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Today's conversations with a tax pro gives us some good guidelines for preparing for the PPP application.
****As always, do your due diligence.****
Small Businesses and Sole Proprietors can apply with their bank beginning April 3rd, and Independent Contractors and Self-Employed can apply beginning April 10th. There is NOT the rush on this as there was for the EIDL - there should be enough funding for everyone who is eligible. Banks are working to get online applications up and running, so they may be available a few days later than expected. For example, Chase bank is looking to have their application online by Monday April 6th.
For Sole Proprietors without employees, you can still apply! Use your Schedule C net income to determine your wage.
Remember - the broad goal of the PPP is to keep people employed.
Who can apply? Basically anyone paying self-employment (SE) tax. If you are unsure if this is you, check out your last filed tax returns to verify if you have been paying SE tax. If you are a Full-Time Equivalent (FTE) independent contractor, or a 1099 MISC contractor, you can apply.
If you are an S-Corp taking distributions on which you're not paying self-employment tax, you probably won't qualify, but could include the distributions with your payroll calculations and see if they are accepted.
Banks are going to work with you to get this sorted.
HOW DO I FIGURE MY PAYROLL CALCULATIONS?
There are different date ranges being supplied for different payroll scenarios. Consider preparing your eligible payroll calculations for all the variables, positioning yourself for whatever options the bank gives you. Our firm is helping our clients to do this, and we may be able to assist you as well. Reach out to us at info@thenonprofitbookkeeper.com.
Yes, you can apply for the EIDL, the PPP, Unemployment (all 3) if eligible. The types of relief funding you get will be considered in the amount of the PPP loan you qualify for.
LOAN FORGIVENESS
The same calculations used to apply for the PPP will be used to calculate the loan forgiveness. You'll be asked to provide proof that the money was spent the way you said it would be. Any funds NOT spent on eligible expenses will be considered a loan at, get this, 1/2 a percentage point for 2 years!
Tip: If you want to get only a loan amount that would likely be 100% forgivable, you could calculate your average monthly payroll costs for 8 weeks x2 rather than the recommended x2.5. If you think you will have additional qualifying expenses besides payroll, use the x2.5 calculation.
SHOULD I RE-HIRE EMPLOYEES?
What makes financial sense for you? Re-hire when you can afford to. In the meantime, help your employees get their 2 weeks of FMLA funds. Then, when you have a loan origination date, re-hire them from that date and use the forgivable PPP loan for their wages.
THE EIDL
This loan has a higher standard for determining economic deprivation. They will call and qualify you for the loan. If you don't qualify for the loan portion, the advance/grant is still yours and you can apply for the PPP.
You've applied for the EIDL (if not, get on it!). Now you can prepare for the PPP. Don't rush it, figure out the best scenario to present the bank.
Together with you!