Application
- PPP Certification Clarification: Originally when applying you certified that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant”. The SBA and Department of Treasury have determined that there will be a safe harbor regarding that certification.
The safe harbor is: Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.
- PPP Loan Taxability: Per IRS guidance, the PPP loan amount forgiven itself is not taxable however the corresponding expenses you used the forgiven funds for, you cannot claim as tax deductions.
- Forgiveness Application: This has finally been released while still some questions remain but here are some things we do know:
-Time Period: You can choose between 8 weeks from the day the loan hit your account or 8 weeks that begins on your first payroll date following the disbursement.
-Payroll Reduction Exemption: There has been new guidance that your forgiveness amount will not be reduced (as it relates to employee retention) if you have reductions related to: Individuals you have made a written offer to rehire but the employee declined, employees whose employment was terminated for cause, or employees who voluntarily resigned.
-Owner’s Cap: The forgiveness amounts paid to owners eligible for forgiveness is capped at the lower of $15,385 (which is the $100k annualized) or the 8 week equivalent of the owners compensation in 2019, again whichever is lower.
PPP Forgiveness Information
PERIOD: 8 Weeks (Starting the date of first disbursement of PPP funds)
WHAT IS FORGIVABLE?
- Payroll Costs (Capped at $100k of annualized basis per employee) including: gross wages, health care benefits, retirement benefits, state and local taxes but NOT employer portion of FICA or FUTA
- Interest on Mortgages Signed Before 2/15/20
- Interest on Debt Incurred Before 2/15/20
- Rent for Lease Agreements Signed Before 2/15/20
- Utility Payments
- Payroll costs must make up 75% of forgiven amount (Ex: $100k PPP Loan, at least $75k payroll)
- Forgiveness amount proportionately reduced by decease in head count or employee wages unless employer reverses that prior to June 30, 2020
- Keep documentation of expenses (payroll reports, tax filings, receipts, etc) to backup the items for proof of forgiveness
Also important to note that things are ever changing so this is what we know now but we expect more details to come from the government regarding the topic of forgiveness.