JohnH

I'm still trying to decipher this, especially in light of what happened to me. I received a $2,000 "Advance EIDL" a couple of weeks ago. Thereafter I applied for a PPP, and on the PPP application I reported that I had already received the $2,000 Advance EIDL. I expected the PPP to be a flat 2.5 times my average monthly payroll for 2019. But what I actually received was the 2.5 times my average payroll PLUS $2,000. Some of my clients have received their PPP now, and each of them received the exact amount of 2.5 times their average monthly payroll for 2019. Each of them had previously received their Advance EIDL. I'm the only person so far to have received the PPP in this fashion, and none of my clients do business with the bank I received my PPP from, thus I have no standard of comparison. So either my bank is doing it correctly and everyone else's bank is wrong, or..

I never thought of it as being any other way. It would be absurd to allow a tax deduction for an expense which was paid by a third party. If I volunteer to pay my client's payroll and rent, common sense would indicate they wouldn't expect to take a tax deduction for it.

Medlin's analysis is awesome. Thanks for sharing your knowledge and recommendations on this. I think I'll switch from my erratic "as cash is available" payroll frequency to a weekly payroll for the next 8 weeks.

I went through a similar thought process when applying for the PPP. I'm operating as an S Corp, so I could have easily included the SEP. But I couldn't get any clear guidance at the time so I elected to use S&W without the SEP. It lowered the amount I could borrow but I didn't want to jeopardize the entire application with a potentially insupportable entry. In retrospect I should have run with it. But now at least I have sufficient flexibility to help meet & exceed the 75% requirement.

Yes, functionally the SEP is a benefit identical to a Medical Insurance plan, and there's no question that the MIP is subject to PPP forgiveness. That's part of what makes me inclined to think the SEP contribution would be subject to PPP forgiveness.

That question definitely needs to be settled. Thanks for the heads up. The examples I've seen use the SEP as one of the permissible items to be used in the PPP loan calculation and also in the calculation of the exclusion. They even go so far as to say that the full SEP contribution counts even when the annualized compensation exceeds $100K and is capped (which doesn't apply to me, BTW ). But obviously the final answer will be based on what SBA says is correct. Definitely keeping an eye on this one. It offers some interesting & unique financial planning opportunities for a sole owner.

Your mention of the SEP IRA is an interesting angle as well. I usually fund my prior-year SEP IRA just prior to the extended filing date for the corporate tax return. Wondering if I could designate money toward the current-year SEP IRA within the 8-week window from PPP funds in May, then designate funds for the prior-year SEP IRA later in the year (late Aug or early Sept). It all goes into the same SEP IRA account, but I am able to designate the year at the time the money is transferred into the account. This might work well for a couple of my clients if it's possible to do within the constraints of the SBA rules.

I thought this article presented a very balanced, reasonable perspective on the PPP loan and how to think & act regarding under-spending (less than full loan forgiveness if it appears likely). https://www.forbes.com/sites/tomhager/2020/04/21/you-need-to-change-your-thinking-paycheck-protection-program-ppp/#4bc590e197c0

Best practice is to go to the USPS Zip Code Lookup and determine exactly the address should be formatted. Use this exact format (even if it was slightly different on the original return). I've been through this with a few clients. Believe me, it's worth the effort to check the USSPS site before entering address info on the IRS site. https://tools.usps.com/zip-code-lookup.htm?byaddress

Sometimes it's hard for a person to understand something when they think their best interests may be served by not understanding it.

Bonuses might be a good solution if there aren't any restrictions in the final qualifications. Not to work against the interests of the employees, but is it a better business practice to give away money if one would not have otherwise done so, or to spend the $ on other expenses which do not qualify for forgiveness and just allow that portion to convert to a 1% loan? (After meeting the 75% standard, of course). Presumably a business applying for the PPP is in need of cash - can't afford to spend it needlessly. This PPP presents some very unusual decision-making scenarios.

Just make sure you have him locked down with multiple disclosures so if he gets audited he can't try to point the responsibility finger back at you. You know he will.

I haven't been following much of this, but I'll just say I'll be happy with the loan forgiveness, no matter how the rest of it sorts out. Personally I think as a matter of fairness, free money would override & exclude the use of any other tax benefit regarding that particular expenditure, but maybe I'm missing something in the conversation.

Several people on an investing forum I participate in have been posting that they filed paper returns within the past few weeks, and of course nothing is happening since IRS isn't processing those returns now. So what would happen if the taxpayer e-filed a return now? Presumably it would have processed and the refund would have been issued by the time the IRS gets around to processing the paper return. Would the taxpayer be in any sort of trouble in that situation? IRS should create a check box to enable those e-flinging their return to notify them that it is intended to replace a previously paper-filed return. That would clear things up considerably, although I don't know how many taxpayers might potentially be involved.

Just coming back to support what others are reporting now. This same client went back in this morning and completed the process of entering their bank account information. They first entered the '0" and didn't check either button. That did not work. Then they chose the "Refund" button and entered "0" as the amount. It worked fine. One thing I will mention for clients who aren't able to get past the first screen. The abbreviations for "Street", "Circle", "Boulevard", "Drive" , etc must conform to the USPS guidelines. That's true even if the original return used them incorrectly. So anyone who keeps failing the initial screen should jump over to the USPS Zip code lookup and verify that the address they are entering conforms to those guidelines.

Thanks Rita. I'd say more but I'm tied up all day and am unable to type anything else.

I just now helped a client who had a zero figure. My experience was the same as Judy's - we could not get it to authenticate no matter what we tried.

Anybody care to critique my answer to a Schedule C client who left me a long voice mail this morning? ===========• Hi Xxxx: I heard your voice mail. I am tied up all day and unable to return phone calls. I don’t know anything about what you described. That info will need to come from someone more familiar with the process. The only thing I’ve done is advise a couple of corporate clients on what to enter on their applications. The corporation questions are very precise so there’s no interpretation or guessing about what to enter. It sounds as though the sole proprietor information is specific to sole proprietorships and/or allows for some interpretation. I’m avoiding SBA loan applications for the simple reason I don’t know their special rules and lingo. But I do know they have the power to make life very unpleasant for accountants who offer advice about their procedures when they haven’t been trained. So I’m declining involvement in anything having to do with these loans. Lending really isn’t tax related anyhow. Sorry I can’t be of any help on this. ============ Yes, I’ll likely lose a client over this, but at this point in my life that isn’t a consideration.

Sure enough, the Advance EIDL deposit (a whopping $1,000 per employee) showed up in my business bank account at 7:00 am today (Apr 20). It was not there on Saturday or Sunday. So this at least confirms that when SBA announced on Thursday they were out of funds, they really meant all the money was "encumbered" but not all was "disbursed". Or maybe the scenarios Medlin suggested are impacting what's happening now.

The EIDL arrived. I applied March 30 listing two employees. Nothing happened until this weekend when I was notified by my credit monitoring service of someone having run a credit inquiry on me. When I took a look, the credit inquiry had been run by the SBA. This morning (April 20) a $2,000 deposit is showing in my business bank account. So I guess the SBA decided 3 weeks was close enough to 3 days when it’s government involved. The good news for some of your clients is that the SBA funding may yet arrive even though they ran out of money last Thursday and no new legislation has yet passed.

I definitely agree with Lion regarding using a separate account. There's too much at stake not to have a solid audit trail for the transactions and proof positive that there was no commingling of funds (by any bureaucratic definition).

Just an FYI. I applied for the EIDL on May 31 and the PPP on April 14. This afternoon (Saturday, Apr 18) my credit monitoring service sent an alert that there had been an inquiry on my credit file. Turns out the inquiry was by the SBA. I've heard from several places that the SBA runs a credit check on owners before depositing EIDL funds. The purpose is not to obtain credit scores, but simply to verify that the owner exists and has submitted truthful information. So this COULD mean that although the initial funds are exhausted, there may be some residual distributions of funds which were committed but not yet disbursed. If my speculation is right, this might be an encouragement to anyone who has applied but has not yet received any funding from EIDL or PPP. (I thought about waiting until the next couple of business days to post this after I had either received a deposit or not, but decided I might forget the time line by then)

Just imagine the scenario if you turned them in and some sort of investigation ensues. They would likely tell IRS that you had been advising them on how to game the system and then turned them in out of spite when they refused to pay you an exorbitant fee. Or something along those lines.

I exceeded the number of tries because I was getting the dreaded "We Don't Know You" reply, and it locked me out for 24 hours. (But it never told me how many tries were too many). Tomorrow I'll start counting.

I saw an article yesterday that PayPal, QuickBooks, and Square are getting SBA authorization to process PPP loan applications. If they are successful and efficient, seems to me this would be a great resource for small businesses and self-employed. These companies have a vested interest in helping truly small businesses and mom & pop shops continue to operate, so they might be more responsive than big banks. Here's a link to one article: https://www.bizjournals.com/sanjose/news/2020/04/13/paypal-intuit-paycheck-protection-program.html