Hi everyone! I wanted to reach out to relay a few key points about the PPP loans and what to expect moving forward. Keep in mind that this is an ever changing target and even the IRS and Congress have not finished with the subject. This is what we know now and is subject to change:
- PPP Applications for this round of funding was supposed to end yesterday, June 30. However, last night the Senate approved an extension of this deadline to August 8!
- There are other loans available to small businesses and self- employed individuals by going to SBA.gov and also checking with your local county and/or city.
- Congress is working on another bill called P4: Prioritized Paycheck Protection Program Act, which would extend the PPP application deadline to December 30 or longer. This would be available to small businesses, sole proprietors and self employed individuals with 100 or fewer employees. This has NOT been passed yet but it is something they are working on and hopefully will roll out soon.
- Forgiveness for the PPP funds that you may have received has to be applied for. It is not automatic. The applications will come through the bank that you received the funds from. Only a few banks have started the forgiveness part of this process and in my professional opinion it’s best to wait a little while until the dust settles. There will hopefully be a new streamlined application that far exceeds the convoluted long and short versions that are circulating now.
- If you hadn’t heard, the original PPP rules also changed. Instead of 8 weeks, companies now have 24 weeks to use the money appropriately for payroll and business expenses like Rent and Utilities. There will be very few businesses that will not be able to do this and so in essence, this PPP loan will turn out to be a grant. This is good news. However, you must still spend the money on the specific expenses laid out in the PPP rules and you should still keep good records with all backup including payroll reports and invoices that you paid in case you will need it for the forgiveness application or if you happen to get audited in the future.
- If you received both an EIDL AND a PPP loan you cannot use both of the loan proceeds but instead must pay back one over the other. There is no “double dipping”. Please be aware of this for when you file for forgiveness.
- Is the PPP money taxable? There is no clear cut way to answer this, however, after studying the best way to record this loan, I believe it will work like any other debt forgiveness program. That is to say, yes, the PPP funds will eventually be recorded as other Income on your P&L and as such will be taxed along with your regular Income. Be prepared to pay a bit more in taxes when you file your 2020 tax return next year.
I’m sure I haven’t answered all of your questions in this newsletter but please feel free to reach out to me directly at our email email@example.com or by calling Yield at 571-249-4316. Our staff has been working with the PPP, EIDL and other grants since the beginning of COVID and we will be here to support you until this is all over!
Hang in there and take care of one another,
Rochelle Dallons, CEO