|The Consolidated Appropriation Act was signed into law on December 27. The Act includes provisions for a second round of PPP loans, 2021 stimulus checks, extended unemployment benefits, and addresses the taxation of forgiven PPP loans (first draw).|
PPP2: Requirements for 1st Draw and 2nd Draw Applicants
The Act included provisions for a 2nd round of Paycheck Protection Program loans. It includes requirements for both new and return PPP loan applicants. While we expect to receive specific guidelines from the SBA this week, here is what we know from our review of the Act:
Paycheck Protection Program Parameters
- Applicants may be eligible for loan amounts up to 2.5 times the average monthly payroll (3.5 times for hotels and restaurants) up to $2 Million.
- Funds can be used to cover payroll, rent, covered mortgage interest, utilities, certain facility modifications, PPE, accounting needs, and software/cloud computed services.
- If at least 60% of the loan amount is used to cover payroll and employee levels are maintained, the eligible loan amount may be forgiven.
- Applications can be processed through banks or financial technology firms (i.e. Intuit/PayPal).
- ATS can also submit applications directly under the American Institute of CPAs partnership with Biz2Credit.
Paycheck Protection Program Eligibility
First time borrowers:
- Businesses with 500 or fewer employees
- Sole proprietors and independent contractors
- Nonprofit organizations (including business associations)
Second time borrowers:
- Same as above, but with 300 or fewer employees
- Ability to demonstrate the full use of the initial PPP loan
- Ability to demonstrate a 25% gross revenue decline in any 2020 quarter when compared to the same quarter in 2019
If you have a relationship with your bank and would like to work through them to apply for PPP2, you may begin pulling documents together to support eligibility. If you do not have a relationship with your bank and/or you would like ATS to assist with assessing eligibility and the application process, please contact us at firstname.lastname@example.org. We anticipate more guidance this week and the SBA to begin accepting applications the week of Monday.
2021 Stimulus Checks are Being Issued
- Payments of $600 for individuals making up to $75,000 per year
- Payment up to $1,200 for married couples making up to $150,000 per year
- $600 payment for each child dependent (with some exceptions)
- Income caps are based on 2019 tax filing
Extension of Unemployment Benefits
- Bill provides an additional $300/week
- Coverage period from 26-Dec 2020 – 14-March-2021
- Coverage includes self-employed, gig workers, and others in nontraditional employment.
PPP Loan Forgiveness Process Simplified
- Simplified forgiveness application process for loans of $150,000 or less
- Act provides that a borrower shall receive forgiveness if a borrower signs and submits to the lender a certification that is not more than one page in length, includes a description of the number of employees the borrower was able to retain because of the loan, the estimated total amount of the loan spent on payroll costs, and the total loan amount.
- Borrowers are required to retain relevant records related to employment for four years and other records for three years, as the SBA may review and audit these loans to check for fraud.
- Repeals the requirement that PPP borrowers deduct the amount of any EIDL advance from their PPP forgiveness amount.
If you have questions or concerns regarding the PPP or loan forgiveness, please contact us.
Upcoming Key Dates:
1/15/2021: 4th Quarter Individual Estimated Tax Payment Deadline
2/1/2021: W-2 Forms due to employees
2/1/2021: 1099 Forms reporting non-employee compensation, bank interest, dividends, and/or distributions from a retirement plan due to fund recipients
Please note, these laws and related policies will continue to evolve in the coming weeks and are subject to change/clarification. Therefore, information contained within this communication is provided for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional accountant. Presentation of the information via the internet is not intended to create, and receipt does not constitute, an accountant-client relationship. ATS CPA & Consulting Services, Inc. specifically disclaims any liability for any direct, indirect, incidental, consequential or special damages arising out of or in any way connected with access to or use of this information.