Small Biz Support 2020

[Core Shot]

Any thoughts on prepaying employee health insurance premiums for future months past the eight weeks to hit the 75%? I've received mixed signals-banker is saying no. CPA is saying it works.

There hasn't been a lot of guidance on the "incurred and paid" rule about the 8 week period. For example, we still don't know the answer to this for certain:

PPP loan funds received 05/01.
Payroll 05/06 for pay period 04/16-04/30. This was paid, but not incurred during the 8 weeks -- does it qualify?

I would be pretty wary of using it for anything that is not either incurred (i.e. covers the period during the 8 weeks) or paid out during the 8 weeks or that will smell of "gaming" the program.
Better off using bonuses to worthy ees who are under $100K (i.e. under $15,385 in pay over the 8 weeks) if you need to get to 75%.

Yep.
Incurred and paid.
I doubt future prepaid rent or health insurance would count.


And yet, for me incurred means three months rent. Unless there is some rule that rent needs to be pro rata
I haven’t paid April, then I got funded in April. Paid rent.
And July will be due in my last two weeks of the eight weeks.
Three months rent. By your own rules Sba

[senior researcher]

FTEE at Jan/ Feb 2020 level, same level on June 30 2020, equals forgiveness? My hires at 3% unemployment have been regrettable. I can see my local health department keeping things locked down until June.

[bizarrefaith]

You can also use a 2019 lookback for FTEs. So use whichever gets you the lower number.
The June 30th deadline for rehires only applies to changes before April 26th.

[Core Shot]

FTEE at Jan/ Feb 2020 level, same level on June 30 2020, equals forgiveness? My hires at 3% unemployment have been regrettable. I can see my local health department keeping things locked down until June.

I call the rehire provision door #2

There’s no Sba regs.
But it’s the law.
If you get to full FTEE and full payroll money on June 30, you are forgiven.

I decided not to. Only because I’m not sure how my biz will be on that date.
I decided to puke cash to my employees for eight weeks.

But I still think door #2 is legit.

And if you ducked up by not getting FTEE in the first few weeks, and you can’t add homeless to your payroll. Then door #2 is the best option.

[bizarrefaith]

There's an error in the math in the bill and no guidance yet but estimate it as:
First, payroll costs (incl. benefits etc) has to be 75% of the forgiven amount.

Then % forgiven = FTE during the 8 weeks / average monthly FTE level for either February 15 through June 30, 2019; or January 1 through February 29, 2020

THEN, forgiveness reduced dollar for dollar any salary reductions exceeding 25% (excluding salary amounts over $100k/$15,385 during the 8 weeks)

[Core Shot]

There's an error in the math in the bill and no guidance yet but estimate it as:
First, payroll costs (incl. benefits etc) has to be 75% of the forgiven amount.

Then % forgiven = FTE during the 8 weeks / average monthly FTE level for either February 15 through June 30, 2019; or January 1 through February 29, 2020

THEN, forgiveness reduced dollar for dollar any salary reductions exceeding 25% (excluding salary amounts over $100k/$15,385 during the 8 weeks)

True.
But also. My bank’s spreadsheet has a line for each employee. Total pay q1 2020, divided by weeks. Then you need to pay at least 75% of that weekly avg through the 8weeks.
So any new hire can be minimum wage. For 30 hours a week. That’s one fte.

I’m not worried about the over $100k rule. Rich people’s problems

[bizarrefaith]

That's what I was referring to at the end with the THEN and the dollar for dollar reduction in forgiveness for dollar any salary reductions exceeding 25% (excluding salary amounts over $100k/$15,385 during the 8 weeks).
Of course all of this is based on a plain reading of the law, when its the regulations that will count so the actual rules for forgiveness may vary greatly. There's no 75% must be used for payroll in the law, but there it is in the regs.

[GoldMember]

I received this today from my banker. It's still a moving target but gives good guidance of how forgiveness is viewed as of an hour and fifteen minutes ago so, take it with a chunk of salt:

The SBA created the rule that 75% of the SBA loan must be spent on qualified payroll costs during the 8 week period after the PPP loan is disbursed. It is my opinion that this will be a threshold issue in determining the maximum amount of loan forgiveness.

This is STEP 1. For example if you had a $100,000 PPP loan and spent $75,000 during the 8 week period, I believe that you would have an opportunity to receive 100% loan forgiveness or $100,000, subject to other deductions in STEP 2 and STEP 3. However if you only spent $50,000 on qualified payroll costs the maximum amount of forgiveness would be reduced by the $25,000 that should have been spent on payroll expenses and was instead spent on other expenses – now your maximum loan recovery is $75,000 no matter if you return your workforce by June 30 or not.

STEP 2. Take the maximum forgiveness amount identified in step #1 and reduce any percentage change in FTE during the 8 week period after the loan was funded. So in “Mr. Smith” example he had 30 FTE prior to the CARES Act. However, if he only employed an average of 15 FTE during the 8 week period, the amount determined in STEP 1 and reduce it by 50%.

STEP 3. This is another potential deduction. You now have to look at every individual employee that you employed during the 8 weeks after you receive the PPP loan funds, and compare their average wages before CARES Act and the wages you paid them during the 8 week period. You have to further reduce the amount you determined in STEP 2 by any reduction in pay during those 8 weeks. Thus, for the 15 FTE Mr. Smith is employing in this example during the 8 weeks, if he would have usually paid them $37,500, but only actually paid them $30,000, the amount determined in STEP 2 would be reduced by the $7,500 difference.

Finally in STEP 4, you bring you work force back (actually 90% of your workforce) and return their pay (actually 90% of their pay) prior to June 30, 2020. However, it is my analysis that even bringing his workforce back at equivalent pay will not impact the initial reduction in STEP 1 if he did not use 75% of the PPP loan on payroll expense during the 8 week period.

In Mr. Smith’s case, if he received a $100,000 loan today, he would have until June 27 to spend all of those funds. If between now and June 27, he spent 75% of those funds on qualified payroll costs, he would be eligible to receive all $100,000 as forgiveness, so long as he returned his FTE to 30 at their normal pay as he plans before June.

I would also caution him that there are many other unknowns about what expenses will qualify as payroll costs, there are the caps on compensation for individuals making more than $100,000 per year and there remains uncertainty as to how all of this will actually be calculated. I am hopeful that the SBA will issue more guidance on forgiveness early next week, but the SBA has not made any promises as to timing of the additional guidance.

It is complicated, even Elizabeth Warren wrote a letter to the SBA scolding it for adding in the STEP 1 75% rule when it was never part of the original law. I wish I had clearer answers.

[Core Shot]

Wow. That’s some crazy banker email there. Surprised they put it in writing without getting legal approval.

Door number one. Spend 75% of the loan on payroll. In eight weeks.
That money is forgiven.
The other 25% is forgiven if it’s spent on rent interest utilities etc.
if you don’t spend it all the rest is a loan.

Door number two is more complicated. But is in the statute.
Just get full strength by June 30.

[GoldMember]

^^ Actually, I think this came from the bank's legal staff as their interpretation. My guy passed it along.

[Core Shot]

^^ Actually, I think this came from the bank's legal staff as their interpretation. My guy passed it along.

Ok.

But yeah. For most peeps. Spend 75% of the loan on payroll.
That money is forgiven.

As long as you maintain FTEE for the eight weeks. Based on either of the two measurement periods.
The latter is going to be the ball buster.
Hire the homeless.
Or your friends wife.
Put someone on payroll for 30 hours to equal one fte.

[bizarrefaith]

STEP 2 by any reduction in pay during those 8 weeks. Thus, for the 15 FTE Mr. Smith is employing in this example during the 8 weeks, if he would have usually paid them $37,500, but only actually paid them $30,000, the amount determined in STEP 2 would be reduced by the $7,500 difference.[/I]

I don’t think this is right - the reduction in pay has to be 25% or greater to affect forgiveness.



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[GoldMember]

^^ Could be, I'm not sure. I just copy and pasted what the banker sent me. I'd have to do some digging to determine my own opinion on this. However, my problem is that we'll probably have to pay some increases over standard wages as our base amount was determined from a time when we had some prevailing wage work going and I'll need to spike the standard wages a bit to come up to the aggregate 75%. Therefore, that step is irrelevant for my situation and I haven't paid it any attention.

[Flyoverland Captive]

One of our companies is gonna give bonuses to hit 75%; the other could max out the two employee's salaries who work there, but the $15,384.62 cap (or whatever the amount is) per person would still leave them short of 75%. I think we'll just hire a temp for a few weeks to get over the threshold.

[Cono Este]

Ok, so it looks like the squeaky wheel got oiled.

My money hit my acct today.


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[Cono Este]

Question. If you are a sole prop, or a sub chapter S, and you don’t give yourself a fixed salary, but just pass it through to yourself, how do you think they determine salary?


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[GoldMember]

If you are a sole prop, you should be able to 2.5 months average net profits as borrowing base. S Corp you are most likely out of luck because you by law you should already have been paying yourself a salary, discussed up thread a bit.


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Yep, this.

[senior researcher]

Soooooo here I am? A trash can Leona Hemsley ,realizing there will be no fucking Catalina wine mixer this year. Yuck.

[::: :::]

PPP funded last night

[senior researcher]

Great!

[GoldMember]

I don’t think this is right - the reduction in pay has to be 25% or greater to affect forgiveness.



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^^ Could be, I'm not sure. I just copy and pasted what the banker sent me. I'd have to do some digging to determine my own opinion on this. However, my problem is that we'll probably have to pay some increases over standard wages as our base amount was determined from a time when we had some prevailing wage work going and I'll need to spike the standard wages a bit to come up to the aggregate 75%. Therefore, that step is irrelevant for my situation and I haven't paid it any attention.

I just had a long conversation with our CPA. The 25% reduction is correct according to her. Other tid-bits of interest:

You don't have to use 75% of the entire approved amount for payroll but whatever you use has to be 75% payroll of requested forgiveness. So, if you got $150k but spent $75k on payroll and $50K on other, you can only get forgiveness on $75k + $25k or $100k total. The balance of the $50k can either be given back or can be kept as a low-interest loan to use for whatever in your business. The $75k is, of course, subject to meeting the payroll criteria for forgiveness. If only $60k of payroll is acceptable, then only $20k of other will be forgivable. Then you have a loan balance of $70k instead of $50k.

The deductibility of expenses against non-revenue forgiveness is being debated and subject to change from the IRS ruling. We shall see....

Utilities that are forgivable are: gas, water, electricity, sewer, garbage, telephone, cell phone, internet, and company vehicle fuel expenses. That last one is still somewhat undetermined but we're tracking it and, if they ultimately turn it down, not that big of a deal.

The rules are continuing to change but clarity will come with time. The argument with IRS having stuck their noses into it should be interesting. The parties involved need to continually remind themselves of what the vision and goals for this plan are and rise out of their narrow silos and get it figured out. Could be that Congress may have to follow up with another bill to deal with the expense deductions but that's a clean up on aisle 7 bill to clarify for the IRS to accept.

That's about it for the moment.

[Core Shot]

Company vehicle fuel?

That’s a new one. Would be nice.

“Transportation “.
No one can figure that out. No Sba guidance.
Fuel would be hudge

[ripvanwinter]

For anyone else still waiting for their bank....

I was waiting weeks for Chase to do anything for me so I applied Sunday night to PayPal.

I was approved today and the funds just showed up in my account!!!

[GoldMember]

Company vehicle fuel?

That’s a new one. Would be nice.

“Transportation “.
No one can figure that out. No Sba guidance.
Fuel would be hudge

I know. I had read that somewhere and she verified it...it's a bit shaky but do some looking around and you'll probably find something on it.

ETA: https://beachfleischman.com/tax-bite...n-forgiveness/

"What utilities are included? - Payment for a service for the distribution of electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020. A “transportation utility” has been interpreted to mean fuel costs for business vehicles."

Also noted in that same article is that any financial instrument's interest that's collateralized with real or personal property can be subject to coverage. I find that surprising as I was under the impression it was only mortgage interest that was eligible. If you have a line of credit with a personal guarantee or is supported by inventory and/or receivables, these guys interpret that as eligible. I think they're being pretty aggressive in their interpretations but, under the intent of this program, they'll probably get forgiveness for these items. I would get a second opinion but, on the other hand, turn in the records for forgiveness and let SBA tell you no. No skin off your nose if you do and they deny it. If you don't turn it in, you're sure to not be forgiven.

[senior researcher]

Right on Rip! Any fees?