Payroll Protection Loans & Business Relief Reminders
Updated on April 21 at 9:00 a.m.
Late last week, the funding for the payroll protection program (PPP) loans under the CARES Act was exhausted. Congress is negotiating adding additional funds to the program and is targeting to have these additional funds available as soon as possible. We encourage clients to reach out to their banks if they did not receive a PPP loan with the original funding to be ready to apply when additional funds are provided.
Those businesses that have received or will be receiving PPP loans should establish good accounting practices to track expenses to maximize the loan forgiveness. Loan recipients have eight weeks to use the funds for qualifying expenses such as payroll, rent, utilities and mortgage interest on debt. However, there is limited guidance available on how the loan forgiveness will be calculated. We recommend clients keep a real-time summary of the loan utilization and copies of invoices, payroll summaries, cancelled checks and bank statements to help demonstrate the qualifying expenses. Clients should work with their lenders to understand what is expected for supporting documentation for loan forgiveness.
In addition to the PPP loans, we wanted to remind clients of the other relief options available. Below is a summary of some of the programs for clients to consider and additional details can be found on our COVID-19 Resources page here. This page also has a link to the IRS website where new FAQ’s and resources are being posted.
- Employee Retention Tax Credit (ERTC) – This credit is for employers who did not utilize the PPP loan. It allows for a credit of 50% of qualified wages paid, claimed on your quarterly payroll tax returns, for employers who were shut down or experienced a significant decline in gross receipts due to COVID-19.
- Paid Sick Leave & Paid Family Leave Credits – This credit allows employers who have paid sick and family leave wages to employees for COVID-19 reasons to receive a refundable credit on their quarterly payroll tax returns. This credit is for the full amount of qualified sick and family leave paid, the allocable qualified health plan expenses and employer’s share of Medicare tax on these wages. This credit can be utilized by employers who have received the PPP loan or ERTC.
- Deferral of Employment Tax Deposits – Employers can defer payment of their employer’s share of social security taxes and self-employed individuals can defer payment of some self-employment taxes on taxes incurred through December 31, 2020. One-half of the deferred social security tax payment would be due on December 31, 2021 and the remainder would be due December 31, 2022. Employers utilizing the PPP loan can only defer employer’s social security taxes until the lender issues a decision to forgive the PPP loan.
Please reach out to us, as we are here to help you navigate through these different programs and difficult times.