In this webinar, we discuss how the Paycheck Protection Program works and how to work with the PPP and Economic Injury Disaster Loans to get forgivable loans for your business.

1. Strategies for SBA
Disaster & CARES Act
Loans

2. Eric Wilder
Senior Tax Manager
WendroffCPA
Rafael Martinez, CTP
VP of Commercial Banking
Atlantic Union Bank
Today’s
Presenters:

3. Agenda:
- The COVID-19 Outbreak Stimulus Response Programs
- How to apply to the Paycheck Protection Program and
Economic Injury Disaster Loans
- Commonly Asked Questions
- Q&A

4. The Paycheck Protection Program (PPP)
- $349,000,000,000 in Small Business Loans
- Loan applications must be received before June 30, 2020
- No SBA Fees
- No collateral or personal guarantees required
- Apply through your local banker
- Loans 100% forgivable if used properly

5. PPP Terms
- Max loan amount: $10m
- Max interest rate: 1%
- Max term: 2 years
- No prepayment fees
- Payments deferred for 6 months- Interest will accrue
- No borrower/lender fees

6. PPP Application Documents Needed
- IRS Forms 941 for 3/31/19, 6/30/19, 9/30/19 and 12/31/19 and
- IRS Form 940 for the year ended 12/31/19 and
- Payroll Reports:
- Summary report for the 12 months ending 2019 (gross wages prior to Section 125 or Deductions)
- Report detailing each employee and their gross pay for the 12 months ending 2019 (totals should agree
with summary report)
- Report detailing vacation, severance pay, group health benefits, retirement benefits, etc…AND
- IRS Forms W-2, W-3 for 2019
Support of the following:
Supporting documentation for health, dental, and retirement benefits paid for calendar 2019.
A schedule summarizing each category of these costs.

7. Calculating Your Loan Amount:
- $10m max
- Max loan amount = 2.5/months of qualified expenses for 12 month period prior to loan
- Use calendar year 2019 financials and payroll reports
- Qualified expenses include:
- Salary, wage, comission or other compensation
- Vacation payments, parental/family/medical leave
- Employment separation allowance
- Retirement benefits payments
- State and local tax compensation payments for employees
- Calculation cannot exceed $100k/year cash payroll of any employee- benefits are not
capped.

8. How may loan be used:
- Payroll costs, including benefits;
- Interest on mortgage obligations, incurred before
February 15, 2020;
- Rent, under lease agreements in force before February
15, 2020; and
- Utilities, for which service began before February 15,
2020.

9. How much of loan forgiven?
- 100% forgiven if at least 75% is used for qualified payroll costs in 8 weeks
from funding date and remainder is used for other qualified expenses.
- Debt forgiveness is not taxable income
How could forgiveness be reduced?
- Your loan forgiveness will be reduced if you decrease your full-time
employee headcount
- Your loan forgiveness will also be reduced if you decrease salaries and
wages by more than 25% for any employee that made less than $100,000
annualized in 2019

10. PPP Loan Example #1: SCorp
- Owner pays himself $120k/year (K1 distribution are not allowed)
- 5 full time employees, average salary: $50k/year
- Group health insurance premiums = $9k/year for all employees
- Calculation:
- Total salary: Owner $100k ($120k capped at $100k) + 5 FTE’s x $50k =
$350k
- Total annual health benefit = $9k
- Annual qualified expenses: $350k + $9k = $359k/12 = $29,916
- Max loan amount = $29,916 x 2.5 months = $74,791
- This company’s loan would be $74,791

11. PPP Loan Forgiveness Example #1: SCorp
- 5 FTE’s + Owner = Monthly payroll expense of $29,916
- Loan amount = $74,791
- 2 months of payroll expenses = $59,832 ($29,916 x 2)
- $59,832/$74,791=.8 (80% reaches loan forgiveness threshold)
- As long as the S corp spends $56,093 ($74,791 x 75%) of the loan on payroll in 8
weeks from funding they would qualify for $74,791 of loan forgiveness. The
remaining funds can be used for rent and utilities.
- As long as the SCorp spends 75% on qualified payroll expenses, and remaining
funds are spent on rent, utilities and other qualifying expenses the loan is
forgiven.

12. PPP Loan Example #2: 1099 Contractor
- 1099 contractor makes Net Income of $85k/year
- Health insurance premiums = $10k/year
- Calculation:
- Total salary: Owner $85k
- Total annual health benefit = $10k/year
- Annual qualified expenses: $85k + $10k = $95k/12 = $7,917 average
monthly cost
- Max loan amount = $7,917 x 2.5 months = $19,791

13. PPP Loan Forgiveness Example #1: 1099
- Monthly qualified payroll expenses=$7,917
- 2 months of payroll expenses = $15,834 ($7,917 x 2)
- $15,834/$19,791=.8 (80% reaches loan forgiveness threshold)
- This contractor’s loan would be $19,791 and would need to take $14,844
($19,791 x 75%) in draws in the 8 weeks after funding the remaining
$4,947 must be used for rent and utilities
- to have the entire amount forgiven.
- As long as the 1099 Contractor spends 75% on qualified payroll expenses
and remaining funds are spent on rent, utilities and other qualifying
expenses the loan is forgiven.

14. Repayment of unforgiven amounts
- 2 years to pay unforgiven loan
- 1% max interest
- No prepayment penalty
- Up to 6 months repayment deferral

15. Economic Injury Disaster Loans (EIDL)
- Working capital loan up to $2m
- For Small Biz (>500), sole props and contractors
- Special waivers
- Personal guarantee waiver up to $200k
- Showing inability to obtain credit elsewhere
- DO NOT USE FOR SAME PURPOSES AS PPP LOAN

16. EIDL $10,000 Advance
- Available through 12/31/2020
- Must be used for payroll, sick leave, supply costs,
rent/mortgage and other items
- SBA pays applicant within 3 days of application
- At this time, we have not heard clients getting the
deposit though
- Advance doesn’t need to be repaid even if denied loan
under EIDL; will offset forgiveness under PPP loan.

17. Commonly Asked Questions
- Q: I am wondering about 1099 benefits.
- A: Use last year's medical and retirement costs and add to the lower of 100k or net income.
- Q: How does this program benefit businesses who hire contractors.
- A: You cannot use 1099 subcontractor payments in your calculation. Subcontractors can apply for
the loan on their own.
- Q: Since I just started my self-employed consulting practice and have had close to zero work so
far, am I eligible for any benefits?
- A: Had to start business by 2/15/20, and you can rely on 1/1/20 to 2/29/20 income to base
calculation on.

18. Commonly Asked Questions
- Q:Can a small a business owner LLC (cleaning company) that only have (1099's resources) on the
books still benefit from the CARES Act program? Also the owner?
- A: Yes, sole proprietorships are eligible for both the EIDL and PPP.
- Q: As a business owner with no payroll, what am I eligible for?
- A: PPP amounts will be based on Net income for sole props with no employees
- Q:Do you rehire employees if you do not have a position for them?
- A: Yes, you must rehire and pay them the wage they were earning for the loan to be forgiven.
- Q: Filing PPP for a partnership/LLC with employees. I have heard that as the owner, my income
is not covered.
- A: It is our understanding that your income is covered and should be included in the payroll
calculations

19. Outbreak Recovery Resources
- Paycheck Protection Program Loan Calculator
- https://www.calcxml.com/calculators/bus15
- Paycheck Protection Program Treasury Updates
- https://home.treasury.gov/policy-issues/top-priorities/cares-act/assistance-for-small-businesses
- WendroffCPA COVID-19 Resource Center
- https://www.wendroffcpa.com/category/covid-resource-center/
- WendroffCPA Recovery Webinar Series
- Will email

20. Eric Wilder
Senior Tax Manager
WendroffCPA
Rafael Martinez, CTP
VP of Commercial Banking
Atlantic Union Bank
Open Q&A

21. How can we help?
Wendroff & Associates, CPA
703-553-1099
www.wendroffcpa.com
darren@wendroffcpa.com