Perhaps no single topic has dominated the tax news of late more than the government’s extensive efforts to provide relief to small businesses devastated by the COVID-19 pandemic. The Paycheck Protection Program (PPP) provides up to 349 billion dollars to small businesses (with up to 500 employees) to primarily pay up to eight weeks of payroll costs including benefits. The loans will be completely forgiven if they are used for payroll costs or interest on mortgages, rent, or utility payments in the eight-week period following receipt of the loan proceeds. Maintaining salary levels and employee retention is necessary for the loan forgiveness. There is a $100,000 limit for payroll costs of each employee annually. 75% of the forgiven amount must be used for payroll. Loan payments will be deferred for six months. No collateral or personal guarantees are required. Loan recipients will not be charged any fees by the government or lenders.
Businesses and sole proprietors can apply beginning April 3rd. Independent contractors and self-employed individuals can apply on April 10th. Applications will be taken through any existing SBA lender or through any federally insured depository institution, federally insured credit union, and participating Farm Credit System institution. Additional lenders will be able to make and service these loans as approved and enrolled in the PPP.
If an employer uses the PPP, it can’t double-dip and utilize the Employee Retention Credit. That credit is 50% of qualified wages paid from March 12, 2020 to January 1, 2021. The maximum wages applicable to each employee are $10,000, so the maximum credit to an employer is $5,000. Closure/suspension of operations or a significant decline in gross receipts are also necessary.
These new programs are not only anathema to deficit hawks, but they can be confusing to even the most astute small business owner. We’ll take care of that concern with our new webinar, Critical Update: Paycheck Protection Program Loans, Family and Sick Leave, and Tax Return Extended Due Dates (PPPL). Do yourself a favor and plan on attending this informative webinar on the most relevant topic facing many of your clients today. And rest assured, you’ll be sure to gain insights on competently advising both your individual and business clients on this incredibly important topic.
Nick Spoltore is VP of Tax & Advisory Content for Surgent CPE. Mr. Spoltore is a graduate of the University of Notre Dame and of Delaware Law School. Before joining Surgent, he practiced tax and business law at the firm of Heaney, Kilcoyne in Pennsylvania and also in Delaware.