2. Disclaimer
The information provided in the materials presented
here is provided for general information and
educational purposes only, and is not intended to be,
does not constitute, and should not be relied upon as,
legal, accounting, tax, investment, or other
professional advice or services. Because every situation
is unique and fact-specific, you should consult a
professional who can thoroughly review and analyze
all aspects of your particular situation before making
any decision or taking action.
3. Agenda
♦ What was the CARES Act? (In a brief nutshell)
♦ The intertwining of ERTC and PPP
♦ Will this be taxable?
♦ Reduction of number of employees
♦ Documentation needed
♦ Other Resources
4. CARES Act: Brief Introduction
Where are we now?
Some local PPP Stats
♦Average company size was 8-9Team Members
♦Average Loan Request size was $114,372 (phase
one)
♦18% submitted through a Major Bank, 11%
through a Credit Union and 71% through a Local
or Regional Bank
6. CARES Act: Brief Introduction
Other Key Provisions
♦ Employee retention credit – provides a refundable payroll
tax credit for 50% of wages paid during the crisis.
♦ Delay of payment of employer payroll taxes – allows
employers to defer paying the employer portion of certain
payroll taxes through the end of 2020; 50% of deferral due
December 31, 2021 and 50% due December 31, 2022.
♦ Individual recovery rebate checks – $1,200 for individuals
and $2,400 for joint returns plus $500 for each qualifying
child.The credit is phased out when income exceeds
$75,000 for single taxpayers and $150,000 for joint returns
with a total phase out at $99,000 and $198,000.
7. CARES Act: Brief Introduction
Other Key Provisions
Continued
♦ Retirement plan distributions – 10% penalty waived on
any coronavirus related distribution up to $100,000.
Distribution can be returned to the qualified plan at any
time during next 3-years.
♦ Qualified Plan and IRA required minimum distribution can
be skipped for 2020.
♦ Above-the-line $300 charitable deduction for 2020 only.
♦ Modification of cap on individual cash charitable
contributions during 2020.
8.
9. ♦Lengthiest Congressional legislation in history
♦ 5,593 pages (Affordable Care Act was only 906 pages)
♦Given to legislators with hours to consider after
eight months of deliberation – packed with pork
♦Provided for new individual stimulus payments,
extended unemployment benefits, and support
for transportation, education and other targets
♦Confirmed deductibility of expenses applied to
PPP loan forgiveness
CARES Act: Brief Introduction
ConsolidatedAppropriations Act (CAA) of 2021
11. ♦In general, PPP loans made to eligible borrowers
qualify for full loan forgiveness if during the 8- to 24-
week covered period following loan disbursement:
♦ Employee and compensation levels are maintained
♦ The loan proceeds are spent on payroll costs and other eligible
expenses; and
♦ At least 60% of the proceeds are spent on payroll costs
PPP & ERTC
ConsolidatedAppropriations Act (CAA) of 2020
12. PPP & ERTC
CARES Act
Paycheck Protection Program (PPP) Loan
Non-payroll Expenses (25% maximum, adjusted to 40%)
♦ Mortgage interest payments for the business on real or personal
property (debt incurred before February 15, 2020);
♦ Rent or lease payments for the business on real or personal property
(lease in force before February 15, 2020); and
♦ Utility payments for the business for electricity, gas, water,
transportation, telephone, or internet access (service began before
February 15, 2020)
13. ♦ For 2020 Q2, Q3 and/or Q4 (for Q2, including March 13 - March 31,
2020), an employer can receive a credit equal to 50% of the first
$10,000 of QualifiedWages paid per employee in the aggregate for all
qualifying quarters.The maximum ERC for all of 2020 would be $5,000
per employee receiving QualifiedWages.
♦ For 2021, an employer can receive 70% of the first $10,000 of Qualified
Wages paid per employee in each qualifying quarter.The maximum
ERC for each such quarter would be $7,000 per employee receiving
QualifiedWages, and the maximum ERC for 2021 would be $28,000 per
employee receiving QualifiedWages.
PPP & ERTC
Amount of ERTC
14. ♦This is not an ERTC seminar so please seek more
details from your tax professional
♦We don’t know about owner’s (and related parties)
yet – IRS Notice 2021-49 – just added to confusion!
Passed August 4, 2021
♦No credit is available for any period for which an
employer is allowed a Work Opportunity Credit with
respect to an employee
♦No credit is available for wages used for PPP Loan
Forgiveness
PPP & ERTC
Caution with ERTC
19. PPP Loan ForgivenessTaxation
♦Original legislation made forgiveness tax free (No
CODI)
♦IRS ruled in July 2020 that the qualifying expenses
would not be deductible
♦Congressional leaders, AICPA, legal scholars have
pushed back, new legislation pending
♦IRS then ruled loss of deductions applies in 2020,
even if delaying forgiveness to 2021
♦Consolidating Appropriations Act of 2021 confirmed
that the deductions are allowed – December 2020
Will this be taxable?
20. PPP Loan ForgivenessTaxation
♦ PPP stays on Balance Sheet as a loan payable
until forgiven
♦Once it is forgiven, it is reclassed to “Other
Non-Taxable Income”
♦ Basis issues – you cannot receive basis for
“tax free” income
Will this be taxable?
23. “Reduction of number of employees”
Common questions
♦So how does the FTE adjustment work?
♦ Second test to maintain payroll - fraction of base compensation
♦ FTE of 8 week lookback period/FTE of pre-pandemic comp=??%
♦ Pre-pandemic period is 1/1/-2/29/2020OR 2/15/-6/30/2019
♦ FTE thought to be ACA 30 hour workweek, but may not matter*
♦ X% timesTotal Payroll Cost is amount of payroll for forgiveness
♦ Example: Payroll is $250k, 8 wks FTE is 20, pre-pandemic FTE 25
♦ So PPP forgiveness amount 20/25 x $250,000 or $200,000
♦ Is that over 75% of the loan proceeds? Hope so!
♦ No FTE limits if restored at > 75% of pre-pandemic level by 6/30
#Ashley Bell, SBA SE Regional Director, indicatesACA rule may not apply
24. “Reduction of number of employees”
Common questions
♦Be careful of potential exceptions:
♦If we laid off some folks and now they won’t come back to work!
♦ Document that you have offered them their job back and document
that they refused to return!
♦If we terminated an Employee for cause!
♦ You need to document the termination “for cause”
♦ Document that you attempted to fill that position but was unable to
do so
♦If we had an Employee retire!
♦ You need to document the retirement
♦ Document that you attempted to fill that position but was unable to
do so
26. Documentation needed
What paperwork do I need?
♦ For those with larger than 150k loans, there is definitely
more paperwork involved, so making sure to get all items
requested gathered in a clear, precise manner is probably
the biggest thing for us (and the banks/SBA).
♦ This helps speed up the process substantially when things
are put together well.
♦ It’s time consuming to track everything down, but will
definitely help you out when it gets sent to review.
♦ …and it is just good business practice!
27. Documentation needed
♦What documentation is required?
♦No real firm guidance on this yet (Check with your bank)
♦Reasonably similar to an income tax correspondence audit
♦ Payroll documentation (ledgers and payroll tax returns)
♦ Invoices for all benefits and all other allowable expenses
♦ Proof of payment of all related expenses
♦The FTE computation may be troublesome for staff
working other than a standard work week. Gather data
now and work on that process as you go or work with your
payroll service provider
28. Documentation needed
Common questions
♦What expenditures qualify for forgiveness of the
indebtedness?
♦Utilities – electricity, water, gas, telephone, internet.
Uncertain coverage for garbage, telephone submitted on
expense reports, IT support, CableTV, etc.
♦Transportation – no definitions
♦Mortgage interest on debt obligations in effect on February
15, 2020
♦Interest on other debt obligations in effect on February 15,
2020
29. Documentation needed
What you can do now!
♦Document your “certification” (rules were relaxed)
♦Gather lease agreements, mortgage documents,
evidence of utilities as of 02/15/20
♦Develop a system for tracking your PPP covered
expenses in your accounting system
♦Save cancelled checks, invoices, payroll reports & bank
statements regarding covered expenses
♦…and it is just good business practice!
31. Other resources
CARES Act
PPP Loan Forgiveness
Forgiveness applications accepted from 8/10/20 through 8/30/21
SBA Form 3508EZ for borrowers who did not reduce employee levels,
wages, or hours https://home.treasury.gov/system/files/136/PPP-Forgiveness-
Application-3508EZ.pdf
SBA Form 3508S for combined loans of $50,000 or less
https://home.treasury.gov/system/files/136/PPP-Loan-Forgiveness-Application-Form-
3508S.pdf
SBA Form 3508 for all other borrowers
https://home.treasury.gov/system/files/136/3245-0407-SBA-Form-3508-PPP-
Forgiveness-Application.pdf
or, more likely, your lender’s equivalent
32. Other resources
CARES Act
Paycheck Protection Program (PPP) Loan
More Resources
♦https://www.sba.gov/funding-programs/loans/coronavirus-relief-
options/paycheck-protection-program
♦https://home.treasury.gov/policy-issues/cares/assistance-for-
small-businesses
♦https://www.cpasite.com/helpful-resources/covid19stimulus/
33. Other resources
CARES Act
Paycheck Protection Program 2nd Draw (PPP2)
More Resources
♦https://www.sba.gov/document/policy-guidance-ifr-paycheck-
protection-program-ppp-second-draw-loans
♦https://www.sba.gov/document/policy-guidance-ifr-paycheck-
protection-program-ppp-second-draw-loans
♦For those who did not apply for the first draw loans, look here:
https://www.accountingtoday.com/news/sba-and-treasury-reopen-
paycheck-protection-program
