Author Topic: Paycheck Protection Program changes and update  (Read 1373 times)

SeattleCPA

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Paycheck Protection Program changes and update
« on: December 22, 2020, 02:23:12 PM »
If you run a small business, you want to REALLY be on top of the PPP law changes that are going into effect.

Here's a summary:

1. Program is restarting with the leftover money from last time plus roughly another $150B. That's a lot. But may go quickly.

2. If you got short-changed last time, you may be able to "top off" your loan to the right amount. These are called PPP loan amount increases.

3. If your business has suffered a 25 percent drop in revenues (as compared usually to the same quarter in 2019), you can get a second PPP loan. E.g., if you got $100K first time? You can maybe get $100K "second draw" PPP loan. (That's what these are called.)

4. The PPP money is now tax free. Congress makes that clear in the new bill. I.e., the loan forgiveness isn't taxable. The spending you fund with PPP money leads to deductions. A technical point, if you run a partnership or S corp, you get "basis" for the PPP forgiveness income.

5. If you borrowed $150K or less, the new forgiveness application process, which isn't available yet, basically works as an honor system. You certify your numbers are right. You get forgiveness. The SBA could audit you...Bottomline, though, you don't provide a pile of paperwork. (So, basically, this works the same way a tax return works.)

If your have a small business that's been beat up by Covid-19, these changes and the restarting of the program may be the help you need to get back into action.

So the takeaway: Stay on top of your bank's timeline and be ready!

Happy holidays everyone...

terran

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Re: Paycheck Protection Program changes and update
« Reply #1 on: December 22, 2020, 04:29:50 PM »
3. If your business has suffered a 25 percent drop in revenues (as compared usually to the same quarter in 2019), you can get a second PPP loan. E.g., if you got $100K first time? You can maybe get $100K "second draw" PPP loan. (That's what these are called.)

What I'm seeing seems to indicate that for businesses established before 2019 they'll look at the whole of 2019 compared to the whole of 2020. Is that your understanding, or are you saying there will be some kind of quarter by quarter determination?

Any idea what the documentation for a sole proprietor without employees will look like for 2020 income since we obviously haven't completed 2020 taxes yet?

SeattleCPA

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Re: Paycheck Protection Program changes and update
« Reply #2 on: December 22, 2020, 05:02:25 PM »
I just re-read the first paragraph for businesses operating all four quarters of 2019. It appears below:

‘‘(bb)(AA) except as provided in subitems (BB), (CC), and (DD), had gross receipts during the first, second, third, or,
only with respect to an application submitted on or after January 1, 2021, fourth quarter in 2020 that demonstrate not less than a 25 percent reduction from the gross receipts of the entity during the same quarter in 2019;


That seems pretty clear to me. Just one quarter "does it"... BTW the thing about the fourth quarter? You need to wait until the quarter is over before you count the quarter's revenues. Otherwise just cutting off, say, December, will probably give you the required 25 percent.

Not sure I understand your documentation question... but you need zero documentation now if loan $150K or less. So it's an honor system thing (like a tax return)...
« Last Edit: December 22, 2020, 05:05:15 PM by SeattleCPA »

Alternatepriorities

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Re: Paycheck Protection Program changes and update
« Reply #3 on: December 22, 2020, 06:13:46 PM »
WF still hasn't figured out what they want me to do on the first one. They just keep advising me that it's okay to let it sit until the SBA figures out the the rules for real...

Kroaler

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Re: Paycheck Protection Program changes and update
« Reply #4 on: December 22, 2020, 06:27:03 PM »
It kinda sucks that it requires you to be in business since 2019, cause as a business that opened Q1 2020... Coronavirus was an unpleasant surprise.

I guess it makes sense that a more established business has higher need.

terran

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Re: Paycheck Protection Program changes and update
« Reply #5 on: December 22, 2020, 09:02:08 PM »
I just re-read the first paragraph for businesses operating all four quarters of 2019. It appears below:

‘‘(bb)(AA) except as provided in subitems (BB), (CC), and (DD), had gross receipts during the first, second, third, or,
only with respect to an application submitted on or after January 1, 2021, fourth quarter in 2020 that demonstrate not less than a 25 percent reduction from the gross receipts of the entity during the same quarter in 2019;


That seems pretty clear to me. Just one quarter "does it"... BTW the thing about the fourth quarter? You need to wait until the quarter is over before you count the quarter's revenues. Otherwise just cutting off, say, December, will probably give you the required 25 percent.

Not sure I understand your documentation question... but you need zero documentation now if loan $150K or less. So it's an honor system thing (like a tax return)...

So a 25% reduction in any one quarter 2019 vs 2020 should make you eligible for a "second draw" regardless of what happened in the other quarters?

By documentation I mean for the first round my bank had me submit my 2019 Schedule C, but we no one has completed a 2020 schedule C yet, and even if they had it won't show quarter by quarter income. Are you saying even that won't be needed and you just need to say one quarter was down 25% in 2020 from the same quarter in 2019, presumably with the possibility you'll be audited?

Wile E. Coyote

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Re: Paycheck Protection Program changes and update
« Reply #6 on: December 22, 2020, 09:08:08 PM »
It kinda sucks that it requires you to be in business since 2019, cause as a business that opened Q1 2020... Coronavirus was an unpleasant surprise.

I guess it makes sense that a more established business has higher need.

It doesn’t require you to have been in business during 2019. You have to have been in business on February 15, 2020.

SeattleCPA

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Re: Paycheck Protection Program changes and update
« Reply #7 on: December 23, 2020, 07:08:27 AM »
It kinda sucks that it requires you to be in business since 2019, cause as a business that opened Q1 2020... Coronavirus was an unpleasant surprise.

I guess it makes sense that a more established business has higher need.

I think you need to be in business on February 15, 2020. That's the requirement.

Kroaler

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Re: Paycheck Protection Program changes and update
« Reply #8 on: December 23, 2020, 07:13:03 AM »
Interesting!

So I've read that it even extends to partnerships. (That's all my business has, just 2 partners)

The trouble I have is all the examples point to using the 1065 from 2019 to calculate the base monthly amount. I haven't found the "how to calculate if you opened in 2020 and don't have a 2019 1065" explanation yet.

SeattleCPA

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Re: Paycheck Protection Program changes and update
« Reply #9 on: December 23, 2020, 07:15:38 AM »
So a 25% reduction in any one quarter 2019 vs 2020 should make you eligible for a "second draw" regardless of what happened in the other quarters?


Yes, I think so. Also just to make this point, there is that "economic uncertainty" certification. And then maybe this stipulation: This thing, like much of the federal and state policy responses to pandemic, doesn't necessarily make a whole lot of sense.

By documentation I mean for the first round my bank had me submit my 2019 Schedule C, but we no one has completed a 2020 schedule C yet, and even if they had it won't show quarter by quarter income. Are you saying even that won't be needed and you just need to say one quarter was down 25% in 2020 from the same quarter in 2019, presumably with the possibility you'll be audited?

I hate it when people in my role say things like, "Well we need the SBA to provide additional guidance, such as an interim final rule, to know details about how this works..." But, er, yeah, we probably need to wait.

Here is a guess. Second draw PPP borrowers will need to probably either "certify" or "attest" they qualify. And at some point, maybe in the forgiveness application maybe in the PPP loan application, they'll need to "show their math."

I've updated this earlier blog post I did on the second draw PPP loans:

https://evergreensmallbusiness.com/ppp-second-draw-loans/

It provides a bit more detail.

This frustrating reality to note, too. Though both House and Senate passed bill with overwhelming veto-proof majorities, Trump recent statements probably create a lot of uncertainty about timing, details and maybe even passage of bill.

SeattleCPA

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Re: Paycheck Protection Program changes and update
« Reply #10 on: December 23, 2020, 07:18:08 AM »
Interesting!

So I've read that it even extends to partnerships. (That's all my business has, just 2 partners)

The trouble I have is all the examples point to using the 1065 from 2019 to calculate the base monthly amount. I haven't found the "how to calculate if you opened in 2020 and don't have a 2019 1065" explanation yet.

If you were short-changed because bank didn't understand partners were eligible for PPP money, you can apply for a PPP loan increase. Here's a blog post with gritty details. Surely, partnerships are one of the categories that get to do this. Others are farmers and ranchers, fishing boat crew members:

https://evergreensmallbusiness.com/ppp-loan-amount-increases/

BTW, I would not be surprised if SBA lets other people who goofed up their initial PPP loan amount also "fix" the earlier mistake.

terran

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Re: Paycheck Protection Program changes and update
« Reply #11 on: December 23, 2020, 09:02:45 AM »
Thanks as always @SeattleCPA for keeping the forum up to date on all these new developments! I'll keep my eye on by bank's website. They were pretty good about it last time around.

SeattleCPA

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Re: Paycheck Protection Program changes and update
« Reply #12 on: December 23, 2020, 11:42:10 AM »
Thanks as always @SeattleCPA for keeping the forum up to date on all these new developments! I'll keep my eye on by bank's website. They were pretty good about it last time around.

:-)

Lamancha

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Re: Paycheck Protection Program changes and update
« Reply #13 on: December 23, 2020, 08:04:20 PM »
Thanks for the updates!
If we already sent our banks the info needed for the first PPP loan can't they just use that to issue the second loan in the exact same amount as the first?

SeattleCPA

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Re: Paycheck Protection Program changes and update
« Reply #14 on: December 28, 2020, 02:58:48 PM »
Thanks for the updates!
If we already sent our banks the info needed for the first PPP loan can't they just use that to issue the second loan in the exact same amount as the first?

I think you'll need to fill out a new application. The second draw PPP loans work slightly different.

BTW, remember that if you got the wrong amount, you may retroactively be able to increase your first draw PPP loan...

Michael in ABQ

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Re: Paycheck Protection Program changes and update
« Reply #15 on: December 28, 2020, 03:29:58 PM »
My e-commerce business has only grown since Covid hit so I guess I'm ineligible. I'm up 250% over last year in terms of revenue (albeit from a relatively low starting point). However, as a sole proprietor 2.5 months worth of my "payroll" would have been a pittance.


Queen Frugal

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Re: Paycheck Protection Program changes and update
« Reply #16 on: December 28, 2020, 04:04:35 PM »
Interesting!

So I've read that it even extends to partnerships. (That's all my business has, just 2 partners)

The trouble I have is all the examples point to using the 1065 from 2019 to calculate the base monthly amount. I haven't found the "how to calculate if you opened in 2020 and don't have a 2019 1065" explanation yet.

If you were short-changed because bank didn't understand partners were eligible for PPP money, you can apply for a PPP loan increase. Here's a blog post with gritty details. Surely, partnerships are one of the categories that get to do this. Others are farmers and ranchers, fishing boat crew members:

https://evergreensmallbusiness.com/ppp-loan-amount-increases/

BTW, I would not be surprised if SBA lets other people who goofed up their initial PPP loan amount also "fix" the earlier mistake.

As a small business owner, I enjoyed your blog post.

SeattleCPA

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Re: Paycheck Protection Program changes and update
« Reply #17 on: December 28, 2020, 06:37:51 PM »
Interesting!

So I've read that it even extends to partnerships. (That's all my business has, just 2 partners)

The trouble I have is all the examples point to using the 1065 from 2019 to calculate the base monthly amount. I haven't found the "how to calculate if you opened in 2020 and don't have a 2019 1065" explanation yet.

If you were short-changed because bank didn't understand partners were eligible for PPP money, you can apply for a PPP loan increase. Here's a blog post with gritty details. Surely, partnerships are one of the categories that get to do this. Others are farmers and ranchers, fishing boat crew members:

https://evergreensmallbusiness.com/ppp-loan-amount-increases/

BTW, I would not be surprised if SBA lets other people who goofed up their initial PPP loan amount also "fix" the earlier mistake.

As a small business owner, I enjoyed your blog post.

😎