This is what we have been able to glean so far from SBA and Department of the Treasury notices (along with CPA and Law firm interpretations).
The SBA will be relying on banks to gather and submit the required paperwork for PPP Loan forgiveness. Fully expect some banks to ask for more documentation than others. Some banks are asking for the PPP funds to go into a separate account. Keep very good records and be prepared to submit details.
Loan forgiveness will be based upon maintaining headcount, maintaining wages for each employee and payroll cost/other cost ratio.
Headcount reduction is determined by dividing the base FTE headcount during the 8 weeks of the PPP loan by the base FTE headcount during the look back period. The look back period is either from 1/1/20 to 2/29/20 OR 2/15/19 to 6/30/19 at the borrower’s discretion. There is no definition yet of full-time equivalent (FTE) employees. Until that is issued, the best advice is to use 30 hours of part-timers = 1 FTE as that’s been used before by the agencies involved.
Forgiveness is reduced for not maintaining wages per employee. The lookback period for wage level is 1st Q 2020. If any employee’s salary is reduced by more than 25% during the 8 weeks of the PPP then the forgiveness is reduced dollar-for-dollar by the dollar amount of the portion beyond the 25% reduction. For employees earning more then $100,000, reductions are only considered if the employee ends up below $100,000 annualized in the more than 25% reduction. There has been no guidance given yet on how to calculate or compare these periods, for now, best advice is to use a weekly average for both periods.
And lastly at least 75% of the forgiveness must be payroll costs. Payroll costs include wages, commission, tips, paid leave, insurance premiums, retirement contributions, etc. Wages above $100,000 annualized to any single employee are excluded. The rest (up to 25%) must be for mortgage, rent or utilities. If more is spent in non-payroll categories the forgiveness will still cap based upon the 75% / 25% ratio.
There is no final guidance on the order of reduction, but everything I have read is presuming that the headcount reduction will be first and then the wage level reduction and then the 75% / 25% calculation will be last. In most cases this produces the biggest overall reduction in forgiveness so it’s safest for projections.
A company had 10 FTE employees during the preferred look back period. During the PPP period they had 6 FTE employees. They reduced 1 of the employee’s wages by 30% (by reducing their hours average from 30 to 21 but keeping their rate at $11.00 an hour). During the PPP period they spent $30,000 on payroll, $4,000 on rent and $2,000 on utilities. They are looking for $36,000 in forgiveness.
They have a 60% reduction due to headcount, therefor $21,600 is eligible for forgiveness.
The wage reduction beyond a 25% reduction is $132 for the 8 weeks, therefor $21,468 is eligible for forgiveness.
Their payroll was 83% of the total, so the rent/utilities forgiveness is not reduced, therefor $21,468 is eligible for forgiveness.
The remaining $14,532 becomes a loan at 1% to be paid back over 2 years.
I don’t think I quite made the 1 sheet reference target, and even still this misses a lot of the finer details.
There are a couple of ways that employers could not keep headcount or wage levels during the 8 weeks of PPP but restore them by 6/30/20 and still get forgiveness, but there are no details at all on how that works or how long after 6/30/20 they’d have to keep those levels restored so I’ve left that off.
Future guidance may change everything here. Feel free to reach out to me if you have any questions, and I’ll do my best to help.
My Friend and Business Associate found this great information online. I wanted to pass it along.
Please consider talking with Katie about Human Resources issues, including payroll.COVID-19 Response Funds
Illinois COVID-19 Response Fund
For the People Collective Artists of Color Emergency Grants
America's Food Fund (National with Illinois Partners)
Arts for Illinois Relief Fund
Illinois Council on Developmental Disabilities Relief Fund
Illinois Humanities COVID-19 Emergency Relief Grants
Blue Cross Blue Shield of Illinois COVID-19 Community Collaboration Fund
Illinois Arts Council Agency Emergency Relief Fund
Serve Illinois Commission on Volunteerism and Community Service
Archdiocese of Chicago
Chicago Federation of Musicians Relief Fund
Big Shoulders Fund
The Resurrection Project Rapid Relief Fund
Cook County's Community Recovery Initiative
A Better Chicago Emergency Relief Fund
City of Chicago Small Business Resiliency Fund
Chicago Theatre Workers Relief Fund
Chicago COVID-19 Journalism Fund
Chicago Community COVID-19 Response Fund
3Arts Artist Resources
Brave Space Alliance Crisis Pantry and Mutual Aid
#LetUsBreathe Collective's Stimulus Package for Humanity City of Chicago COVID-19 Artist Relief Information Page
Open Door Advisor's COVID-19 Emergency Relief Funding Opportunities Guide
DuPage Foundation Fund
Community Memorial Foundation COVID-19 Urgent Response Fund
Evanston Community Foundation Rapid Response Fund
Fox Valley Grantmakers COVID-19 Response Fund
United Way of Northwest Illinois COVID-19 Response Fund
Community Foundation of Grundy County Disaster Fund
Community Foundation of Kankakee River Valley Emergency Response Fund
Knox and Warren County
Galesburg Community Foundation Rapid Response Fund
United Way of Lake County, Lake County Government, Lake County Community Foundation, and the Lake County Municipal League COVID-19 Response Fund
Community Foundation for McHenry County and United Way of Greater McHenry County COVID-19 Response Fund
Morton Community Foundation Disaster Relief Fund
Oak Park River Forest
Oak Park-River Forest Rapid Response and Recovery Fund
Quad Cities Community Foundation Disaster Relief Fund
United Way of Quad Cities Actions & Info
Community Foundation of the Quincy Area COVID-19 Nonprofit Response Fund
Southeastern Illinois COVID-19 Relief Fund
Community Foundation for the Land of Lincoln and United Way of Central Illinois COVID-19 Response Fund
United Way of Will County COVID-19 Response Fund
After spending most of my time during the "Shelter In Place" on Zoom (and Free Conference Call, WebEx, Global Meet and my trusty iPhone), I finally figured out what to do to make the podcast more of a regular feature and promote power partners GLM's clients should know and possibly utilize.
The idea is to talk with a business associate I know very well. Maybe they have worked with a client, or I have learned of their outstanding reputation from others I trust. During the 10 Minutes interview I make sure to ask most of these questions:
The IRS is regularly updating the Economic Impact Payment and the Get My Payment tool frequently asked questions pages on IRS.gov as more information becomes available. Taxpayers should check the FAQs often for the latest additions; many common questions are answered in these.
More than 80 million Economic Impact Payments have already been delivered to the nation’s taxpayers. More payments are on their way. As part of this effort, the IRS has launched two tools to help taxpayers get their payments:
Economic Impact Payments: www.irs.gov/eipfaq
Get My Payment tool: www.irs.gov/getmypaymentfaq
What to Do If Your Stimulus Check is For the Wrong Amount
A stimulus payment was deposited into your bank account, but it doesn't seem like the right amount. Who do you call?
The IRS started depositing payments into Americans' bank accounts less than three weeks after stimulus checks were authorized. In the first week alone, 80 million payments were made. That's quite an accomplishment, and the IRS should be applauded for cranking out deposits so quickly…but, in some ways, the rollout hasn't exactly gone according to plan.
There have been a few bumps in the road, such as problems with the "Get My Payment" tracking tool, deposits sent to incorrect bank accounts, and indecision on whether Social Security recipients would automatically receive payment. And, now, there are reports of people getting payments for the wrong amount. Sometimes, people are not getting the extra $500 for one or more children. In other cases, there's no apparent rhyme or reason why people received the amount they did. What do you do if this happens to you? Here's what we recommend.
1. IRS launches tool to help non-filers register for Economic Impact Payments
To help millions of people, the Treasury Department and the IRS launched a new web tool allowing quick registration for Economic Impact Payments for those who don’t normally file a tax return. The non-filer tool, developed in partnership between the IRS and the Free File Alliance, provides a free and easy option designed for people who don't have a return filing obligation, including those with too little income to file. The feature is available only on IRS.gov, and users should look for Non-filers: Enter Payment Info Here to take them directly to the tool.
"People who don't have a return filing obligation can use this tool to give us basic information so they can receive their Economic Impact Payments as soon as possible," said IRS Commissioner Chuck Rettig. "The IRS and Free File Alliance have been working around the clock to deliver this new tool to help people."
Economic Impact Payments will be distributed automatically to most people starting next week. Eligible taxpayers who filed tax returns for 2019 or 2018 will receive the payments automatically. Automatic payments will also go in the near future to those receiving Social Security retirement or disability benefits and Railroad Retirement benefits.
For more information and additional updates, visit IRS.gov/coronavirus.
2. IRS extends more tax deadlines to cover individuals, trusts and estates
The Department of Treasury and the Internal Revenue Service this week announced extensions of additional key tax deadlines for individuals and businesses.
Last month, the IRS announced that taxpayers generally have until July 15, 2020, to file and pay federal income taxes originally due on April 15. No late-filing penalty, late-payment penalty or interest will be due.
Notice 2020-23 expands this relief to additional returns, tax payments and other actions. As a result, the extensions generally now apply to all taxpayers that have a filing or payment deadline falling on or after April 1, 2020, and before July 15, 2020. Individuals, trusts, estates, corporations and other non-corporate tax filers qualify for the extra time. This means that anyone, including Americans who live and work abroad, can now wait until July 15 to file their 2019 federal income tax return and pay any tax due.
More information on tax relief is available at IRS.gov/coronavirus.
3. CARES Act: Guidance available on net operating losses
The Internal Revenue Service this week issued guidance providing tax relief under the CARES Act for taxpayers with net operating losses, in addition the agency issued tax relief for partnerships filing amended returns.
COVID Relief for taxpayers claiming NOLs
Revenue Procedure 2020-24 provides guidance to taxpayers with net operating losses that are carried back under the CARES Act by providing procedures for:
In Notice 2020-26, the IRS grants a six-month extension of time to file Form 1045 or Form 1139, as applicable, with respect to the carryback of a net operating loss that arose in any taxable year that began during calendar year 2018 and that ended on or before June 30, 2019. Individuals, trusts, and estates would file Form 1045, and corporations would file Form 1139.
COVID relief for partnerships with NOLs
The IRS also issued Revenue Procedure 2020-23, allowing eligible partnerships to file amended partnership returns using a Form 1065, U.S. Return of Partnership Income, by checking the “Amended Return” box and issuing amended Schedules K-1, Partner’s Share of Income, Deductions, Credits, to each of its partners. Partnerships filing these amended returns should write “FILED PURSUANT TO REV PROC 2020-23” at the top of the amended return.
The Treasury Department and the Internal Revenue Service today announced that distribution of economic impact payments will begin in the next three weeks and will be distributed automatically, with no action required for most people. However, some seniors and others who typically do not file returns will need to submit a simple tax return to receive the stimulus payment.
Who is eligible for the economic impact payment?
Tax filers with adjusted gross income up to $75,000 for individuals and up to $150,000 for married couples filing joint returns will receive the full payment. For filers with income above those amounts, the payment amount is reduced by $5 for each $100 above the $75,000/$150,000 thresholds. Single filers with income exceeding $99,000 and $198,000 for joint filers with no children are not eligible.
Eligible taxpayers who filed tax returns for either 2019 or 2018 will automatically receive an economic impact payment of up to $1,200 for individuals or $2,400 for married couples. Parents also receive $500 for each qualifying child.
How will the IRS know where to send my payment?
The vast majority of people do not need to take any action. The IRS will calculate and automatically send the economic impact payment to those eligible.
For people who have already filed their 2019 tax returns, the IRS will use this information to calculate the payment amount. For those who have not yet filed their return for 2019, the IRS will use information from their 2018 tax filing to calculate the payment. The economic impact payment will be deposited directly into the same banking account reflected on the return filed.
The IRS does not have my direct deposit information. What can I do?
In the coming weeks, Treasury plans to develop a web-based portal for individuals to provide their banking information to the IRS online, so that individuals can receive payments immediately as opposed to checks in the mail.
I am not typically required to file a tax return. Can I still receive my payment?
Yes. People who typically do not file a tax return will need to file a simple tax return to receive an economic impact payment. Low-income taxpayers, senior citizens, Social Security recipients, some veterans and individuals with disabilities who are otherwise not required to file a tax return will not owe tax.
How can I file the tax return needed to receive my economic impact payment?
IRS.gov/coronavirus will soon provide information instructing people in these groups on how to file a 2019 tax return with simple, but necessary, information including their filing status, number of dependents and direct deposit bank account information.
I have not filed my tax return for 2018 or 2019. Can I still receive an economic impact payment?
Yes. The IRS urges anyone with a tax filing obligation who has not yet filed a tax return for 2018 or 2019 to file as soon as they can to receive an economic impact payment. Taxpayers should include direct deposit banking information on the return.
I need to file a tax return. How long are the economic impact payments available?
For those concerned about visiting a tax professional or local community organization in person to get help with a tax return, these economic impact payments will be available throughout the rest of 2020.
Where can I get more information?
The IRS will post all key information on IRS.gov/coronavirus as soon as it becomes available.
The IRS has a reduced staff in many of its offices but remains committed to helping eligible individuals receive their payments expeditiously. Check for updated information on IRS.gov/coronavirus rather than calling IRS assistors who are helping process 2019 returns.
We understand that the COVID-19 pandemic is rapidly evolving. We are monitoring the situation and are following the recommendations of our public health authorities, as the health of our employees and clients is a top priority.
We are also keeping up-to-date on the various resources being made available. As they come up, we will keep you informed. We have a dedicated page on our website we will also keep up to date:
State of Illinois Resource
Illinois Emergency Small Business Grants and Loans Assistance
Under Governor JB Pritzker, DCEO is working with partners to launch emergency assistance programs for Illinois small businesses. For Suburban Businesses, these initiatives include:
Illinois Small Business Emergency Loan Fund: https://us.accion.org/small-business-loans/
DCEO and the Illinois Department of Financial and Professional Regulation (IDFPR) are establishing the Illinois Small Business Emergency Loan Fund to offer small businesses low interest loans of up to $50,000.
Businesses located outside of the City of Chicago with fewer than 50 workers and less than $3 million in revenue in 2019 will be eligible to apply. Successful applicants will owe nothing for six months and will then begin making fixed payments at a below market interest rate for the remainder of a five-year loan term.
Get More Details Here
Small Business Administration Resource
Disaster Assistance Loan Program: https://www.sba.gov/funding-programs/disaster-assistance
At first they were encouraging everyone to use the online application. Now they are asking to download the paperwork. Fill it out and upload it through their site. Please note if they are a Sole Proprietorship; they use a different Form (C)
Forms Available Here (If the Above Site is too Busy)
Get More Details Here
What Congress' stimulus package would mean to local business:
The $2 trillion economic rescue package approved by the U.S. Senate late Wednesday night and passed today in the House includes a number of provisions and aid for businesses struggling to maintain normalcy during the COVID-19 pandemic.
Get More Details Here
Your Bank Can Help
Contact your banker and have a conversation about your business and what is happening with it. They may be able to adjust your current loans to add months to the end of the loan to by-pass making payments now.
If you have existing SBA Loans you may have a way to differ payments for up to 6 Months.
Again, contact your banker and talk with them.
Sooner is Better then Later.
Get More Details Here
Other Resources Available
Local Business Support
Get More Details Here
WASHINGTON – The U.S. Treasury Department, Internal Revenue Service (IRS), and the U.S. Department of Labor (Labor) announced that small and midsize employers can begin taking advantage of two new refundable payroll tax credits, designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing Coronavirus-related leave to their employees. This relief to employees and small and midsize businesses is provided under the Families First Coronavirus Response Act (Act), signed by President Trump on March 18, 2020.
The Act will help the United States combat and defeat COVID-19 by giving all American businesses with fewer than 500 employees funds to provide employees with paid leave, either for the employee’s own health needs or to care for family members. The legislation will enable employers to keep their workers on their payrolls, while at the same time ensuring that workers are not forced to choose between their paychecks and the public health measures needed to combat the virus.
To take immediate advantage of the paid leave credits, businesses can retain and access funds that they would otherwise pay to the IRS in payroll taxes. If those amounts are not sufficient to cover the cost of paid leave, employers can seek an expedited advance from the IRS by submitting a streamlined claim form that will be released next week.
The Act provided paid sick leave and expanded family and medical leave for COVID-19 related reasons and created the refundable paid sick leave credit and the paid child care leave credit for eligible employers. Eligible employers are businesses and tax-exempt organizations with fewer than 500 employees that are required to provide emergency paid sick leave and emergency paid family and medical leave under the Act. Eligible employers will be able to claim these credits based on qualifying leave they provide between the effective date and Dec. 31, 2020. Equivalent credits are available to self-employed individuals based on similar circumstances.
The Act provides that employees of eligible employers can receive two weeks (up to 80 hours) of paid sick leave at 100% of the employee’s pay where the employee is unable to work because the employee is quarantined, and/or experiencing COVID-19 symptoms, and seeking a medical diagnosis. An employee who is unable to work because of a need to care for an individual subject to quarantine, to care for a child whose school is closed or child care provider is unavailable for reasons related to COVID-19, and/or the employee is experiencing substantially similar conditions as specified by the U.S. Department of Health and Human Services can receive two weeks (up to 80 hours) of paid sick leave at 2/3 the employee’s pay. An employee who is unable to work due to a need to care for a child whose school is closed, or child care provider is unavailable for reasons related to COVID-19, may in some instances receive up to an additional 10 weeks of expanded paid family and medical leave at 2/3 the employee’s pay.
Paid Sick Leave Credit
For an employee who is unable to work because of Coronavirus quarantine or self-quarantine or has Coronavirus symptoms and is seeking a medical diagnosis, eligible employers may receive a refundable sick leave credit for sick leave at the employee’s regular rate of pay, up to $511 per day and $5,110 in the aggregate, for a total of 10 days.
For an employee who is caring for someone with Coronavirus, or is caring for a child because the child’s school or child care facility is closed, or the child care provider is unavailable due to the Coronavirus, eligible employers may claim a credit for two-thirds of the employee’s regular rate of pay, up to $200 per day and $2,000 in the aggregate, for up to 10 days. Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.
Child Care Leave Credit
In addition to the sick leave credit, for an employee who is unable to work because of a need to care for a child whose school or child care facility is closed or whose child care provider is unavailable due to the Coronavirus, eligible employers may receive a refundable child care leave credit. This credit is equal to two-thirds of the employee’s regular pay, capped at $200 per day or $10,000 in the aggregate. Up to 10 weeks of qualifying leave can be counted towards the child care leave credit. Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.
Prompt Payment for the Cost of Providing Leave
When employers pay their employees, they are required to withhold from their employees’ paychecks federal income taxes and the employees' share of Social Security and Medicare taxes. The employers then are required to deposit these federal taxes, along with their share of Social Security and Medicare taxes, with the IRS and file quarterly payroll tax returns (Form 941 series) with the IRS.
Under guidance that will be released next week, eligible employers who pay qualifying sick or child care leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child care leave that they paid, rather than deposit them with the IRS.
The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees.
If there are not sufficient payroll taxes to cover the cost of qualified sick and child care leave paid, employers will be able file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less. The details of this new, expedited procedure will be announced next week.
If an eligible employer paid $5,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes, including taxes withheld from all its employees, the employer could use up to $5,000 of the $8,000 of taxes it was going to deposit for making qualified leave payments. The employer would only be required under the law to deposit the remaining $3,000 on its next regular deposit date.
If an eligible employer paid $10,000 in sick leave and was required to deposit $8,000 in taxes, the employer could use the entire $8,000 of taxes in order to make qualified leave payments and file a request for an accelerated credit for the remaining $2,000.
Equivalent child care leave and sick leave credit amounts are available to self-employed individuals under similar circumstances. These credits will be claimed on their income tax return and will reduce estimated tax payments.
Small Business Exemption
Small businesses with fewer than 50 employees will be eligible for an exemption from the leave requirements relating to school closings or child care unavailability where the requirements would jeopardize the ability of the business to continue. The exemption will be available on the basis of simple and clear criteria that make it available in circumstances involving jeopardy to the viability of an employer’s business as a going concern. Labor will provide emergency guidance and rulemaking to clearly articulate this standard.
Labor will be issuing a temporary non-enforcement policy that provides a period of time for employers to come into compliance with the Act. Under this policy, Labor will not bring an enforcement action against any employer for violations of the Act so long as the employer has acted reasonably and in good faith to comply with the Act. Labor will instead focus on compliance assistance during the 30-day period.
For More Information
For more information about these credits and other relief, visit Coronavirus Tax Relief on IRS.gov. Information regarding the process to receive an advance payment of the credit will be posted next week.
In true blog fashion, the last parts are at the top of the page. Scroll all the way down and work your way back up to read them in order.
Tom is the Business Development Manager for GLM. If you are interested in learning more about GLM's services, contact him: