As we are nearing the last quarter of the year, businesses that received the PPP loan are now starting to get emails from their lenders to began gathering their documents to apply for forgiveness.
Here are some points regarding our take on the timeline along with important dates to keep in mind.
Possibly delay applying for forgiveness
With the tremendous administrative pressure on banks and the SBA to process millions of forgiveness applications. There have been numerous discussions and proposed bills in congress to automatically forgives PPP loans which are under $150,000.
An example is Marco Rubios recent bill which for examples says that small businesses who borrowed less than $150,000 don’t need to provide substantiation of their spending. They need to attest that they followed the program requirements and keep records for three years in case the SBA wants to do an audit. Note this is a proposed bill not not a law yet.
Based on these discussions we believe it is best to wait to see if Rubio’s bill or another bill is passed which will streamline the forgiveness process.
Possibly use the 24 week Covered Period
When it is time to apply forgiveness, we believe most clients will benefit from the 24 week forgiveness period, because the PPP loan provides 10 weeks of payroll, which can easily be used within 24 weeks.
Review and possibly reinstate any reduced headcount by Dec 31st 2020.
For full PPP forgiveness, your total employees on payroll should be the same as the total number employees you had on Feb 15 2020. If not you have until Dec 31st 2020 to bring your total employee count back up to that level and still receive full forgiveness.
If you can’t bring the employee levels back up to Feb 15 2020 numbers there are six exemptions which can be applied.
For any employees during the … Covered Period
1. The Borrower made a good-faith, written offer to rehire an employee, which was rejected by the employee
2. Were fired for cause
3. Voluntarily resigned
4. Voluntarily requested and received a reduction of their hours
5. Borrower made a good faith, written offer to restore any reduction in hours at the same salary or wages, but the employee rejected
6. Borrower was unable to hire similarly qualified employees for unfilled positions by December 31, 2020
• Any FTE reductions in these cases do not reduce the Borrower’s loan forgiveness.
What should you be doing?
Doctors and Dental offices have faced unique challenges in staffing along with office closures during the second quarter.
Talk to your CPA to see what strategy they have in place to ensure they have taken the above items in consideration for your business plan. For our clients, we are taking the above items in consideration and are working to roll out action items as we get more clarity from law makers and the SBA.
Here’s to your best financial future ever!
Written by Omar Virjee, CPA. For more information on our services, please feel free to contact one of our Doctor CPA team members by calling 713-396-3172 or emailing firstname.lastname@example.org
Disclaimer- Advise in this blog should not be taken as tax advise. Each person’s tax circumstance is different and unique. Using these strategies without full knowledge of the current IRS rules and regulations regarding the specific items discussed can result in heavy fines, penalties and interest. Please discuss the guidance in this document with a tax expert before making any decisions.