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COVID-19 Business Tips - May 2020

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May 2020

Tech Checks e-Guide for Small Business

News & Insights to Navigate the World of Small Business
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PPP Loan Forgiveness Guidelines – More Questions than Answers
 
You may have heard that The Treasury Department and Small Business Administration released a loan forgiveness application form for the CARES Act’s Paycheck Protection Program (PPP), which was supposed to clarify much of the confusion around the forgiveness part of the program. 

But according to the American Institute of CPAs and many accountants, while the document and related instructions partially address some issues, it leaves others unaddressed and does not fully clarify the questions many small businesses are left wondering about.

However, major issues remain. In particular, small businesses need flexibility on when the 8-week period should start or if they need to have the covered period extended to more than 8 weeks.

The forgiveness application form does help address some administrative items such as providing additional clarity around “costs incurred but not paid” during the covered period.. 

Here are some of the points that were clarified by the most recent release:

What happens if receive my PPP loan and re-hire my employees?

You would be maximizing your loan forgiveness, provided that you had the same number of full-time employees last year during the same time period.

What happens if I don’t re-hire all of my employees?

If your business won’t be able to bring back all of the former employees, you will have to split your loan 75/25. 75% of the PPP loan will go towards payroll, while the remaining 25% will go towards your expenses. 

How do I calculate my expenses from the PPP loan?

Start separate records of all your expenses related to the loan. You should include any allowable payroll, rent, benefits, and utility expenses in your records. Allowable payroll includes the full retirement benefits, state and local taxes, and any healthcare coverage paid for by the employer.

Will I be forgiven for costs incurred and payment made during the covered period payroll cost?

There isn’t a clear answer to this right now, but you would likely not be allowed to make prepayments or be able to pay your bills after the pay period.

There is a helpful calculator on the AICPA website that can help business owners calculate what part of their PPP loan is forgivable. However, since the guidance is constantly changing, the calculator requires frequent updates.

Disclaimer: Tech Checks doesn't imply any guarantee or endorsement of the information provided. The information in this article was taken from Industry Week. You can read the full article here.

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