all you need to know about the ppp forgiveness application · the borrower can apply for...
TRANSCRIPT
All You Need to Know About the PPP
Forgiveness ApplicationChris MartinSenior Manager A&A Practice
Karen HendersonSenior Manager
Tax Practice
Agenda
• EZ Application
• PPP Forgiveness Application Example
• Safe Harbors Available
• 24-Week Period Versus 8-Week Period
• Other Considerations
2
EZ Application ChecklistThe Borrower can apply for forgiveness of PPP loan using this SBA Form 3508EZ if they can check at least one of the three boxes below:
Self-employed, independent contractor, or sole proprietor with no employees at time of application and no salaries used to calculate loan.
Did not reduce annual salary or hourly wages of any employee (making less than $100k during 2019) by more than 25% during covered period compared to 1/1/20-3/31/20 – AND – did not reduce employees or average paid hours between 1/1/20 and end of covered period.
• This does no include reductions arising from inability to hire or rehire due to refusal to work
Did not reduce annual salary or hourly wages of any employee (making less than $100k during 2019) by more than 25% during covered period compared to 1/1/20-3/31/20 – AND – unable to operate due to compliance with social distancing, sanitation, or other safety measures
Applicants who do not meet any of the above test must complete the standard application, which has been streamlined to 5 pages
3
EZ Application
4
Standard Form Workshop• Page 1 – Informational• Schedule A – Worksheet
• Salary and Wage Reduction Calculation• Payroll/FTE Calculation
• Safe Harbors – Three Options• Schedule A• Page 1 – The “meat” of the Application• Certifications
5
Assumptions• 200 FTE average through 2/15/2020• Dropped to 140 average FTEs during 2/15/2020 – 4/26/2020• Did not bring back FTE’s during 2020• Decrease in total payroll of about 33% due to decreased headcount of 30%• Using alternative covered period - first payroll was paid on 5/15 /2020• NOT electing 8-week covered period• Total payroll, including owner’s comp, is $3,200,000 during 24-weeks
6
Standard Application
EIDL, if applicable
7
Standard Application
8
Payroll Costs
Eligible Payroll Costs Include:• Payment for/of:
• vacation, parental, family, medical, or sick leave. • allowance for dismissal or separation (severance)• required group health care benefits• retirement benefit • state or local tax assessed on the compensation of employees
9
Key Items to Note• Payroll Forgiveness Costs
• $46,154 - if using 24-week period for employees plus other payroll costs
• Self-employed, general partners of partnership, owner-employees of Corps
• Limited to original loan amount $100K/12 X 2.5 = $20,833 now instead of eight weeks or $15,385
• Consideration for S-corporation owners:
• Health insurance can not be included when calculating payroll costs
• Retirement costs can be included
10
Schedule A Worksheet
11
Salary/Hourly Wage Reduction
12
Jr.
Salary/Hourly Wage Reductions
• Average FTE based on 40-hour work week• Take average hours worked per week and divide by 40• Round to nearest tenth – capped at 1.0• Simplified method – 40 hours = 1.0; Less than 40 hours = 0.5
13
Salary/Hourly Wage Reductions
14
Salary/Hourly Wage Reductions
15
Workbook
16
Jr.
Schedule A Worksheet
From Workbook
17
Schedule A Worksheet
18
Workbook
19
Schedule A Worksheet
From Workbook
20
FTE Safe Harbors
21
FTE Safe Harbor 2• Restoration of FTE’s by the earlier of application date or 12/31/20…
22
FTE Safe Harbor 2
Reference period -whichever is more beneficial (lower)
2/15/19-6/30/19 or 1/1/20-2/29/20
23
FTE Safe Harbor 2
140 < 200 so line 13 of Schedule A must be completed!
24
FTE Safe Harbor 2
Schedule A
25
Additional Safe Harbor Considerations• Good-faith written offer to rehire during covered period was rejected• Employee fired “for cause,” resigned, or took reduced hours
These reductions are added back on Table 1 of Schedule A Worksheet
26
Assumptions for Schedule A
• No mortgage interest• Rent = $15k/month• Utilities = $10k/month• Health insurance = $200k for covered period• Retirement plan matching contributions = $96k for covered
27
Schedule AEmployees <
$100k
Employees > $100k
Cap – 2.5 mos. avg.
28
Standard Application
29
30
8 or 24 Weeks?What’s the rush?
• Lenders aren’t ready
• 10-month deferral
• Payroll costs alone enough for forgiveness– less room for error
• Tailored reports from payroll providers
• Tracking info for a longer vs. shorter period
• Things may change...new legislation?
31
Considerations• Timing of forgiveness period• Changes in FTE’s and salary reductions• Need for non-payroll costs• Tax considerations• GAAP/financial statements• Nonprofit organizations• PPPforgivenesstool.com – from the AICPA
32
Contact Information
Chris Martin, CPA Senior Manager, SobelCo
Karen Henderson, CPASenior Manager, SobelCo
Visit our website for additional information: SobelCoLLC.comEmail our PPP Help Desk – [email protected] 33