“EZ” PPP Loan Forgiveness Application Available
The SBA recently released Form 3508EZ and the related instructions, a form designed to simplify the loan forgiveness process for eligible borrowers.
You must meet one of the following three criteria to be eligible to use the EZ form:
- The Borrower is a self-employed individual, independent contractor, or sole proprietor who had no employees at the time of the PPP loan application and did not include any employee salaries in the computation of average monthly payroll in the Borrower Application Form (SBA Form 2483).
- The Borrower did not reduce annual salary or hourly wages of any employee by more than 25 percent during the Covered Period or the Alternative Payroll Covered Period (as defined below) compared to the period between January 1, 2020 and March 31, 2020 (for purposes of this statement, “employees” means only those employees that did not receive, during any single period during 2019, wages or salary at an annualized rate of pay in an amount more than $100,000);
AND
The Borrower did not reduce the number of employees or the average paid hours of employees between January 1, 2020 and the end of the Covered Period. (Ignore reductions that arose from an inability to rehire individuals who were employees on February 15, 2020 if the Borrower was unable to hire similarly qualified employees for unfilled positions on or before December 31, 2020. Also ignore reductions in an employee’s hours that the Borrower offered to restore and the employee refused. - The Borrower did not reduce annual salary or hourly wages of any employee by more than 25 percent during the Covered Period or the Alternative Payroll Covered Period (as defined below) compared to the period between January 1, 2020 and March 31, 2020 (for purposes of this statement, “employees” means only those employees that did not receive, during any single period during 2019, wages or salary at an annualized rate of pay in an amount more than $100,000);
AND
The Borrower was unable to operate during the Covered Period at the same level of business activity as before February 15, 2020, due to compliance with requirements established or guidance issued between March 1, 2020 and December 31, 2020 by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration, related to the maintenance of standards of sanitation, social distancing, or any other work or customer safety requirement related to COVID-19.
Paycheck Protection Program Update
The President signed the Paycheck Protection Program Flexibility Act of 2020 (PPPFA) on June 5, 2020.
The Act made a number of changes to existing PPP guidance, including:
- Requirement that 75% of PPP loan proceeds be used for payroll is reduced to 60%.
- Borrowers can extend the “Covered Period” to 24 weeks instead of the original 8 weeks.
- Borrowers and lenders can agree to extend existing loan repayment periods to 5 years instead of the original 2 years. Loans made after the law’s passage will have a 5 year repayment period.
- Significant changes in FTE restoration requirements, including exemptions for employers unable to return to normal operation levels due to COVID related restrictions.
The AICPA’s PPPFA summary can be read here.
The AICPA’s PPP FAQ page can be found here.
U.S. Treasury announcement can be read here.
Many questions regarding loan forgiveness remain unanswered. Guidance will be posted as it becomes available.
PPP Loan Forgiveness Application Now Available, Additional Guidance
The SBA has released the Loan Forgiveness Application form and, more importantly, instructions to apply for Paycheck Protection Program (PPP) loan forgiveness.
Businesses that obtained PPP loans will use this form to calculate the forgivable portion of the loans and submit the form to their lenders.
The instructions clarify and define points relevant to the forgiveness calculation, including full-time equivalent employee and safe-harbor calculations.
Additional forgiveness guidance was issued by the U.S. Treasury and the SBA on May 22, 2020 by way of the Interim Final Rule on Loan Forgiveness, offering further clarification of alternative Covered Period calculations, owner-employee compensation calculations, when non-payroll costs must be incurred to qualify, and alternative FTE calculations.
IRS Publishes Guidance Regarding Tax Treatment of Forgiven Paycheck Protection Program Loans
The IRS has issued Notice 2020-32, explaining the tax treatment of loans forgiven under the Paycheck Protection Program (PPP).
Their position is that forgiveness of the PPP loan creates income exempt from federal income tax, and therefore the expenses incurred that gave rise to that forgiveness are nondeductible as ordinary and necessary business expenses. In other words, business taxpayers will not be able to deduct expenses that were used to obtain forgiveness of the PPP loans.
The entire Notice can be read here.
Pandemic Related Employer Resources
Below is a list of links that employers will find helpful to deal with the current public health crisis:
Recent federal relief legislation:
Coronavirus Aid, Relief and Economic Security Act (CARES Act) – includes:
- Paycheck Protection Program – purpose is to assist employers with employee retention during the crisis. Provides private bank loans that, if used for payroll and other eligible expenses, will not have to be repaid. PLEASE NOTE: There is a funding cap for this program, therefore it is urgent that you apply as soon as possible to obtain benefits. SBA Interim Final Rule (see page 5 for “What do borrowers need to know and do?”, AICPA guidance regarding Average Monthly Payroll Cost calculation, U.S. Treasury guidance, Application Form, U.S. Treasury Information Sheet, Ohio Bankers League FAQ, U.S. Chamber of Commerce Guide, SBA guidance.
- Expanded SBA Economic Injury Disaster Loans – SBA guidance and to start an application
Families First Coronavirus Response Act (FFCRA) – effective April 1, 2020 – requires certain employers to provide employees with paid sick leave or expanded family and medical leave for specified reasons related to COVID-19. DOL guidance, IRS guidance.
General resources:
Thomson Reuters COVID-19 Relief – Assists businesses to identify types of assistance available
Ohio Chamber of Commerce – Coronavirus Business Resources
Financing resources:
SBA Guidance for Businesses and Employers to Plan and Respond to Coronavirus Disease 2019 (COVID-19)
Unemployment insurance resources (layoffs or furloughs)
Ohio Dept. of Job and Family Services Q&A on Unemployment Benefits
Employee benefits continuation (health insurance):
Bulletin 2020-03 – Health Insurance Flexibility for Ohio Employees
Ohio Bureau of Workers’ Compensation:
Coronavirus (COVID-19) Frequently Asked Questions
Business Continuity Planning
AICPA post “Five Steps for Business Continuity Amid COVID-19”
Employer preparedness and hygiene guidance:
Ohio Dept. of Health COVID-19 Checklist for Business/Employers
OSHA Guidance on Preparing Workplaces for COVID-19
Ohio Department of Health Guidance for Employers and Businesses
CARES Act Update
The CARES Act was signed by the President on March 27, 2020.
This legislation provides broad relief to the country in response to the COVID-19 pandemic and includes numerous individual and business relief provisions.
More information on the key provisions of the Act are here:
Individual Relief
Economic Impact Payments
IRS News Release regarding economic impact payments.
This release explains eligibility and income requirements, as well as the phase out ranges and provisions for dependents.
The income amounts in the Act refer to Adjusted Gross Income.
Your adjusted gross income can be found on your 2019 Form 1040, Line 8b, or your 2018 Form 1040, Line 7.
An online rebate calculator can be found here.
If you are not required to file a tax return, but qualify for an Economic Impact Payment, you can notify the IRS that you are eligible here.
No 10% penalty for coronavirus-related retirement plan distributions and RMD waiver
$300 above-the-line charitable deduction to incentivize charitable giving
Business Relief
Employee retention credit for employers
Delay of payment of employer payroll taxes
Forgivable Business Continuity Loans
This post will be updated as more information becomes available.
