Terranova & Associates, LLC strives to keep our clients up to date during these unprecedented times with the fluid Government COVID - 19 tax changes that will affect you.
President Trump signed into law the Coronavirus Aide Relief and Economic Security Act, knows as CARES Act. The Loan-to-Grant SBA Loan that I have been discussing in our last emails has a name is PAYCHECK-PROTECTION-PROGRAM (PPP). Here are issues to consider:
We are now moving into the next phase of the PPP where many Banks have issued PAYCHECK-PROTECTION-PROGRAM checks, Taxpayers have projected what portion of the PPP Loan will be a Grant versus Loan, and now must prepare for Requesting Forgiveness to the SBA. To that end:
Taxpayers that have received PPP funds should start to prepare to apply for PPP Forgiveness by completing the appropriate applications. At this time the Small Business Administration has provided us with PPP Loan Forgiveness Application Form 3508EZ and 3508 that expire October 31, 2020.
Hours before the June 30, 2020 dead line to applying for PPP loans the U.S. Senate voted UNANIMOUSLY to extend the Paycheck Protection Program FIVE WEEKS. The purpose appears to be to allow Taxpayers that have not applied for the PPP to do so as there is over $120 Billion in PPP still available. Now the House of Representatives and President Trump would need to sign the Extension for it to go into effect.
ACTION TO TAKE
If you have not prepared an application for PPP funds and need assistance, please contact Terranova & Associates, LLC for assistance at 978-774-7700.
This is welcoming news to many Business Owner’s ears! There are some Business industries such as the Restaurant Industry that are looking for a longer of time for the PPP.
For those of you who have not applied for the PPP Loan, it is not too late there are still funds available. If your Business has been affected by COVID-19 you should apply immediately for the PPP. If your Bank has not assisted you with the PPP, please contact our office for assistance to a Bank that will assist you.
What to Consider when preparing your Projection:
The 8 weeks to use the funds starts when you receive the PPP funds and ends five weeks from the earlier deadline of June 30, 2020. There are a few critical tests:
1. Use of funds:
a. Min of 75% of the PPP loan is used for NET PAYROLL up to $100,000 of annual payroll per person
b. Up to 25% of the PPP Loan is used for rent and other allowed expenses
2. Employee count:
a. Compute the average number of Full Time Equivalent Employees during the 8 weeks starting with the date of the Loan.
i. There is no requirement to re-hire same employees
b. Compute the LESSER OF average number of Full Time Equivalent Employees between:
i. February 15, 2019 and June 30, 2019, OR;
ii. January 1, 2020 and February 29, 2020, OR
iii. Seasonal employers only February 15, 2019 and June 30, 2019
3. The Payroll Portion of debt forgiven will be the proration of full time equivalent employees by comparing “a” to “b” above.
4. Payroll documentation will be required to support your calculation.
5. Rent is based upon Lease agreement in place and utilities are based upon invoices during the 8 weeks after you receive the loan.
The Paycheck Protection Program is implemented by the Small Business Administration with support from the Department of the Treasury. Lenders should also visit www.sba.gov or www.coronavirus.gov for more information.
We are available for consultations regarding this and other tax matters if you need assistance, please contact us. We are excited to welcome the new clients that have retained our services!
This is our update as of this time and we will strive to keep you informed; please keep in mind this is a fluid topic and subject to change at any time.
This information should be used to strategically navigate through the months ahead. We are in the office and are happy to assist you.
Please feel free to share this with your relatives and friends and remember we are here to help our clients during this difficult time.
Thomas D. Terranova, Jr., CPA, PFS, CITP