Quick Reminder the deadline for filing and paying taxes is quickly approaching, July 15th is less than 45 days away. If you have not filed your tax return, you still have time, do not procrastinate any longer!
If you owe and have not paid, make sure you do on or before July 15th to avoid any interest and/or penalties.
Great News for Business Owners that received money for the Paycheck Protection Program (PPP). A new bill was signed into law, Paycheck Protection Program Flexibility Act (PPPFA), this bill addresses many concerns that were expressed by the small business community. Here are the changes this law makes to the original PPP program within the Cares Act:
- The loan originally required 75% of the money you received to be used just for payroll, you now can use 60% on payroll and 40% on rent, mortgage payments, utilities, and interest on loans.
- Originally you had only 8 weeks to spend the money, from the date you received it. This new law extends this to 24 weeks. This extension will make it easier to receive complete loan forgiveness since the loan amount was based on one-month of 2019 payroll multiplied by 2.5, which equals approximately 10 weeks. In addition, the PPPFA also does not require businesses to wait for 24 weeks to apply for forgiveness, but they can still do so after eight weeks if they prefer.
- You previously had until June 30 to rehire workers. The PPFA pushes back this deadline to December 31, 2020. A big issue if your business still has not fully opened!
The law has not changed how salaries are calculated towards forgiveness. The payroll calculation used in the loan application still applies to the forgivable amount. For employees that earn $100,000 or more the amount of compensation eligible for forgiveness is still $15,385 and employer owners and independent contractors are still capped at an 8-week average of their total 2019 wages (or Schedule C net profit). Hopefully, having an extra six months of expenses eligible for forgiveness will make up for any gaps and ensure 100% forgiveness of the loan.
- The intent of the PPP was to keep the same number of employees on the payroll that was used to calculate the loan. The business was required to rehire the same number of full-time employees or full-time equivalents by June 30, 2020. The only exception to this rule was if an employer could document in writing an attempt to rehire an employee who rejected this offer.
The PPPFA adds additional exceptions for a reduced head count. The law states a business can still receive forgiveness on payroll amounts if it:
- Is unable to rehire an individual who was an employee of the eligible recipient on or before February 15, 2020;
- Is able to demonstrate an inability to hire similarly qualified employees on or before December 31, 2020; or
- Is able to demonstrate an inability to return to the same level of business activity as such business was operating at prior to February 15, 2020.
Demonstrating that you are unable to rehire “similarly qualified employees” or that you are “unable to return to previous levels of business activity” could be a challenge, but that is the required justification for an exception so do your best to document your hiring efforts and how you are determining the number of employees you need to bring back through December 31, 2020.
- Originally, if the loan was not forgiven you had 2 years to repay the loan. The PPPFA extends the repayment terms, if the loan is not forgiven. You now will have five years at 1% interest to repay the loan. In addition, the first payment will be deferred for six months after the SBA makes a determination on forgiveness.
- Additionally, the PPPFA now allows borrowers to take advantage of the CARES Act provision allowing deferment of the employer’s payroll taxes for Social Security. Previously, PPP did not permit deferment of these taxes on the forgivable portion of the loan.
This new law is what business owners were asking for. Now you will be able to get more out of this program with relaxed rules. However, the SBA has expressed that they will randomly audit all loans no matter what size, and all loans over $2 million will be audited to determine if the business was eligible for the loan to begin with or if the forgiveness received was correct.
Document, document, document. Keep receipts, invoices, purchase orders, bank statements. If you are not doing any bookkeeping, you need to. If you need a professional bookkeeper, we are here to help! http://www.denisecalderon.com