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PPP Flexibility Act Eases Rules For Borrowers Coping With COVID-19

As you may recall, the Small Business Administration (SBA) launched the Paycheck Protection Program (PPP) back in April to help companies reeling from the economic impact of the COVID-19 pandemic. Created under a provision of the Coronavirus Aid, Relief and Economic Security (CARES) Act, the PPP is available to U.S. businesses with fewer than 500 employees.

In its initial incarnation, the PPP offered eligible participants loans determined by eight weeks of previously established average payroll. If the recipient maintained its workforce, up to 100% of the loan was forgivable if the loan proceeds were used to cover payroll expenses, certain employee health care benefits, mortgage interest, rent, utilities and interest on any other existing debt during the “covered period” — that is, for eight weeks after loan origination.

On June 5, the president signed into law the PPP Flexibility Act. The new law makes a variety of important adjustments that ease the rules for borrowers. Highlights include:

Extension of covered period.

By Linkenheimer LLP|2020-09-03T20:02:41+00:00June 10th, 2020|business, New Tax Laws|0 Comments

Paycheck Protection Program Loan Forgiveness Calculators

Many small businesses are struggling navigating the complexity of the Paycheck Protection Program (PPP) and loan forgiveness aspect of it. While legislation, regulations and info regarding loan forgiveness is changing and revised often, it’s important to be proactive and keep a close eye on your record keeping. The AICPA has released an excel file that serves as a calculator, based on the current parameters of the loan forgiveness program. If you have questions, please reach out to your Linkenheimer CPA.

You can access the calculator by clicking here. It will download a copy of excel file once you click on it. You can also find the calculator on the AICPA website here.

By Linkenheimer LLP|2020-09-03T20:02:53+00:00May 26th, 2020|business|0 Comments

Fortunate Enough To Get A PPP Loan? Forgiven Expenses Aren’t Deductible

The IRS has issued guidance clarifying that certain deductions aren’t allowed if a business has received a Paycheck Protection Program (PPP) loan. Specifically, an expense isn’t deductible if both:

The payment of the expense results in forgiveness of a loan made under the PPP, and
The income associated with the forgiveness is excluded from gross income under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

PPP basics

The CARES Act allows a recipient of a PPP loan to use the proceeds to pay payroll costs, certain employee healthcare benefits, mortgage interest, rent, utilities and interest on other existing debt obligations.

A recipient of a covered loan can receive forgiveness of the loan in an amount equal to the sum of payments made for the following expenses during the 8-week “covered period” beginning on the loan’s origination date: 1) payroll costs, 2) interest on any covered mortgage obligation, 3) payment on any covered rent, and 4) covered utility payments.

The law provides that any forgiven loan amount “shall be excluded from gross income.”

Deductible expenses

So the question arises: If you pay for the above expenses with PPP funds, can you then deduct the expenses on your tax […]

By Linkenheimer LLP|2020-09-03T20:02:57+00:00May 18th, 2020|business, New Tax Laws, small business|0 Comments

Paycheck Protection Program Loan Forgiveness

Dear Clients and Friends:

Congratulations if you received a Paycheck Protection Program (PPP) loan! We hope it provides much needed cash during these uncertain times. Now that you have the funds, we want to point out certain steps you should take over the next eight weeks to ensure maximum forgiveness of your PPP loan.

Use the Funds for Forgivable Purposes. Forgiveness of your PPP loan depends largely on whether you use the money to pay forgivable expenses. These include (1) payroll costs (if you’re self-employed, these costs include the net profit amount from your business, as reported on your 2019 tax return), (2) interest payments on mortgages incurred before 2/15/20, (3) rent payments on leases dated before 2/15/20, and (4) utility payments under service agreements dated before 2/15/20. However, according to the Small Business Administration (SBA), not more than 25% of the forgivable loan amount (the amount of the loan used to pay forgivable expenses) may be attributable to nonpayroll costs. In other words, at least 75% of the loan must be used for payroll costs.

To help you meet this requirement, consider implementing the following best practices:

Set up a separate bank account for […]

By Linkenheimer LLP|2020-09-03T20:03:00+00:00May 4th, 2020|business, employer, liability, New Tax Laws|0 Comments