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