PPP Loan Forgiveness Application

On Friday, May 15th, the SBA released the much anticipated PPP Loan Forgiveness Application. The application and related instructions do not provide as much guidance and detail as we expected, but there are still several key takeaways as outlined below:

Alternative Payroll Covered Period: For administrative convenience, Borrowers with a biweekly (or more frequent) payroll schedule may elect to calculate eligible payroll costs using the eight-week (56-day) period that begins on the first day of their first pay period following their PPP Loan Disbursement Date (the “Alternative Payroll Covered Period”). For example, if the Borrower received its PPP loan proceeds on Monday, April 20, and the first day of its first pay period following its PPP loan disbursement is Sunday, April 26, the first day of the Alternative Payroll Covered Period is April 26 and the last day of the Alternative Payroll Covered Period is Saturday, June 20.

Eligible payroll costs: Borrowers are generally eligible for forgiveness for the payroll costs paid and payroll costs incurred during the eight-week (56-day) Covered Period (or Alternative Payroll Covered Period defined above) (“payroll costs”). Payroll costs are considered paid on the day that paychecks are distributed or the Borrower originates an ACH credit transaction. Payroll costs are considered incurred on the day that the employee’s pay is earned. Payroll costs incurred but not paid during the Borrower’s last pay period of the Covered Period (or Alternative Payroll Covered Period) are eligible for forgiveness if paid on or before the next regular payroll date. Otherwise, payroll costs must be paid during the Covered Period (or Alternative Payroll Covered Period).

Eligible non-payroll costs: An eligible non-payroll (mortgage interest, rent and utilities) cost must be paid during the Covered Period or incurred during the Covered Period and paid on or before the next regular billing date, even if the billing date is after the Covered Period. Eligible non-payroll costs cannot exceed 25% of the total forgiveness amount.

Non-Compensation payroll costs to Owners (owner-employees, self-employed individuals, general partners): It appears that non-compensation payroll costs (health insurance and retirement costs) for owner-employees, self-employed individuals and general partners are not eligible for forgiveness.

It is possible (and likely) that additional guidance and clarification will be issued. At that time, we will follow-up as appropriate.

Click here for a link to the SBA Forgiveness Application.

Click here for a link to a detailed article by Tony Nitti discussing the application.

Please let us know if you have any questions.

May 13 deadline to get economic impact payment as direct deposit

In an Information Release, IRS has urged taxpayers who qualify for, but have not already received, their CARES Act economic impact payment (EIP), to provide direct deposit information on IRS’s Get My Payment website by noon on Wednesday, May 13 if they wish to get their EIP via direct deposit and thus avoid the delay involved in receiving a paper check.

Tax filers with adjusted gross income up to $75,000 for individuals and up to $150,000 for married couples filing joint returns receive the full payment. For filers with income above those amounts, the payment amount is reduced by $5 for each $100 above the $75,000/$150,000 thresholds. Eligible taxpayers who filed tax returns for either 2019 or 2018 automatically receive an EIP of up to $1,200 for individuals or $2,400 for married couples. Parents also receive $500 for each qualifying child.

In general, if IRS has direct deposit bank information about a taxpayer eligible to receive an EIP, then the taxpayer will receive the EIP via direct deposit. If IRS does not have that information, then the taxpayer will receive the EIP via paper check.

IRS has set up the Get My Payment website/tool that: (a) shows taxpayers either their EIP amount and the scheduled delivery date of the EIP by direct deposit or paper check, or that a payment has not been scheduled; and (b) allows taxpayers who did not use direct deposit on their last filed tax return to provide their direct deposit information which will speed their receipt of their EIP.

May 13 deadline for getting direct deposited EIP. After noon on Wednesday May 13, IRS will begin preparing files for use in sending paper checks that will begin arriving through late May and into June. Taxpayers who use Get My Payment before that cut-off can still take advantage of entering direct deposit information.

So, IRS has urged taxpayers who haven’t yet received their EIP and haven’t entered their direct deposit information at Get My Payment, to enter that information before Wednesday at noon.

Paycheck Protection Program expenses not deductible

In a Notice, the IRS has clarified that no deduction is allowed for an expense that is otherwise deductible if both (1) the payment of the expense results in forgiveness of a loan made under the Paycheck Protection Program and (2) the income associated with the forgiveness is excluded from gross income pursuant to Coronavirus Aid, Relief, and Economic Security Act.

Notice 2020-32, 2020-21 IRB