I feel like the acronym “PPP” is a hot topic right now, and it should be for many business owners. Whether you have applied for funds, received funds, or are still debating if you need them, it is a big deal to business owners during this Corona-Craziness! To some business owners it is the difference between keeping their doors open and shutting down for good. While phase 1 of this program is applying and trying to get approved for the funds, phase 2 is going to be the usage and forgiveness of the loan. Here are some tips and thoughts on how to ensure you can get the funds properly forgiven within the guidelines.
Forgiveness Period
The 8-week timeline to track forgiven expenses starts the day the funds are deposited into your bank. Banks have up to 10 days to fund the loan from when it is approved. So, make sure that all expenses you are wanting forgiven happen within the 8 weeks from when you receive the funds. Be sure to cut your last paychecks and pay bills by the last day of the 8-week period. At the moment it does not look like pre-payments and qualifying expenses incurred before or after the period will be allowed to count towards forgiveness.
Have a Separate Account
One piece of advice that many people are recommending is to have a separate account that you put the PPP funds into and then pay all of your qualifying expenses out of that account. You don’t have to set your payroll up to come straight out of this account (which can be tough and time consuming on your payroll provider’s part) but instead transfer the exact funds for your payroll from this account to your normal account to pay your qualifying payroll expenses.
Keep Documents
As a tax advisor, I highly recommend keeping documentation for all expenses and income in your business. It is even more important now to keep track of all of your qualifying expenses to help aid in the forgiveness process. The more documentation you have the better. Be sure to keep all payroll records, invoices, receipts, copies of checks etc. to submit for full loan forgiveness at the end of the period.
Self Employment
For my self-employed people with no employee’s it appears that the guidelines for forgiveness on your PPP loan will be 8/52 of the 2019 Schedule C income. One of the biggest questions the SBA has yet to clear up for us is if that is a cut and dry number, or if you have qualifying rent, utilities, mortgage loans, etc. can you still get that forgiven as part of your 25% of the loan? We don’t know the answer at the moment, but you can plan on at minimum getting 8/52 forgiven for sure, and it appears this will be an easier streamlined process for all involved.
It is very hard to cover all of the aspects of the PPP Forgiveness for everyone. There are so many variables and factors that are different for everyone, we’ve tried to give a general educational overview to help everyone get started. It doesn’t help that there is still a lot of questions to be answered from the SBA and IRS. As one article we’ve seen said “the SBA has done a fantastic job of answering questions in a way that prompt more questions”. For answers geared towards your specific situation we would be more than happy to help out!
It’s All Good!
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