How to Maximize PPP Loan Forgiveness
Many businesses are getting notification that their PPP loans are approved, and some businesses have actually already received funding. The next hurdle is maximizing the amount to be forgiven. As of this date, we don’t have the final rules from the SBA. Here is an article on the details of the statue with great definitions of the new terms. The high points are:
- Open a new bank account with the PPP proceeds.
- Spend at least 75% on Payroll Costs in the next eight weeks.
- Spend the rest on Covered Rent, Utilities, and Mortgage Interest in the next eight weeks.
- Keep as many employees on the payroll as possible during the next eight weeks compared to your baseline period (2/15/19 – 6/30/19 or 1/1/20 – 2/29/20, whichever is less).
- Keep salary reductions below 25%
- If your headcount drops during the eight-week period, hire people back by June 30, 2020.
We know this can be confusing, so give us a call to help you through the math. This is where we shine.
New PPP Guidance for Self-Employed & Partners
Yesterday the SBA issued guidance regarding the calculation of the maximum loan amount for individuals with self-employment income who file a Form 1040, Schedule C, or Profit or Loss From Business. The 2019 Form 1040 Schedule C is required to be provided with the PPP loan application. Self-employment income of partners in a partnership may be reported as a Payroll Cost, up to $100,000 annualized, on a PPP loan application filed by or on behalf of the partnership ( or LLC filing taxes as a partnership). Individual partners may not submit a separate PPP loan application as a self-employed individual. More details can be found here.
Independent Contractors – Apply for Unemployment or PPP Loans?
Normally independent contractors, sole proprietors and gig workers are not eligible for unemployment benefits, but under the CARES Act, now they are. The best way to apply for benefits can be found here.
These workers can also apply for the PPP loans as of this week, but if loan forgiveness is a priority, an individual would no longer be eligible for unemployment benefits because forgiveness is tied to the worker using the PPP loan to pay compensation to themselves. Because it is likely that the eight-week forgiveness period and the additional unemployment insurance benefit will overlap, each impacted individual should carefully evaluate which program provides the best economic benefit. See more information on this here.
As we all navigate this new normal the best way possible, we hope you and your family are staying safe, staying well, and staying sane. Through it all, we are here for you.
theKFORDgroup team is ready to assist you with your tax questions. Give us a call at (210)340-8351.