.

PPP loan forgiveness rules have changed since the beginning of the program. This adds confusion to an already confusing process. Read below and join the Simple Profit Facebook Group for PPP loan forgiveness to ask questions and get support for this process. 

The program has been extended to August 8, 2020. Do not wait until the week of the deadline to apply. If your business has been impacted by COVID-19, you were in business by February 15, 2020 and had earnings or owners salary in 2019, you may qualify. 

PPP LOAN FORGIVENESS FB GROUP

NEW FAQ 8/4/2020


TREASURY GUIDANCE UPDATE

On 8/4/2020 the Treasury issued new guidance on PPP loan forgivness. We still await congress passing blanket forgivness for borrowers which is being discussed by has not passed the House or the Senate.

Some FAQ are summarized below. You can find the full FAQ on this link here: FAQ on Loan Forgiveness

  • Borrowers have 10 months to apply for forgivness. Interest is only due to paid on unforgiven amounts. (FAQ page 1-2).
  • All PPP loan funds must be used by December 31, 2020. No covered period can extend beyond this date even if 24 weeks would extend into 2021. (FAQ page 2-3)
  • Forgivable payroll costs include all forms of cash compensation including tips, commissions, bonuses and hazard pay (FAQ page 3).
  • Health insurance costs and retirement costs cannot include any amounts paid by the employee and the payments must relate to the covered period (8 weeks or 24 weeks). The payments cannot be forgiven if they relate to other periods before or after the covered period. (FAQ page 3-4). 
  • If an owner has multiple businesses and multiple PPP loans, owners compensation is capped at $100,000 in total across all businesses. (FAQ Page 4). 
  • S-Corp owners can include premiums for group health insurance as part of their W2 compensation. The total forgivable pay for owners remains 2.5 months of 2019 pay in total, including health benefits. (FAQ page 5)
  • Self-employed owners cannot include the cost of health insurance premiums or retirement benefits in the forgivness amount, but just like S-Corp owners above the total forgivness for each owner is 2.5 months of 2019 earnings. (FAQ page 5)
  • Self-employed owners who did not submit a Schedule C with their PPP loan application must submit one with their forgiveness application. (FAQ page 5)
  • Businesses can renew their leases as long as the lease was in place before February 15, 2020 and continue using PPP loan funds to pay the rent costs. (FAQ page 7)
  • The PPP loan rules said transportation costs could be paid as utility expense. The Treasury intends this to mean transportion fees assessed by a utility service. (FAQ page 7)

PPP LOAN UPDATE


SUMMARY OF NEW RULES

Congress has passed updates to the PPP loan which include the following:

  • 24 weeks to use the PPP loan funds instead of the previous 8 weeks (known as the "covered period"). You can choose 8 weeks if the loan was issued before June 5, 2020. Choosing 24 weeks often means having more forgiven.
  • If you choose 24 weeks you do not have to wait the full 24 weeks to ask for forgivness. You can apply once the funds are spent, if your bank is accepting applications.
  • You have to apply for forgiveness within 10 months after your covered period ends. 
  • 60% or more must be for payroll costs (see what can I use the PPP loan for? below). This is a change from 75% down to 60%. This means you can use up to 40% for office rent, business utilities and building mortgage interest.
  • Unforgiven amounts can be repaid over 5 years instead of only 2 years. If the loan was issued before June 5, 2020 the lender has to agree to 5 years. June 5th or later, the term is automatically 5 years.
  • Employers trying rehire employees have until December 31, 2020 to do so rather than the previous deadline of June 30, 2020. 
  • If employers have a decrease in employees, they can avoid having forgiveness limited by showing they 1) tried to rehire employees and the employees refused or 2) could not replacement workers.
  • If using a 24 week covered period, employers will need to certify their employees were not or will not be paid less than 75% of Q1 2020 earnings for the entire 24 weeks. 
  • Employers may delay filing of payroll taxes. Be careful with this one, as it can be difficult to catch up later. If you can pay your payroll taxes, consider doing so.
  • There is a new EZ forgiveness application which is much more logical and simple. Note: few banks are accepting applications because the rules keep changing and they need time to establish a forgivness process. 

 

What can I use the PPP loan for?


The PPP loan can only be used for four expense categories: payroll costs, business office rent, mortgage interest and utilities. 60% or more must be spent on the following (down from 75% previously):

  • Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee);
  • Employee benefits including costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit; 
  • State and local taxes assessed on compensation; and
  • For a sole proprietors, LLC owners or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee.

40% or less (changed from 25%) of the PPP loan can be used for:

  • Rent, under lease agreements in force before February 15, 2020 (note this does not include home office or personal rent expense); 
  • Interest on mortgage obligations, incurred before February 15, 2020;
  • Utilities, for which service began before February 15, 2020. Utilities include electricity, gas, water, transportation, telephone, and internet access.

Source: PPP Borrower Information Sheet updated for new PPP loan changes.

BEWARE OF SCAMS

There are many scams out there related to the coronavirus, especially related to financial relief. Here are resources to help you avoid scams:

Bankrate: 3 types of coronavirus scams to watch out for
Federal Trade Commission (FTC): Coronavirus: Scammers Follow the Headlines
Yahoo: Coronavirus: 6 Scams to Watch Our For


DO NOT CLICK ON EMAIL LINKS! If you get an email about relief money go to the official government or charity website, verify the phone number, and avoid using any links or numbers in the email itself that may contain viruses or take you to a place to enter your personal information so it can be stolen. Beware many scams have email addresses that look official but are not. Many web pages will appear official and are not. Check and verify.

DISCLAIMER: Information provided here is for general education only. Please consult as needed with your tax professional, financial planner, banker and attorney to make the best decisions for your business and personal circumstances.

SEND ME COVID-19 UPDATES

I am not satisfied with how this relief process is being handled. What can I do?

Contact your Congressperson! You can call, email, mail or tweet them. Let them know if you are a struggling business and how you are impacted. 

You can use a program called Resistbot to quickly send messages to elected officials by text. Note, these messages could be viewed as spam.

Try Resistbot

You can contact your congressperson the old fashioned way. Find your U.S. senator and representative contact information below. 

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Jennie Schottmiller is a CPA. She simplifies complicated topics for small business owners and helps them make business decisions with confidence. Jennie is also a licensed family therapist and runs a private practice in Pennsylvania.

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