Small Biz Support 2020

**Iowagriz** · 05-03-2020, 10:55 AM

I should post under an alias, but are you guys stating that you need to hire staff in order to turn the cash into a grant? If so, I'm sure that Mrs Griz is available for hire (and not show up). What am I missing? Do they have to be re-hires and not new hires?

**Core Shot** · 05-03-2020, 11:44 AM

Originally Posted by Iowagriz

I should post under an alias, but are you guys stating that you need to hire staff in order to turn the cash into a grant? If so, I'm sure that Mrs Griz is available for hire (and not show up). What am I missing? Do they have to be re-hires and not new hires?

If you rehire someone that worked q1 2020, you better pay them 75% of that weekly average.

Someone new can b put on at minimum wage for 30 hours of nothing.

I know mrs Griz is your wife but I would at least need a handy.

**Flyoverland Captive** · 05-03-2020, 02:19 PM

Anyone in OR having issues with the loan? I have a contact at WaFed who is doing loans; as of Friday she was all caught up, and looking for more applicants. PM me.

**Mustonen** · 05-03-2020, 05:32 PM

Originally Posted by Core Shot

I know mrs Griz is your wife but I would at least need a handy.

I laughed. And then felt guilty about it. #metoo

**CascadeLuke** · 05-03-2020, 06:21 PM

My PPP just got approved and I have little info as I haven’t seen paperwork. Can someone answer- if you’re an independent contractor 1099 how do you handle the funds and forgiveness? No employees, just me. In my mind it’s income / payroll to me. Am I bulletproof - or missing something?

**Bunion 2020** · 05-03-2020, 06:48 PM

The advice given to me is to put in in the bank and make draws over the next 8 weeks. Keep a record of them and anything else you spend $$$ on, cell service/internet/utilities and Health Insurance (ACA is acceptable). Burn up the total, you should at least achieve 75% forgiveness.

**Flyoverland Captive** · 05-03-2020, 06:52 PM

Are cell phone bills/ phone bills forgivable? I’ve seen conflicting info.

**Core Shot** · 05-03-2020, 07:02 PM

Originally Posted by Flyoverland Captive

Are cell phone bills/ phone bills forgivable? I’ve seen conflicting info.

It’s explicitly listed as a utility bill. Yes.

**Flyoverland Captive** · 05-03-2020, 09:21 PM

Awesome; thanks.

**GoldMember** · 05-03-2020, 10:48 PM

Originally Posted by Flyoverland Captive

Are cell phone bills/ phone bills forgivable? I’ve seen conflicting info.

Originally Posted by Core Shot

It’s explicitly listed as a utility bill. Yes.

Really.... Good to know. We weren't collecting those expenses. Thanks for the tip.

**bizarrefaith** · 05-04-2020, 08:52 AM

FYI all, from the latest update to Treasury's PPP FAQs:

40. Question: Will a borrower’s PPP loan forgiveness amount (pursuant to section 1106 of the CARES Act and SBA’s implementing rules and guidance) be reduced if the borrower laid off an employee, offered to rehire the same employee, but the employee declined the offer?

Answer: No. As an exercise of the Administrator’s and the Secretary’s authority under Section 1106(d)(6) of the CARES Act to prescribe regulations granting de minimis exemptions from the Act’s limits on loan forgiveness, SBA and Treasury intend to issue an interim final rule excluding laid-off employees whom the borrower offered to rehire (for the same salary/wages and same number of hours) from the CARES Act’s loan forgiveness reduction calculation. The interim final rule will specify that, to qualify for this exception, the borrower must have made a good faith, written offer of rehire, and the employee’s rejection of that offer must be documented by the borrower. Employees and employers should be aware that employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation.

**Core Shot** · 05-04-2020, 09:27 AM

Can you post a link?
All I see is the April 3 interim final rule.

**bizarrefaith** · 05-04-2020, 09:50 AM

Originally Posted by Core Shot

Can you post a link?
All I see is the April 3 interim final rule.

https://home.treasury.gov/policy-iss...all-businesses

Scroll down to "Program Rules" and this is were the most recent releases appear. FAQ's were just updated yesterday. There have also been several updates to the interim final rules since April 3rd. Many of the rule updates have been highly specific/technical in nature and not of interest to most borrowers but the updates on liquidity and the borrower certifications and the new safe harbor are important. However, most all of the rule updates so far have been covered (and tend to appear first) in the FAQs so you can probably just stick to that and leave the actual rule text to your lawyer and/or accountant if you have them.

**bizarrefaith** · 05-04-2020, 09:57 AM

I would say my big concern right now is how are they going to assess liquidity for smbs since they seem to be interested in taking a harder look at eligibility now. The updated guidance states qualification requires the lack of "other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business." That's pretty vague.

**::: :::** · 05-04-2020, 10:40 AM

Originally Posted by GoldMember

Generally, owner distributions aren't considered 'payroll expenses' in this. But, I'm no expert. You might want to read this article and see how you fit into the scenarios.

https://www.nav.com/blog/does-an-own...am-ppp-606284/

coming back to this

has anyone confirmed from another source the paragraph saying K1 is not allowed? [maybe direct from SBA...?]

from the link:

Conspicuously absent from this guidance is any instruction for S Corporation owners who pay themselves from owner’s draw or distributions. The SBA Administrator and Treasury have not released official guidance on whether owner’s draw counts toward the payroll calculation for purposes of qualifying for PPP. But an email from the SBA dated April 6, 2020 states, “Only payroll costs in the form of salary, wages, tips, etc. are eligible for the PPP program. Owner draws, distributions, amounts recorded on a K-1 are not eligible for the PPP program.” An SBA webinar I recently attended stated the same information so it appears to be an official position of the SBA.

SBA's "How to calc" pdf, see ques 4 & 5
https://home.treasury.gov/system/fil...an-Amounts.pdf

Our bank says our distributions ARE income and are not a problem at all & that we should move forward as we had submitted. They also suggested setting up a secondary checking account to use for the sole purpose of the PPP funds for clarity of how they are used.

My understanding of legislation being silent on an issue was that it meant no barrier was indicated. Obviously, a clarification direct from SBA would be notable (& presumbably would be publicly published?). But the article above does not provide that link...wondered if someone found that info separately?

**bizarrefaith** · 05-04-2020, 10:51 AM

I doubt K-1 distributions qualify. If you are an S Corp owner, you shouldn't be "paying yourself" via K-1 distributions anyways. Salary/wages for your work (i.e. payroll costs) are already required to be paid via payroll by current regulations which require a "reasonable salary". Distributions aren't supposed to be compensation for your work but distributions of profit.

**bizarrefaith** · 05-04-2020, 10:55 AM

Also, you should not rely on what your bank tells you exclusively as the regs establish that banks have essentially no liability if your loans are deemed out of compliance or fraudulent.

**NewYorkDirtBag** · 05-04-2020, 11:14 AM

Originally Posted by Crusty

AICPA announced they are pushing congress and IRS to allow deductions for PPP qualified costs so maybe...?

In my opinion they are going to have to or it opens a bit of a mess.

2 scenarios; 2 businesses, one is an s corp, one is a single member llc (sole prop) both owners are paid 100,000. the s corp owner as wages, the llc member as a draw.

Assuming both received $20,833 in PPP since no other employees. Both use 75% for 'payroll'. S corp owner will have to pay income tax on $20,833 since that portion of their expenses are not tax deductible from their 1120s. LLC member only has 5,208 in non deductible expenses since they aren't deducting officer payroll (its just part of net income) and only pay tax on $5,208.

Not equitable treatment under the tax code. Extrapolate out to multi owner s corps and LLC's and it becomes a bigger problem

**GoldMember** · 05-04-2020, 11:15 AM

This article may shed some light on the attitude at the IRS regarding salary versus distributions in a small business/S Corp. In general, the ruling is that small companies must pay a reasonable salary for the work performed by an owner. The purpose is so that the owner isn't ducking payroll taxes by taking money solely through distributions. Therefore, I believe the rule to only include salary and wages is in line with prior rulings related to the choices made.

https://www.nolo.com/legal-encyclope...ton-issue.html

**NewYorkDirtBag** · 05-04-2020, 11:21 AM

Originally Posted by GoldMember

This article may shed some light on the attitude at the IRS regarding salary versus distributions in a small business/S Corp. In general, the ruling is that small companies must pay a reasonable salary for the work performed by an owner. The purpose is so that the owner isn't ducking payroll taxes by taking money solely through distributions. Therefore, I believe the rule to only include salary and wages is in line with prior rulings related to the choices made.

https://www.nolo.com/legal-encyclope...ton-issue.html

Yes, those that were ducking self employment taxes and unemployment taxes kind of screwed themselves a bit on this one. Hopefully they have been saving that extra money they were saving for a rainy day.

**bizarrefaith** · 05-04-2020, 11:22 AM

Originally Posted by GoldMember

This article may shed some light on the attitude at the IRS regarding salary versus distributions in a small business/S Corp. In general, the ruling is that small companies must pay a reasonable salary for the work performed by an owner. The purpose is so that the owner isn't ducking payroll taxes by taking money solely through distributions. Therefore, I believe the rule to only include salary and wages is in line with prior rulings related to the choices made.

https://www.nolo.com/legal-encyclope...ton-issue.html

Exactly, and jacking up your salary now or changing the proportions of distribution to salary for PPP may raise all kinds of red flags.

**Conundrum** · 05-04-2020, 11:37 AM

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.

**bizarrefaith** · 05-04-2020, 11:47 AM

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%.

**Flyoverland Captive** · 05-04-2020, 12:08 PM

We got funded this morning; huge relief.

**GoldMember** · 05-04-2020, 12:12 PM

Originally Posted by Conundrum

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.

Even if you prepay the premiums for a full year, they'd be amortized to a monthly basis and you'd only receive the 8 weeks worth for forgiveness.