Jump to content
ATX Community

PPP LOAN FORGIVENESS APPLICATION


Lee B

Recommended Posts

I just finished skimming thru the forms and instructions for the PPP Loan Forgiveness Application.

My largest client is a multi-location restaurant with 70 employees.

This will be just as time consuming as preparing their Form 1120 and they have hundreds of assets.

 Currently I have 4 clients that have received a PPP Loan and 2 more that are waiting to be finalized.

I think the absolute minimum I would charge to do one of these applications is $500 and that's for a client with 2 or 3 employees.

For larger clients this will be a lot of work. Now I know what I will be doing next month.🤔

 

 

Link to comment
Share on other sites

Despite gloom and doom, there are still billions left.  The "hint" is the loan process will be tweaked or some statements made, to try to get than amount used.  A "hint" for forgiveness is the 56 days will possibly lengthened, to accommodate businesses that have been unable to reopen yet, or to allow businesses to pick, within some parameters, their 56 day window (which would only be a very slight tweak).

I suspect some sort of "these really are" final rules are made public this week.  Many have already finishes their 56 days are are left wondering.  The usual example is a restaurant which has been unable to reopen, and has already funded.  Many were considering returning their loan today, which is something that should not happen.

Link to comment
Share on other sites

As was thought before, there is still nothing prohibiting an increase in employees or payroll expenses (over the application numbers).

Some businesses may have had a need to add payroll.  (Not suggesting no show positions for wife, kids, relatives, but real employees performing real work.)

Some businesses may need to, such as to encourage retention, add employer paid retirement or other benefits.

--

One example I was asked about is employer contributions to SEP IRA.  Typically, for this person, the amount is determined and contributed at end of year.  I can see nothing which prevents calculating an "incurred" amount, say based on an average of the last few year's annual amounts, or preventing making an actual contribution to count as a "paid" expense.  I would go with "paid", as the current forgiveness app, Sch A, used the term paid for Line 7, even though the place the Sch A figures go to are for incurred expenses and paid expenses.  Paid will be easier to document for the low level staffer at the lender bank...

With trying to use "paid" as the more desirable method, I can see many doing an out of cycle payroll on their day 56, and paying incurred costs on day 56.

Link to comment
Share on other sites

It seems the interpretation is paid OR incurred. You can count the first paid payroll in your eight-week window, even if the workdays preceded the date your PPP funded, as long as the pay date is after funding. And, you can count workdays preceding your end date, as long as they are paid by the next regularly-scheduled pay date, even if after your end date. At least, that's what they were saying yesterday in a webinar. The webinar I'll attend Friday might give new clarifications!

Link to comment
Share on other sites

Without knowing the experience and knowledge of the likely low level staffer doing the review, "paid" items will be more likely to not cause issues.  Also less documentation, compared to possibly providing time card type documentation, and some sort of documentation showing current pay rate for the incurred but unpaid time.  I believe the bank only has to do reasonable review, and is insulated from any non obvious fraud, so they have no incentive to use their best for this process.  (Same as WC field auditors, at least for me, are almost always new hires...)

If the employer is paying every week or every other week, they could (at least with the current rules) adjust their covered period for the payroll expenses, to better align with the pay periods, but that could mean some loss of covered expenses at the front end of the period (where the "paid" aspect could benefit, by including at least some data before the covered period, but paid during).

Could all end up moot, as the negotiation for more changes finishes up.  Many expect more than 56 days to be allowed, and possibly more leeway in setting the covered period.

Link to comment
Share on other sites

Copied from the Journal of Accountancy:

AICPA Says Treasury and SBA PPP Loan Forgiveness Application Leaves Many Questions

The forgiveness application form does help address some administrative items such as providing additional clarity around “costs incurred but not paid” during the covered period, which is aligned with a recommendation by the AICPA.

May 19th, 2020

The Treasury Department and Small Business Administration have released a loan forgiveness application form for the CARES Act’s Paycheck Protection Program (PPP), which had been urgently sought by CPA firms and their small business clients in recent weeks. The document and related instructions partially address some outstanding issues but leave others unaddressed and, more importantly, still do not provide enough flexibility for those who receive funds, according to the American Institute of CPAs.

The forgiveness application form does help address some administrative items such as providing additional clarity around “costs incurred but not paid” during the covered period, which is aligned with a recommendation by the AICPA. However, major issues remain. In particular, small businesses need flexibility on when the 8-week period should start or need to have the covered period extended to more than 8 weeks.

“It’s clear the application form and instructions provided yesterday are not enough,” said Erik Asgeirsson, president and CEO of CPA.com, the AICPA’s business and technology arm. “Some of the most pressing issues are not addressed and in other areas it appears new questions have arisen.”

As the AICPA has emphasized throughout this process, questions surrounding guidance make critical decisions unnecessarily challenging and complex for PPP loan recipients and those who are considering applying for the program. That’s why the AICPA created a loan forgiveness calculator this week that reflected both SBA guidance at the time and additional recommendations from the institute. Both the calculator and the underlying recommendations were designed to create a commonly accepted approach to PPP loan forgiveness, and were made in consultation with an AICPA-led small business funding coalition whose members provide services and support to businesses that employ more than 75 million people.

“The AICPA loan forgiveness calculator provided more support and details than the SBA loan forgiveness application, and we will continue to encourage Treasury and SBA to leverage our recommendations,” said Mark Koziel, CPA, CGMA, the AICPA’s executive vice president of firm services. “We will now reconcile our calculator with this form and publish an updated version with additional recommendations and direction for our 44,000 CPA firms.“

The updates to the AICPA forgiveness calculator are expected to be available by Monday. The revised calculator will be available at www.aicpa.org/SBA. In addition, the AICPA will be reviewing in detail the loan forgiveness application along with our updated recommendations at the AICPA’s weekly Town Hall Meeting this Thursday."

Link to comment
Share on other sites

As far as I can tell, the allowed (or some might say, not prohibited) "maximizing" strategies (beyond timing of payroll "paid"):

Employer retirement contributions.  Unclear as to whether 8/52 (or whatever the time frame ends up being) calculation will do (incurred).  Unless there is a contractual contribution in place, could be hard to prove incurred.  Most suggest actual deposits (paid), even if not normally paid during the magic time.  SEP IRA may be an option for some (not likely for owner employees), as the deposits are discretionary, as long as the same formula is used for all eligible employees.

Additional payroll.  Nothing prevents adding employees/increasing employee payroll (within the limits of 100k per employee as being counted).

Rehire bonus.  Likely a legitimate strategy, especially if an existing employee hints they want to stay on the dole instead of working.  Might be better than the hammer of reporting the refusal, causing their UI eligibility to end, assuming the employer wants that type of person back.

Non veteran WOTC eligible employees.  Non veteran WOTC employee credit may be allowed even for the same wages were used for PPP, or maybe for wages other than the amount for PPP.  Tough to say, as the end result will not be known until the actual company tax return is done, and what the forms have on them at that time.  But, since the 941 expressly deals with and prevents the special veteran type of WOTC credit "and" has no mention of the other WOTC types, this may slip through.

---

I stlil suspect the 56 days will be lengthened, because of the press regarding restaurants and others who have yet to reopen.  But, until then, or in case the current rules are the final rules, the above could be useful.

 

Link to comment
Share on other sites

  • 2 weeks later...

Possibly new rules next week.  House passed a new bill, Senate is thought to be agreeable (subject to adjustments), and President is likely to sign.

Whatever works out, or does not, it is best to continue to plan no changes (8 weeks, 75% payroll).  Also explore the possibility of 16 weeks, or 24 weeks, and even the possibility of an adjustment in the amount which must be payroll.

Link to comment
Share on other sites

If you pay weekly or biweekly, you can align your 56 day window with the start of your first regular pay cycle after funding -- the Alternate pay cycle. That Alternate 56 days is for payroll only. Your normal day 1 is the date funded, and that 56 days is for all non-payroll items.

If you pay less often than biweekly, remember the Incurred part to be able to count payroll incurred but not yet paid at the end of your 56 day window -- as long as it's paid by the next normal payday.

But, wait until June and it will change again.

Link to comment
Share on other sites

I've run  few scenarios, and it appears that all my clients will be fine with a stretch to 12 weeks or longer, even if the 75% rule doesn't change.  (and provided they don't alter other aspects of the forgiveness requirements).  That makes sense, since the original calculation was based on 2-1/2 weeks of 2019 payroll. 

It still seems to me that everyone who received the Advance EIDL and then a PPP will wind up with the Advance-EIDL dollar amount of their PPP unforgiven, if I'm understanding the rules correctly. That isn't a complaint - just a reality.  It also makes sense if you follow the logic. But if Congress changes that, I wouldn't complain.

 

Link to comment
Share on other sites

12 weeks will work for some, those who were able to stay open, or reopen on or about their funding date.  Appears, at present, to be a negotiation on 16 and 24, which will be better for those who were not able to reopen as quickly, and those who were not able to fully reopen quickly.

The longer the magic days, the less important it may be to be perfect with documentation as it could end up just being payroll ledgers and 941 forms, versus documentation for other items which could be left to interpretation by the possibly new hire processor at the lender.

Link to comment
Share on other sites

15 minutes ago, Medlin Software said:

Appears, at present, to be a negotiation on 16 and 24, which will be better for those who were not able to reopen as quickly, and those who were not able to fully reopen quickly.

But if you look at the bill in its present form passed by the House, this bill with its longer term applies only to loans made on or after passage of the bill and not to any existing PPP loans already received.

I couldn't easily find the details of the Senate's bill and ran out of time to look for it.

Link to comment
Share on other sites

https://www.sba.gov/sites/default/files/2020-05/3245-0407 SBA Form 3508 PPP Forgiveness Application.pdf Posted by SBA 5/15, though SBA officials on a webinar a week ago said it would probably be revised and to not use it until revisions are promulgated. Banks may prefer to use their own internally produced form. 

Link to comment
Share on other sites

I hope this does not violate the "no politics" edict.   I was shocked that the House bill was passed by unanimous consent.   I was sure this was going to go to reconciliation process.   I wonder what went down outside our eyes that allowed this to happen this way.   I knew we were going to get something, but it is rare that the Senate did not make any changes to a House bill.   

Which leaves us with the new 60% cliff, but the Senate says it will take up a technical correction on that issue.   But will that really be an issue, with 24 weeks to spend the money, I think it should be pretty easy to meet that standard.

We still have the rules for FTEs and Individual wage levels maintained.   I still don't understand all those rules and they keep changing.   I think that will be the next issue is how to figure the forgiveness amount based on these rules.   I hope they make them a little easier to understand.

Tom
Modesto, CA

Link to comment
Share on other sites

3 hours ago, BulldogTom said:

I hope this does not violate the "no politics" edict.   I was shocked that the House bill was passed by unanimous consent.   I was sure this was going to go to reconciliation process.   I wonder what went down outside our eyes that allowed this to happen this way.   I knew we were going to get something, but it is rare that the Senate did not make any changes to a House bill.   

 

 

We aren't going to discuss anything related to the motivation, or why or how this went down. The rest of your post was fine.

Link to comment
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Restore formatting

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
  • Recently Browsing   0 members

    • No registered users viewing this page.
×
×
  • Create New...