Update on the State of the PPP
Oct 01, 2020
As the pace of changes to the Paycheck Protection Program (PPP) has relaxed, many are wondering about the current status and potential changes yet to come. We wanted to share with you some of the discussions occurring at the federal level about possible next steps. While there appears to be strong bipartisan support for these additional actions in concept, the specific details will likely change throughout the process.
What is the status of PPP and forgiveness?
- $525 billion was lent to 5.2 million businesses.
- Most lenders are now accepting forgiveness applications.
- As of 9/24, the SBA had received 96k forgiveness applications but had not completed the processing of any of them.
What is the latest guidance related to PPP forgiveness?
On 8/24, additional guidance was released regarding the following:
- C or S Corporation owners with less than 5% ownership are not subject to the compensation caps
- Expenses attributable to a tenant are not eligible for forgiveness.
- Rent payments to a related party are capped at the amount of mortgage interest owed on the property.
- Related party mortgage interest is not eligible for forgiveness.
What changes might still be coming to the PPP?
- There continues to be bipartisan support in Congress for blanket forgiveness of “small” loans – typically discussed as $150,000. The exact terms and dollar amount still need to be negotiated.
- There continues to be some bipartisan support for tax-deductibility of expenses related to forgiveness.
- Congress has been slow to act, and it is likely we will not see movement on these items until after the election.
Will there be a second PPP?
Maybe. Again, this is a topic that Congress continues to discuss. Eligible businesses would likely be much more targeted in this round. We are likely to see a lower cap on the size of business (as measured by the number of employees) and it is likely that businesses will need to demonstrate they have been significantly negatively impacted.
What should I be doing now?
- Continue to monitor our WVC COVID-19 Resource Center.
- Calculate your loan forgiveness amount using a tool such as our forgiveness calculator.
- Understand your lender’s process and timeline for forgiveness applications.
- In most cases, it makes sense to sit tight and wait for the final changes to work their way through Congress. Your forgiveness application is due 10 months after the end of your Covered Period, so you have time.
- Reach out to your WVC Advisor or our WVC PPP Loan Task Force leader, Kate Matz to discuss the above and plan for your specific situation.
Connect with the author:
Kate Matz, CPA, CEPA, CVGA, CGMA
Value Growth Practice Leader, William Vaughan Company
kate.matz@wvco.com | 419.891.1040
Categories: COVID-19, Other Resources
Processing Delays Within the IRS Generates Balance Due Tax Notices
Aug 28, 2020
The Internal Revenue Service and State tax departments have experienced delays in tax return processing due to the COVID-19 pandemic. A current delay in the processing of payments received is affecting both Individual and Trust income tax filings. Taxpayers across the country have received tax notices from both the IRS and State tax departments that are citing tax amounts due with penalties and interest tacked on even though the taxpayers timely paid the tax amount due with their filings. Situations have occurred where the payment due was electronically withdrawn or check cashed, but the payment has not been applied to the account appropriately. Other situations have occurred that the payment check was received by the taxing agency but not yet cashed. Either way – the tax payments being applied to these accounts have a definite lag time. The lag time, however, was not stopping the tax departments from sending out balance due notices.
On August 21, the IRS posted an update on their website about these notices and that they are suspending future mailings until they have caught up on processing the mail and payments they have received. In addition, they will be providing penalty relief for any dishonored checked that they’ve received from March 1 to July 15 due to the processing delays. While the policy to suspend these future mailing has been put in place, there could still be mailings that were sent out prior to this policy that are still moving through the USPS system.
What Should You Do if You Received One of These Notices?
- Let your tax preparer know if you’ve received one of these notices so they are aware of the situation.
- Make sure you have documentation of the payment that you made. It should equal the balance the notice is showing due before penalties and interest. If this is not the case, your tax preparer can assist with looking into the variance for you.
- If you sent the payment via certified with return receipt, hold onto the receipt records.
- Finally, closer to the due date of the notice unless the IRS has released additional guidance, either the tax preparer with a valid Tax Power of Attorney or the taxpayer should call the tax agency to confirm the payment is finally applied to the account and nothing further is due.
The tax departments are currently inundated with phone calls and their call centers are not able to keep up with the volume. Our advice would be to give time for them to apply the payments and for the departments to clear up their processing delay.
Categories: COVID-19, Other Resources
PPP Application Deadline Extended to August 8
Jul 06, 2020
On Saturday, July 4, President Trump signed legislation extending the application deadline for the Paycheck Protection Program (PPP) enacted in the weeks following the economic shutdown as a result of COVID-19.
The original deadline to apply was Tuesday, June 30, but with more than $130 billion still available in the fund, both houses of Congress approved the extension unanimously earlier in the week. With the President’s signature Saturday, businesses will now have until August 8 to apply for the assistance.
The PPP provides loans to small businesses to be used for certain payroll and non-payroll costs they may otherwise have difficulty funding due to the coronavirus pandemic. Such loans may be forgiven in part or in whole.
You can apply for your PPP loan through any of the 1,800 participating SBA approved 7(a) lenders or through any participating federally insured depository institution, federally insured credit union, and Farm Credit System institution. For more information on the federally funded program, visit the SBA website or connect with your William Vaughan Company advisor for additional guidance and recommendations based on your specific situation.
Categories: COVID-19, Other Resources
Latest SBA Guidance & Other Updates
Jun 18, 2020
Interim SBA Ruling
On Tuesday, June 16 the SBA filed its 19th Interim Final Rule (IFR) focused on revisions made from Paycheck Protection Program Flexibility Act (Flexibility Act) signed into law on June 5th.
Notable provisions in the unpublished document include:
- The newest guidance shows how to calculate owner compensation. For Borrowers using a 24-week Covered Period, this amount is capped at $20,833 (the 2.5-month equivalent of $100,000 per year) for each individual or the 2.5-month equivalent of their applicable compensation in 2019, whichever is lower. For Borrowers using an 8-week Covered Period, this amount is capped at $15,385 (the eight-week equivalent of $100,000 per year) for each individual or the eight-week equivalent of their applicable compensation in 2019, whichever is lower. While the guidance is somewhat unclear, this cap appears to apply to owners of all entity types, and at any level of ownership.
- The payroll requirement was reduced from 75% to 60%.
- Lastly, the loan forgiveness amounts for non-payroll expenses have also been extended to 24 weeks, making it much easier to meet loan forgiveness thresholds.
EZ Version Loan Application
In addition, the SBA also released two new applications: a revised full-loan application and the new EZ Forgiveness Application. The agency says the EZ version “requires fewer calculations and less documentation” and reduces the burden for smaller recipients, like self-employed individuals and sole proprietors. This new EZ application applies to borrowers that:
- Are self-employed and have no employees; OR
- Did not reduce the salaries or wages of their employees by more than 25%, and did not reduce the number or hours of their employees; OR
- Experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25%”.
Economic Injury Disaster Loan (EIDL) Re-opened
The SBA recently re-opened the Economic Injury Disaster Loan (EIDL) and EIDL Advance program portal to all eligible applicants experiencing economic impacts due to COVID-19. Businesses with 500 or fewer employees are generally eligible. The loan process is streamlined and is completed online directly through the SBA. Loan amounts are determined by the SBA and can be up to $2 million with repayment terms up to 30 years and an interest rate of 3.75% (2.75% for non-profits). Additionally, you can request an advance on the loan, which will be awarded as $1,000 per employee, up to a total of $10,000.
As always, should you have questions or concerns about your specific situation, please contact your William Vaughan Company advisor. Additional resources can be found on our WVC COVID-19 Resource Center. Finally, stay tuned for an updated version of our WVC PPP Loan Forgiveness calculator which will reflect this updated guidance.
Categories: COVID-19, Other Resources
President Trump Signs Much Needed PPP Flexibility Bill Into Law
Jun 05, 2020
Today, President Trump signed the Paycheck Protection Program Flexibility Act (the PPP Flexibility Act). This Act provides much-needed relief by relaxing the stringent guidelines for businesses to receive loan forgiveness under the Paycheck Protection Program.
Key provisions include:
- The original 8-week period in which borrowers needed to spend the PPP Loan proceeds received can now be extended to 24 weeks. This extension provides additional time and opportunity for businesses to make the qualified expenditures necessary to have the loan proceeds forgiven. However, it is advisable if all loan proceeds have already been spent, businesses elect to apply for the original 8-week period (which is permissible) and expedite their forgiveness assuming the full-time equivalents (FTEs) have been restored.
- Previous regulations required a minimum of 75% of the loan proceeds forgiven must be spent on payroll expenses, health insurance, and/or retirement plans. If not met, loan recipients would forfeit a portion of their forgiveness. Thankfully, that hurdle has been dramatically reduced to 60% which allows businesses to now allocate up to 40% of the potentially forgivable loan proceeds to rent, utilities, and interest on secured debt. However, it does appear upon reading this is a “cliff rule”. Meaning if you only spend 59% on payroll, potentially ZERO dollars will be forgiven.
- Before H.R. 7010, PPP loan forgiveness rules indicated the amount forgiven would be reduced proportionately to the reduction of a recipient’s workforce during the original 8-week window if that same number of employees were not brought back by June 30th. According to updated legislation, this window has been modified to use the new 24-week window mentioned above with the amnesty rehire date being pushed back to December 31, 2020. For example, take an employer with 80 employees pre-pandemic who reduced its workforce to 40 employees during the 24 weeks. Assuming they spend the loan proceeds on qualified expenses during said 24 weeks, the employer will receive complete forgiveness so long as they’ve brought the workforce back to 80 by December 31st.
- Whether due to government restrictions still in place, a lack of qualified individuals, or even individuals choosing not to return to work as a result of the current federal unemployment subsidy, an exception to the rehire rule has been enacted. To qualify for this exception, the borrower must establish they have been unable to restore previous FTE levels due to one or more of the aforementioned scenarios. Unfortunately, this exception is still largely a gray area and we are hopeful that additional guidance is imminent aucasinosonline.com.
- The repayment period for loan proceeds still owed after reductions for forgiveness and EIDL grants (up to $10,000) has been extended from 2 years to 5 years with the interest rate remaining unchanged at 1%. Additionally, payments on the amounts still owed can be deferred up to the date on which the SBA makes the loan forgiveness determination.
Many loan recipients were hopeful for some clarification and additional guidance as it pertains to the deductibility of expenses for which the PPP loan proceeds were used. However, this still remains unanswered.
William Vaughan Company continues to keep a careful watch on additional legislation and is committed to sharing with you our insights and perspectives as regulations develop aucasinosonline.com/nz. To ensure you are staying up-to-date, we encourage you to sign-up for our WVC Insights emails here.
Categories: COVID-19, Other Resources