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Now the flurry of EIDL and PPP applications are in full swing and everyone is just waiting for the funds, I have assembled a list of FAQ’s based on comments received from, our clients! Hopefully these will help you navigate through the next period of this process.
PAYROLL PROTECTION (PPP) / EMERGENCY INJURY DISASTER LOAN (EIDL)
Q. When will I get the money?
A. Depends. The 3-day deposit of the $10,000 is now taking 3 weeks for the EIDL and the PPP programs handled through the banks are slow in coming online with applications. Some banks have just now started taking applications. First applications were available 4/3/20.
Q. If I wait to apply, will I get any money?
A. The PPP is limited to $350,000,000,000 and once that money runs out, there is no more until another stimulus bill is approved. I have heard that some of the big national banks have received an allocation of the money and once their applications have hit this limit, they will accept no more applications. To date, I have not been informed by Chase, BBVA, Wells Fargo or BOA of running out of their allocation.
Q. What is the difference between the EIDL (Economic Injury Disaster Loan) and the PPP (Payroll Protection Program) both offered through SBA.
A. The EIDL is not a new program. It was established to assist taxpayers to meet financial obligations and operating expenses that could have been met had the disaster not occurred. The $10,000 grant is a new component which is not required to be repaid. The remaining portion of the EIDL is a normal loan. This loan is handed directly by SBA @ www.sba.gov.
The PPP (aka SBA 7a loan) is a new program created by the CARES Act. This loan was established to help businesses impacted by COVID-19 to keep people on payroll and continue their health benefits, period. This loan may be forgiven if the guidelines of the program are met. These loans are handled through banks.
Q. Can I apply for both EIDL & PPP?
Q. Can I apply at any bank for the PPP?
A. Yes, you can but it is strongly advisable to apply with the bank that has your current business banking/loan business. Credit Unions and smaller banks may also be participating in the PPP but you will need to contact them directly to confirm and how to apply.
Q. Should I apply at several banks just in case one runs out of money before my application is accepted?
A. No, as part of the application, you will be asked if you have applied for an SBA 7a loan previously. I presume if you answer YES, your application will be denied. If you answer NO, you have committed fraud. NOTE: the banks are just handling the application process and proceed distributions. ALL applications go to SBA for final approval and they can track applications by EIN or SSN.
Q. How do I qualify for the $10,000 grant and if I am not approved, do I pay it back?
A. As part of the EIDL application process, you will request the $10,000 grant. Regardless of loan decision, you will not pay back the $10,000. The $10,000 grant is based on number of employees x $1,000. This last bit is completely new to us as we were not aware of any restriction of this grant. It was not communicated on any SBA.Gov webpage or, as far as I can remember, disclosed during the EIDL application process. You just checked a box saying YES, I want the $10,000 grant. I am not certain how SBA will determine the number of employees and when this clarification was communicated but we have, just today, 4/14/20, received communication from clients of this restriction.
Q. I have applied for the EIDL and haven’t heard back, and it has been more than 3 days. Is this normal?
A. The 3-day first announced as part of the CARES Act that SBA must respond within 72 hours of application, has been completely ignored by the SBA. Probably due to insufficient staffing and a complete mishandling of the process. SBA is now reporting it can take up to 3 weeks before you will receive an e-mail requesting you to set up a portal account. I presume at that time you will have to send in further documentation, possibly including employee count, to continue the application process. Some experts are reporting that after this step it may be another 3 weeks before the loan proceeds are deposited into your account.
NOTE: We submitted our EIDL on 3/30 and have not received any further communication as of this time.
Q. Does it make financial sense to apply for these loans, even if I qualify, because they will need to be paid back?
A. There are many individual factors you must consider before applying for any loan. The most important is your personal felling toward debt. Ultimately, you must do what is best for you so you can sleep at night and be ready and operating when the economy opens back up. Generally, if you do qualify for the programs, and even if you ultimately must pay back some or all of the proceeds, the terms of these loan are incredibly favorable. The following table was provided by SBA.gov:
Paycheck Protection Program Full EIDL Loan
Forgivable if used for payroll (minimum of 75% of the funds received) and the remaining for certain operating expenses (amount of any EIDL advance is not forgivable)
To meet financial obligations and operating expenses that could have been met had the disaster not occurred (amount of any EIDL advance is forgiven)
Up to $10 million
1% interest rate
Up to $2 million
3.75% for businesses
2.75% for non-profits
NO – EIDL Loan
YES – EIDL Advance
FIRST PAYMENT DUE
Deferred 6 months
Deferred 1 year
Q. What do I need to apply for the PPP?
A. Each bank is developing their own application based on SBA guidelines so the requests for information and documents vary. To much frustration, it appears the Banks, along with most everyone else sharing their opinion, are combining the 2 aspects of the PPP into 1 process (Loan application and Loan forgiveness)
1) loan application - you can apply for a loan amount that equals 2.5 times your monthly average payroll costs. Payroll costs include employee compensation, health insurance premiums and employer retirement plan contributions, Period, end of story. Nothing else is needed or required to be included.
2) loan forgiveness - the amount of principal can be forgiven if you can prove you spent the loan proceeds on:
a. Payroll for employees (see costs explained above)
d. Mortgage payments on loans for the business.
75% must be spent on payroll costs. The remaining can be spent on b, c, & d above and still qualify for loan forgiveness. Some banks are asking for applicants to allocate the loan amount among the various expenses. WHY? It doesn’t have any bearing on the loan amount or how it will be forgiven.
Q. Are employer payroll taxes part of Payroll Costs?
A. No, Only State and Local income taxes can be included as payroll costs. Texas doesn’t have state income tax.
Q. What should I do while I wait for the money?
A. 1) monitor your cash situation.
2) If you are still operating, but at a reduce level, keep only the staff on board needed to continue operations.
3) furlough or lay-off unneeded employee so that can apply for unemployment
4) If no longer have operations, you can keep staff on payroll by paying out any PTO. When that runs out, they apply for unemployment
5) shut down operations until funds are received.
6) review our COVID-19 e-mails for financial tips during this time.
Q. How do we calculate the amount of loan forgiveness?
A. Once you receive the PPP funds, only the amounts spent on qualifying expenses during the 8-week period following the receipt of the funds qualify for loan forgiveness. We have addressed some possible situations that could allow 100% of the funds to be spent on qualifying expenses. See our COVID-19 emails.
Q. Can you assist us with the Payroll Costs and Loan Forgiveness calculations?
A. Absolutely. For clients we currently provide accounting and/or payroll services, we can provide you with the Avg. Monthly payroll costs, Proposed PPP amount and assist you with loan forgiveness planning.
Q. I am self-employed. Can I obtain a PPP or EIDL?
A. Yes, your application process is the same. Instead of payroll, you will report Net Self-Employment income. If we prepare your personal returns, we can assist you with this calculation.
Q. Do I include Independent Contractors as payroll costs? There is a line item on the application for this amount.
A. No, independent contractors are NOT part of your employee costs. The banks have 1 application form to be used by any type of business/sole proprietor when it may have been better to have 1 application for incorporated business and one for sole proprietors but given the rush to get this done, I can certainly understand the need for just one form, even if it causes confusion.
Q. If I am an employee of my S-Corp and I also have a business on the side, can I apply for EIDL & PPP for both?
A. I believe so, but you must not double dip. The maximum any one person can be counted as far as income is $100,000. If your salary from the S-Corp is $90,000 and your net self-employment income from your Sch C is $30,000; the max you can apply for under both is $100,000 so only $10,000 of the net SE income would be available.
Q. I don’t’ have an SSN, do I qualify for PPP or EIDL or Unemployment.
A. No, these programs are restricted to US citizens and permanent residents with a valid SSN.
Q. I have an ITIN for me but I have an EIN for my Sch C. Do I qualify for PPP or EIDL?
A. Yes, the Sch C would be able to apply under the EIN for these programs. You, however, would not qualify so you cannot include your net S/E income as part of the application.
EMPLOYER CREDITS AND SICK PAY PROGRAMS
The federal government prior to the passing of CARES, implemented sick pay laws to ensure employers and employees effected by COVID-19 received some relief. The CARES Act also provides employer credits as well.
Q. Must I pay sick pay to employees even if I don’t have a sick day policy?
A. Yes. Families First Coronavirus Response Act (FFCRA or Act) requires certain employers, with less than 500 employees, to provide their employees with paid sick leave and expanded family and medical leave for specified reasons related to COVID-19. These provisions are for wages paid from April 1, 2020 through December 31, 2020
Q. Who qualifies for Sick pay?
A. Employees unable to work or telework because the employee:
1) Is subject to a federal, state, or local quarantine or isolation order related to COVID-19,
2) has been advised by a health care provider to self-quarantine due to concerns related to COVID-19,
3) Is experiencing symptoms of COVID-19 and seeking a medical diagnosis,
4) Is caring for an individual subject to an order described in (1) or who has been advised as described in (2),
5) Is caring for a child if the school or place of care has been closed, or the childcare provider is unavailable, due to COVID-19 precautions; or
6) Is experiencing any other substantially similar condition specified by the U.S. Department of Health and Human Services.
Q. How much do they receive?
A. Up to two weeks (80 hours, or a part-time employee’s two-week equivalent) of paid sick leave based on the higher of their regular rate of pay, or the applicable state or Federal minimum wage, paid at:
Q. What is Expanded Family and Medical Leave?
A. The 2nd component to the FFCRA is EFMLA. If you have an employee employed for at least 30 days prior to the request for leave, they can receive up to 10 weeks of paid sick leave and expanded family and medical leave paid at least 2/3 of their pay rate for qualifying reason when an employee is unable to work or telework due to the need to care for a child under age 18 because the school or place of care has been closed, or the childcare provider is unavailable, due to a public health emergency for up to $200 daily and $10,000 total. The first 10 days (or 2 weeks) can be unpaid but once they pass this, up to the next 10 weeks is paid.
Q. If the employee’s job duties can be done by telework but we are not set up to do so, does this matter?
A. This is a legal question which you should address with your attorney but I would presume that if the employee could telework, even if not available to do so currently, this would relieve the employer of the requirements of the FFCRA. You would just set up the employee for remote work.
Q. How am I going to pay for sick leave I am required to provide?
A. The government will allow employers to apply for a credit again their payroll taxes. The credit can be applied directly on the payroll tax return for the quarter the sick pay was paid or by filing Form 7200.
Q. Will you assist in calculating the credit.
A. Yes, we will assist currently payroll clients with the amount of credit due and if filing Form 7200 is allowed.
Q. What is the Employer Retention Credit (ERC) and how does it coordinate with the PPP.
A. We have discussed this on a prior COVID-19 e-mail. The employer is given two options when dealing with the PPP. Depending of which course the employer believes is best for their situation, they can have Loan Forgiveness or Employer Retention credits BUT not both.
Loan forgiveness process is discussed above.
A refundable Employer Retention Credit equal to 50% of qualified wages (which would include health insurance premiums) up to $10,000 per employee of such employer for such calendar quarter, against quarterly employment taxes for wages paid or incurred from 3/31/20 – 12/31/20.
Q. How do I qualify if I want to take the credit?
A. Receipts are less than 50% of what they were in the same calendar quarter in 2019 AND ending with the quarter that follows the first quarter beginning after the quarter in which your gross receipts were greater than 80% of what they were in the same calendar quarter in 2019.
Q. How is the credit received?
A. it is applied against your quarterly payroll tax return Form 941. If the credit exceeds your payroll taxes, the overage is refunded to you.
Q. If I choose the credit and believe the credit will result in a refund on my 941, do I have to make payroll tax deposits?
A. No, if you anticipate the ERC will be more than your payroll taxes, you do not have to make any payroll tax deposits for that quarter. The IRS will not impose a penalty if you can show you reasonably expected the credit will produce a refund on Form 941.
Q. Can you assist with the calculation?
A. Yes, we will assist current payroll clients with this calculation.
In addition to the federal Government, State and Local governments are also revising due dates, payment dates, reduce penalties, interest and fines during this period of COVID-19. We continue to monitor changes as they occur.
Q. What are the due dates for Federal Tax returns and estimated tax payments?
A. Any return or payment originally due on 4/15 has be moved to 7/15. There is no penalty or interest charged during the period of 4/15 – 7/15.
PLEASE NOTE: The remaining ES tax deposit due dates have not changed so the 2nd ES tax deposit is still due 6/15. We don’t understand this either!
Q. I heard there was an extension for Employer payroll tax deposits, is this correct? If so, should I do this?
A. Yes, Employers can defer employer payroll tax deposits for FICA/MC. 50% of the taxes due for the period 4/1/20 – 12/31/20 can be paid on 12/31/20 and the remaining 50% paid on 12/31/21. Though this may be a great opportunity to save cash, we advise if you decide to do this process, you catch up once you have received your EIDL or PPP. Our concern is once 12/31/20 or 2021 hits, you won’t have the funds available and then you are hit with penalties/interest.
We firmly believe ALWAYS PAY THE GOV’T FIRST!!!!
More info can be found here: https://www.irs.gov/newsroom/deferral-of-employment-tax-deposits-and-payments-through-december-31-2020
Q. What about Texas taxes?
A. The following changes have been made:
For other updates, such as Sales Tax, please go to TWC or Texas Comptrollers websites:
We are monitoring the situations consistently and will ensure compliance for our clients that we prepare SALT (State and Local Taxes), Sales Tax, Mixed Beverage Tax and payroll tax returns.
2020 Stimulus Payment
For up to the minute details, check out the IRS website:
Q. What is the stimulus payment and how do I know if I qualify?
A. This is a 2020 tax credit that is being paid now like the stimulus payment made during the economic crisis of 2012. If you meet certain income requirements, you could receive $1,200 for you, your spouse and $500 for each dependent. The IRS will use 2018 tax info, if 2019 has not been filed, to determine if you may qualify. If you do, you will receive a check by mail or direct deposit.
Q. If, based upon filing my 2020 tax return, I actually don’t qualify for the payment, will I have to repay the amount advanced?
Q. Can my dependents file on their own to qualify for the higher amount or just qualify if I don’t because of income?
A. No, Allowed or Allowable dependents receive $500. If you could claim someone but choose not to do so, they will not be able to claim the stimulus payment. They must notate on their return, if filing on their own, that they could be claimed. Failure to do so is tax fraud.
Q. How can I be sure the IRS has my correct info (address, banking info, etc) if I have not filed a 2018/2019 return?
A. You can input your info here: https://www.irs.gov/coronavirus/economic-impact-payments under the Filers: Get Your Payment (coming mid-April). You can:
Check your payment status
Confirm your payment type: direct deposit or check
Enter your bank account information for direct deposit if IRS doesn't have your direct deposit Information and IRS has not yet sent your payment
Get My Payment (coming mid-April)
If you moved since you last filed, let us know your new mailing address.
The feature to track or enter in your info may not be available yet as the service is set to be active Mid-April so keep checking back
Q. If I will not have my 2019 tax return filed soon, what should I do?
A. Go to the Filers: Get Your Payment webpage and update your info
Q. I heard that if I don’t normally file a tax return because I just receive SS benefits, I don’t have to do anything to receive my payment.
A. Yes, this is correct. The IRS will work with SSA to ensure US Citizens receiving SSA benefits will receive the stimulus payment. If you have your SS direct deposited, your banking info will be sent from SSA to IRS. However, this may take more time as the IRS us currently sending out stimulus checks to individuals that have filed a 2018/2019 tax return. IRS stated it may be a few weeks before stimulus checks are sent to SSA recipients.
Q. If, based upon filing my 2020 tax return, I actually don’t qualify for the payment, will I have to repay the amount advanced?
Q. If I owe money to the Gov’t, will they take the stimulus payment and apply to my balance?
A. No, there is no offset on this payment. You will receive even if you owe money and are or are not in an installment agreement.
We advise that you e-file a “streamline” tax return on IRS. Gov. The process takes a few minutes and once accepted; we believe the normal direct deposit timeframe applies. Normally 10 – 12 business days.
Go here to start the tax return process: https://www.irs.gov/coronavirus/non-filers-enter-payment-info-here and click on Non-Filers: Enter Payment Info Here button.