Paycheck Protection Program (PPP) Loan Update

Since President Trump signed the CARES Act on Friday, March 27, our firm has been working diligently to find answers to many questions that have arisen from the language in the law and how that applies to the Paycheck Protection Program (PPP).

Our goal is to try and get answers to our clients as soon as possible in anticipation of the banks allowing you to apply for the loans today, Friday, April 3. Late last night we received some interpretations from the SBA that clarify some of the questions that we had on the PPP loan and wanted to share them.

These are highlights and are not all inclusive:

  • Exclude from payroll costs for loan and loan forgiveness purposes:
    • Employee’s share of FICA and federal income taxes that are required to be withheld from employees during the period from February 15, 2020 and June 30, 2020.
      • The instructions for the PPP application form suggest you use calendar year 2019 for calculating the loan amount so the above item would not affect you at this time. However, when calculating loan forgiveness, it will have an effect.
    • Independent contractors that you pay.
  • Maturity date on the loan amount leftover after forgiveness is two years; interest is at 1%.
  • No  payments are required on the  loan for six months, but interest will accrue.
  • Not more than 25% of the loan can be used for non-payroll purposes.  At least 75% of the loan proceeds have to be used for payroll purposes.
    • If PPP funds are used for unauthorized purposes, SBA will direct borrower to repay those amounts however they do not say how quickly.
    • If PPP funds are knowingly used for unauthorized purposes, borrower will be subject to additional liability such as charges for fraud.
  •  You will be certifying in good faith to the above items along with other certifications.

If you need additional clarity or would like additional direction, please do not hesitate to reach out to our task force at 888-356-2295 or info@bergankdv.com. As we’ve shared throughout this week, every situation is unique, and we want to make sure you and your business are taken care of!

 

CATEGORIES: COVID-19 | Tax, Audit & Accounting
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