Are you tired of talking and thinking about the PPP? Because I'm tired of talking and thinking about the PPP.
That said — this program has been a lifesaver for a variety of my Minnesota clients, and it has provided a great shot in the arm for others.
And, well … we finally have definitive guidance FROM THE SBA about forgiveness.
But first there's this:
GREAT news for those who have smaller PPP loans (<$2MM):
I wrote last week about whether or not a business MUST pay back a PPP loan that they received if they have somehow survived well, and aren't in danger of going out of business.
My advice turned out to be prescient because the the Treasury and SBA just released a new FAQ #46 that states:
"[a]ny 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."
Essentially, if your PPP loan is UNDER $2MM, then you will not be forced to re-examine this reality, and your initial certification of "economic uncertainty" will be considered sufficient.
There are some warnings for those who may have gotten the loan and did not need it AND it is over $2MM — if that's you, let's talk.
But this should be a sigh of relief for many: essentially, if you are under $2MM in loan amount, the SBA (likely) will not audit your loan.
YOU STILL MUST COMPLY WITH FORGIVENESS REQUIREMENTS. But that's between you and your lender. And we can help with that.
Speaking of forgiveness, the new guidance from the SBA includes instructions and an application.
There are still some issues with it that the AICPA is pressing to get resolved (specifically regarding the 8-week period during which these expenses need to be spent), but to rehash, the forgivable costs are:
Payroll costs, which are:
- Salary, wages, commissions or similar
- Cash tips or the equivalent
- Payment for leave
- Allowance for separation or dismissal
- Housing allowance or stipend
- Payments for group health care benefits, including group health care coverage
- Payment of any retirement benefits
- Payment of state and local taxes assessed on the compensation of employees
Mortgage interest on real or personal property (owned by the Minnesota business) or rent under a leasing agreement for agreements in effect prior to 2/15/2020.
Utilities, which includes payment for expenses such as electricity, gas, water, transportation, telephone, or internet access. Service must have been established prior to 2/15/2020.
Any EIDL to be refinanced (the initial advance will also be wrapped into the PPP loan).
A few things on the payroll costs:
1) 75% of eligible costs are to be used for payroll. If you spend less than 75%, the forgiveness is reduced.
2) Only the equivalent of the first $100K in annualized payroll costs can be counted (that is, it cannot exceed $15,385).
3) This doesn't include payments to independent contractors.
There are other, even more picayune payroll rules, but those are the biggies.
There is a two-page application for forgiveness that Minnesota businesses will submit to their lender, which includes a Schedule A along with a Worksheet for Schedule A, and each Schedule/Worksheet has a set of instructions. It looks a bit daunting, but I expected no less.
We can help with all of this. Let us know … you know where to find us.
The Business Advisors
Business Advisors Inc
I'm grateful for our chance to serve you and your business — and we are dedicated to its success, in every season.
Feel free to forward this article to a business associate or client you know who could benefit from our assistance. While these particular articles usually relate to business strategy, as you know, we specialize in tax preparation and planning for families and business owners.