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New Law Changes Make it Easier to Find Forgiveness

The Paycheck Protection Program Flexibly Act of 2020 (“Flexibility Act”) was signed into law last Friday, June 5th, 2020. Revisions to the program address issues taxpayers encountered while trying to take advantage of the promised loan forgiveness. Before outlining the changes, however, we’ll make quick note of one other item.

DON’T THROW AWAY YOUR STIMULUS REBATE!

Some stimulus rebates (officially known as economic impact payments) are being sent as debit cards. Some taxpayers, however, have mistaken them for junk mail and thrown them out. According the IRS website, debit card payments come in a plain envelope from “Money Network Cardholder Services.” No wonder taxpayers are confused.

https://www.irs.gov/coronavirus/economic-impact-payment-information-center

KEY CHANGES TO THE PAYCHECK PROTECTION PROGRAM (PPP)

Maximizing loan forgiveness is now much easier.

  1. Borrowers now have 24 weeks to spend loan proceeds, up from 8 weeks.
  2. The amount that must be spent on payroll costs is reduced to 60%.
  3. The date by which your workforce must be restored to avoid reductions in the amount forgiven has been extended to December 31, 2020.
  4. New exemptions to the re-hire requirement have been added.
  5. Restrictions on taking advantage of the CARES Act deferral of employer social security payments have been removed.

Of course, the devil is often in the details. We do not yet know how these changes will be interpreted and implemented by the SBA.

IF YOU HAVE STILL HAVEN’T BEEN ABLE TO GET A PPP LOAN, DO NOT GIVE UP!

PPP funds are still out there, but you will need to be persistent. Some clients have had success with lesser known lenders such as Funding Circle and Kabbage. Paychex and Gusto have lender information you can access through their websites. QuickBooks payroll clients can apply for loans through QuickBooks capital.

For self-employed individuals and partners, the lenders will base your loan on your 2019 schedule C or 2019 schedule K-1 income. Current SBA rules are that the amount forgiven for the income related to your schedule C or K-1 earnings will be exactly 8/52 times the amount of 2019 income shown, but not more than $15,384. We do not know if the SBA will modify the rule in light of the changes for other borrowers in the Flexibility Act.

PPP LOAN FORGIVENESS APPLICATIONS & WORKBOOKS

Remember that you must separately apply for your PPP loan to be forgiven. The SBA has released a loan forgiveness application, but it has not yet been updated for changes made by the Flexibility Act. Watch for updates at the SBA website.

https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program#section-header-8

The AICPA offers MS Excel based loan forgiveness workbooks on its website. These currently are dated June 3 and have not yet been updated to reflect the changes in the Flexibility Act. We do not know if updates are planned.

https://future.aicpa.org/topic/firm-practice-management/covid-19-small-firms

Two East Coast regional accounting firms collaborated to create an extensive MS Excel based PPP loan forgiveness workbook that was available to the public. They have temporarily pulled the workbooks from their website to allow for the revisions necessitated by the Flexibility Act. If you are interested in the workbook, you can watch their website for the update.

https://www.cpabr.com/covid_19_news/ppp-loan-forgiveness-workbook/

IRS FAQs

The IRS continues to expand guidance on various COVID-19 relief benefits by posting new FAQs. An index is available at the IRS website.

https://www.irs.gov/coronavirus/coronavirus-and-economic-impact-payments-resources-and-guidance

REMINDER: DEFERRAL OF EMPLOYER SOCIAL SECURITY

Defer paying the employer half of social security taxes.

https://www.irs.gov/newsroom/deferral-of-employment-tax-deposits-and-payments-through-december-31-2020

Lawrence S. Smith, CPA
1527 5th Avenue, San Rafael, CA   94901
82 West Portal Avenue, San Francisco, CA  94127
Tel 415-458-5100
Fax 415-458-5105
smith@smithcpas.com
DISCLAIMER 

While we hope the contents of these alerts are helpful to our clients, these alerts are not intended to be advice upon which you should rely. Tax advice contained in these alerts is not intended to be used for, and cannot be used for, the purpose of avoiding penalties under the US federal tax laws. Inclusion of topics outside the scope of our normal service areas is intended to serve solely as a general starting point and should not replace consultation with experts in the related fields. 

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