IRS Issues Update Saying Businesses May Not Receive PPP Tax Deductions
Nov 19,2020
Businesses that received loans under the Paycheck Protection Program (PPP) may not be eligible to claim tax deductions for certain expenses. The Internal Revenue Service (IRS) has released Revenue Ruling 2020-27 and Revenue Procedure 2020-51, which prevent businesses from claiming tax deductions for eligible business expenses that were paid using proceeds from a PPP loan, assuming a business has or will receive loan forgiveness. The IRS considers this double-dipping. Eligible Deductions According to the CARES Act, eligible business expenses that are tax deductible include payroll costs, mortgage interest, covered rent and covered utilities (electricity, gas, water, transportation, telephone or internet access). However, if PPP loans are used to pay for these expenses, the IRS has determined that those who apply for forgiveness of these loans cannot then claim those expenses as tax deductible. The formal ruling can be found here. Safe Harbor The Revenue Procedure 2020-51 provides a safe harbor...
PPP Loan Necessity Forms from SBA
Nov 12,2020
If your business or nonprofit received $2 million or more in Paycheck Protection Program (PPP) loans, you will be required to complete one of two Small Business Administration (SBA) forms: Form 3509 – Paycheck Protection Program Loan Necessity Questionnaire (for-profit), or Form 3510 – Paycheck Protection Program Loan Necessity Questionnaire (nonprofit). These forms (which are still in draft) were created to collect additional information that will be used by SBA loan reviewers in evaluating the good-faith certification of loan necessity due to economic uncertainty made by borrowers on applications. The loan necessity forms will be provided by the lender to the loan recipient after the lender submits the loan forgiveness application to the SBA. Once the lender has notified the loan recipient of an SBA request for these forms, they will be due within 10 days. The questionnaires are extensive and we’re finding that clients which are required to complete...
Applying for PPP Loan Forgiveness
Oct 30,2020
If you received a loan through the Small Business Administration’s Paycheck Protection Program, your covered period has likely ended or will be ending soon. Whether your coverage period was for 8 or 24 weeks, it is time to think about loan forgiveness. Businesses have up to 10 months from the end of the covered period to apply for loan forgiveness but are encouraged to begin the application process early. Understandably, there is a lot of confusion around the PPP due to its complex reporting, but we are here to help you. Either full or partial forgiveness of a loan is possible, and naturally businesses will want to have the loan completely forgiven. To that end, several criteria have to be met. Your tax advisor is the best person to walk you through the process. To get started, you will need to have the pertinent paperwork available, including payroll information, full-time...
SBA and Treasury Publish Interim Final Rule on PPP
Jun 30,2020
Today, June 30, 2020, is the last day a business can apply for a PPP (Paycheck Protection Program) loan. Businesses will now need to focus on applying for loan forgiveness, if they have not already done so. On June 25 and 26, the Small Business Administration (SBA), in consultation with the Department of Treasury, provided additional guidance for businesses applying for PPP loans. There was also a Federal Register notice published on June 26 to finalize Interim Rules about PPP loan forgiveness and loan review procedures. Among the items covered by the Interim Final Rules: Early loan forgiveness Businesses may apply for loan forgiveness early, if they have spent all of the loan amount, but the interim final rule published on June 26 warns that those businesses may face some reductions in loan forgiveness. These two examples from the interim final rule illustrate how: 24-week covered period example: A borrower...
SBA and Treasury Update PPP Loan Forgiveness Application Form
Jun 19,2020
The Paycheck Protection Program (PPP) was very popular when it was introduced, particularly because of the prospect of the loan being fully forgiven if all criteria were met. However, the application forms were long and complicated. On June 16, the Small Business Administration (SBA), in consultation with the Department of Treasury, published a simplified version of the PPP loan forgiveness application form, implementing the modifications made by the PPP Flexibility Act of 2020. The SBA also published a new, EZ version for certain employers. The new application forms were published alongside revised interim rules on how to calculate employee and owner compensation for loan forgiveness as a result of the Flexibility Act. Revised Application Form The revised form incorporates the changes made by the Flexibility Act and include: eligible and non-eligible costs: S corporation owners cannot include their health insurance costs when calculating payroll, but their retirement costs are eligible....
Guidance from the AICPA on Accounting for Forgivable PPP Loans
Jun 15,2020
Businesses, including nonprofits, that qualified for a forgivable loan from the Small Business Administration through the Paycheck Protection Program (PPP) have been given accounting guidance by the American Institute of Certified Public Accountants (AICPA). The guidance addresses how a borrower under the program should account for the loan. The guidance states that the legal form of the PPP loan is debt and may be accounted for in accordance with existing financial liability guidance. A business should: record the loan as a financial liability and accrue interest; not assign additional interest at the market rate; continue recording proceeds from the loan as a liability until the loan is either partly/fully forgiven or has been paid off; reduce the PPP liability by the amount of the loan that was forgiven and record a gain on the extinguishment when legally released from repayment of the PPP loan. If a commercial business entity expects...
Maximizing Forgiveness of Your PPP Loan
Jun 11,2020
The Paycheck Protection Program Flexibility Act, which was signed by the President on June 5, 2020, made changes to the terms of PPP loans. This article reflects those changes.   Marvin Willis, the partner in charge of Smith & Howard’s Accounting & Advisory group, recently appeared in a webinar organized by the Forsyth County Chamber of Commerce to advise businesses on maximizing forgiveness if they were successful in obtaining a Paycheck Protection Program (PPP) loan. Willis cautioned that there have been several changes to the terms of the PPP, so while loan recipients should follow the most recent guidance, published on May 15, when applying for forgiveness, they should also be prepared for more guidance to be issued. PPP calculation process One of the most attractive features of the PPP is the promise of loan forgiveness if certain criteria are met. Among them is that 60% of a loan must...
SBA and Treasury Announce PPP Loan Modifications, Based on PPP Flexibility Act
Jun 09,2020
The Small Business Administration (SBA) and Treasury announced on June 8 that they will be issuing guidance and additional rules for the Paycheck Protection Program Flexibility Act passed by Congress on June 3, 2020. Of particular note, the announcement clarified that partial loan forgiveness will be allowed if the 60% payroll costs threshold is not met. The pending guidance will be accompanied by modified application forms for borrowing and for loan forgiveness. The changes to the PPP rules and modifications to the forms that will be addressed based on the Flexibility Act include: Extended covered period Loan forgiveness is extended from the original eight weeks after the date of loan disbursement to 24 weeks. Borrowers who have already received PPP loans may still opt for the eight-week covered period.  Partial Loan Forgiveness Borrowers may now use 60% of their PPP loan on payroll costs instead of the previous 75% during...
Steps Private Schools Need to Take to Qualify for PPP Loan Forgiveness
May 28,2020
As the COVID-19 pandemic disrupted businesses around the country and Congress stepped in to provide financial aid through the Paycheck Protection Program (PPP), many private schools qualified for help. The attractiveness of the PPP – 100% loan forgiveness – puts the burden on recipients to meet the criteria for forgiveness, and applications must be done in the next three to six months. First, private school leaders need to ask their PPP lenders what is required to fulfill all requirements for loan forgiveness. Generally, criteria fall into three buckets: providing proper documentation, proving economic uncertainty and ensuring all the terms of the loan are met. A brief overview follows: 1. Providing proper documentation Schools must document how the loan was used for payroll costs (at least 75% of the loan amount must be used for this) and proof of the number of full-time equivalent staff on payroll. Documents can include payroll...
SBA Releases Guidance on Good Faith Certification
May 13,2020
Earlier today (May 13, 2020) the Small Business Administration (SBA) and Department of the Treasury released FAQ #46. The new FAQ provides clarification for businesses taking Paycheck Protection Program (PPP) loans, regardless of the loan size. Businesses taking a PPP loan with an original principal amount of less than $2 million will automatically be granted safe harbor relief with regard to the “good faith certification” it is required to provide. According to the FAQ, the “SBA has determined that this safe harbor is appropriate because borrowers with loans below this [$2 million] threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans. This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees.” Businesses taking loans greater than $2 million will be subject to a...

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