PPP FORGIVENESS KEY TAKEAWAYS & STRATEGIES AGENDA PPP Loan - - PowerPoint PPT Presentation

PPP FORGIVENESS

KEY TAKEAWAYS & STRATEGIES

AGENDA

• PPP Loan Overview
• Forgiveness of Payroll Costs
• Forgiveness of Non-Payroll Costs
• Recordkeeping
• Repayment Terms
• Tax Considerations

https://home.treasury.gov/policy-issues/cares/assistance-for-small-businesses

PPP LOAN OVERVIEW

• Maximum Loan – 2.5 Times Monthly Average Payroll Cost
• Loan Forgiveness – 2 Months of Eligible Costs
• Payroll Cost
• Rent
• Utilities
• Mortgage Interest
• Loan Repayment

PPP LOAN FORGIVENESS OVERVIEW

• Eligible Costs are Forgivable
• Payroll Costs Must Represent at Least 75% of Forgiven Amount
• Non-Payroll Can Represent Up to 25% (Rent, Utilities, Interest)
• Reduction in Forgiveness for Failure to Maintain FTE’s
• Reduction in Forgiveness for Failure to Maintain Pay Rates
• Safe Harbor Available to Eliminate Reduction in Forgiveness

Plan For the Worst…Hope for the Best

PPP LOAN FORGIVENESS DETAILS

• Payroll Cost Calculations
• Covered Period
• Alternate Covered Period
• Payroll Not to Exceed $15,385
• Back Pay is an Option
• Payroll Paid or Incurred
• This Should Align with the Covered Period Selected
• NEW - Certification for Owner’s Compensation
• Clarity Needed for Employment of Family Members

PPP LOAN FORGIVENESS DETAILS

• Reduction for FTEs
• Reduction in Forgiveness Proportionate to Reduction in FTEs
• Example
• Definition of FTE
• Weekly Hours Divided by 40, Rounded to nearest .1 (NO OT HOURS)
• Option to Use .5 for Any Employee Working Less Than 40 Hours
• Exceptions FTE Equivalent Reduction
• Offer to Return
• Termination for Cause
• Resignations
• Request for Reduced Hours

PPP LOAN FORGIVENESS DETAILS

• Reduction for Payroll Rate
• Reduction in Forgiveness for the Amount an Employee’s Pay Rate Was Reduced
• Only Reductions of More than 25%
• Example
• Not Expecting to See Much of This – mostly anti-abuse provision

PPP LOAN FORGIVENESS DETAILS

• Safe Harbor for Reduction
• If Borrower Reduced FTEs Between 2/15/20 and 4/26/20, and
• If Borrower Restored the FTEs on or Before 6/30/20
• Forgiveness Reduction Calculations Will Not Apply
• Clarity Needed to Determine if Dates Prior to 6/30/20 Will Qualify (i.e. Forgiveness App)
• Clarity Needed to Determine When Reductions can Resume (i.e. 7/1/20?)

PPP LOAN FORGIVENESS DETAILS

• Other Eligible Payroll Costs
• Employer Paid Health Insurance
• Employer Paid Retirement Contributions
• Clarity Needed for 2019 Profit Sharing Contributions
• Employer Paid State Unemployment and Disability
• Expected to Correspond to Payroll and Covered Period Selection
• Incurred but Paid by Normal Due Date

Non-Payroll Costs

• Rent or Lease in Existence Prior to 2/15/20
• Real or Personal Property
• Clarity Needed to Determine if Vehicle or Equipment Leases are Eligible
• Interest on Mortgages in Existence Prior to 2/15/20
• Real or Personal Property
• Clarity Needed to Determine if Loans Collateralized by Vehicles or Equipment are

Eligible

• Utilities on Accounts in Existence Prior to 2/15/20
• Electricity, Gas, Water, Transportation, Telephone, or Internet Access
• Transportation Utility Fees – Defined by US Dept of Transportation

Record Keeping to Submit

• Payroll
• Bank Statements, Third Party Payroll Reports, Tax Forms, Receipts, Cancelled

Checks, or Statements

• FTE
• Documentation of FTEs on Payroll Per Month for both “Choice” and “Covered”

Periods

• Non-Payroll
• Lender Amortization Schedules, Lease Agreements, Invoices, Receipts, Cancelled

Checks, or Statements from both February 2020 and for the “Covered” Period

Record Keeping to Retain

• Employee Documents
• Each Employee and Related Calculations for Salary or Wage Reductions
• Each Employee That Earns More than $100,000 and Excess Wage Calculation
• Offers, Refusals, Firings for Cause, Voluntary Resignations, and Reductions
• FTE Documentation
• Calculation of Safe Harbor

Repayment of Unforgiven Loan

• The Unforgiven Portion of the Loan Will be Repaid
• In 2 Years from Receipt of Loan Proceeds
• At 1% Interest Per Annum
• Interest Payments will be Made Monthly Beginning 6 Months After Receipt of

Proceeds

Tax Considerations

• Forgiven Amount Not Treated as “Forgiveness of Debt Income”
• Pursuant to IRS Notice, Expenses Paid with Forgiven Loan are Not

Deductible

• Effectively the Same as Being Taxable
• Misc Note: Ask Your Bank to Waive Loan Covenants Now

Questions?

THANK YOU!

Melinda D’Antuono, CPA, MBA Douglas C. Smith, CPA, CVA mdantuono@axiomcpas.com dsmith@axiomcpas.com Axiom CPAs, LLC 103 Carnegie Center Drive Suite 300 Princeton, NJ 08540 609-955-3427